Negotiable Instrument: Meaning and Explanation

Type of Negotiable Instrument: -

1. Promissory Note
2. Bill of Exchange
3. Cheque

1. Promissory Note: -

-Section 4 of India's Negotiable Instruments Act, 1881

The feature of the Promissory Note: -

1. It is in writing.
2. An unconditional promise to pay a certain sum of an amount.
3. An amount should be described in it.
4. It must be signed by the maker or issuer.
5. The document must be dated and properly stamped.
6. The amount must be payable to either a certain person or on his/her behalf.
7. It clearly mentions the date of payment.

2. Bills of Exchange: -

Definition: -

-Section 5 of India's Negotiable Instruments Act, 1881

The feature of the Bill of Exchange: -

1. It should be in writing.
2. In order to make a payment on the specific date or after a certain period.
3. An unconditional order of payment, it does not contain any condition of payment.
4. A certain amount should be described in it.
5. It must be signed by both parties Drawer (maker) and Drawee.
6. The amount must be payable to either a certain person or on his/her behalf.
7. It should be paid on the date of maturity or on-demand or on mutual understanding.

Cheque: - 

-Section 6 of India's Negotiable Instruments Act, 1881