Question

Explain the concept of negotiability

Answer 1

Negotiability deals with the characteristic of a document that is commonly used like a check, draft, or bill of exchange and it makes sure that it is to be legally and freely assignable, saleable, or transferable. The ownership of the document should be able to pass from one party to the other. The need for negotiability arises when we are looking for a substitute to the money while we are involved in trading. Negotiability assures that the party accepting a payment document will get its value or payment without fail as it protects from the actions or defects of the transferor. The document's ability to effect a free transfer of legal defense is the very characteristic of negotiability. Below mentioned are the requirements of negotiability:

• The document must be in writing.
• The document must be signed by the maker or drawer.
• The document must be an unconditional promise or order to pay.
• The document must represent a fixed amount of money.
• The document must say that it must be payable on demand or at a definite time.