Define negotiable instrument. GROUP: B Descriptive Answer Questions 5 × 10 = 50

A negotiable instrument is a signed document that contains an unconditional promise or order to pay a fixed sum of money to a specific person or bearer. It is freely transferable by delivery or endorsement, allowing the holder to enforce payment without the need for further consent from the original parties. Under the Negotiable Instruments Act, 2034 (1977), it must be in writing, signed by the maker or drawer, and payable to order or bearer on demand or at a fixed future time.

Key characteristics include:

• Transferability: Can be negotiated (transferred) to another person.
• Legality: Recognized as evidence of debt in a court of law.
• Commercial utility: Widely used in trade and commerce (e.g., promissory notes, bills of exchange, cheques).

This instrument simplifies transactions by ensuring smooth transferability and enforceability.