Essential Features of a Negotiable Instruments

The essential characteristics of a negotiable instrument have been shown as under:

1. Payable to order or bearer

2. Freely transferable

3. Presumption as to holder

4. Title of holder in due course

5. Presumption as to consideration

1. Payable to order or bearer: - It must be payable either to order or bearer

2. Freely Transferable:- A instrument payable to order is negotiable by endorsement and delivery and an instrument payable to bearer is negotiable by mere delivery

3. Presumption as to Holder:- Every holder of negotiable instrument is presumed to be holder in due course (Section 118)

4. Title of holder in due course:- A holder in due course ( i.e. the person who become the possessor of negotiable instrument before maturity, for valuable consideration and in good faith ) get the instrument free from all defects in the title of transferor

5. Presumption as to considerations:- Every negotiable instrument is presumed to have been made, drawn, accepted, endorsed , negotiated or transferred for consideration.

Since the Negotiable Instrument Act deals with only three Negotiable Instruments; Promissory Note, Bill of exchange and cheque.