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negotiable instrument

A Dictionary of Business and Management | 2006 | © A Dictionary of Business and Management 2006, originally published by Oxford University Press 2006. (Hide copyright information) Copyright

negotiable instrument A document of title that can be freely negotiated (see negotiability). Such documents are cheques and bills of exchange, in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee or by making the document ‘open’ by endorsing it (signing one's name), usually on the reverse. Holders of negotiable instruments cannot pass on a better title than they possess. Bills of exchange, including cheques, in which the payee is named or that bear a restrictive endorsement, such as ‘not negotiable’, are non-negotiable instruments.

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