negotiable instrument, bill of exchange, check, promissory note, or other written contract for payment that may serve as a substitute for money. It is simple in form and easy to transfer. Transfer of a negotiable instrument, accomplished by delivery or endorsement and delivery, gives the new holder of the contract the right to enforce fulfillment in his own name. Negotiable instruments made payable to bearer are transferred by delivery; those made payable to order are transferred by endorsement and delivery. Like commercial paper, negotiable instruments were developed to meet the needs of trade. They are used by businessmen to facilitate long-distance transactions and to avoid the constant exchange of large amounts of cash.
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.