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Characteristics of a Negotiable Instrument

1. Free Transferable.
The negotiable instrument cannot exist if there is no transferability as it consists of involvement of
parties. The possessor of negotiable instrument gives acknowledgement to the owner of property
owned by them. Negotiable instrument does not simply give ownership of the instrument but right to
property as well. The property in negotiable instrument can be moved without any formality. In the
case of bearer instrument, the possessions pass by meagre delivery to the transferee. In case of order
instrument, endorsement & delivery are necessary for transfer of property. For example, A makes a
promissory note in the name of B so the specific amount mentioned in the note has to be transferred
from A to B at a given period of the time as mentioned in the note.

2. The Title.
The title of holder free from all defects a person taking in an instrument bonafide and for value,
known as the holder in due course, gets the instrument free from all defects in the title of the
transferor. He is not in any way affected by any defect in the title of the transferor of any prior party
he is not affected by certain defense which might be available against the previous holder, for
example, fraud, provided he himself is not a party to it. In other words, a holder in due course (i.e. a
person who becomes the possessor of negotiable instrument before maturity for valuable
consideration in good faith) gets the instrument free from all defects in the title. For example, Jitesh
gets negotiable instrument drawn in his favour by Gaurav by means of coercion and later endorses it
in the name of Chetan for value and Chetan accepts that in good faith. Here, though the title of Jitesh
is defective yet Chetan gets a good title of the instrument, and can receive payment from Gaurav.

3. Recovery.
The holder in due course can sue upon a negotiable instrument in his own name for the recovery of
the amount further he/she need not give notes of the instrument to pay in other words, the transferee
has the right to recovery, i.e. he/she can sue on the instrument on his/her name to enforce his/her right.
Moreover he/she need not give any notice of transfer to the party liable for the payment. For example,
Peter receives a negotiable instrument drawn in his favour from Raj. He endorses it to Jaime who
further endorses it in favour of Rakesh. Raj refuses to pay to Rakesh by stating that he was not
informed about the endorsement by Peter. So here, Rakesh can sue Raj for recovery in his own name
and there is no obligation to inform Raj.

4. Presumption.
The Certain presumption applies to all negotiable instruments unless the contrary is provided. This
presumption is dealt under the sections, 118 and 119 and are as follows

(a) Consideration.
Every negotiable is presumed to have been made drawn, accepted, endorsed, negotiable or transferred
for consideration. This would help a holder to get a degree from a court without any difficulty.

(b) Date
. Every negotiable instrument bearing a date is presumed to have been made or drawn on such date.

(c) Time of acceptance.

When a bill of exchange has been accepted, it is presumed that it was accepted within a reasonable
time of its date and before its maturity
(d) Time of transfer.
Every transfer of negotiable instrument is presumed to have been made before its maturity.

(e) Order of endorsements.

The endorsement appearing upon a negotiable are presumed to have been made in the order in which
they appear thereon

(f) Stamp.
When an instrument has been lost it is presumed that it duly stamped.

(g) Holder a holder in due course.

Every holder of a negotiable instrument is presumed to be holder in due course (sec 118)

(h) Proof of protest

In a suit upon an instrument which has been dishonour, the court, on proof of the protest presumes the
fact of dishonour, unless and such fact is disproved (sec 119).

The above presumption is rebuttable by evidence if any one challenge any of this presumption, he has
to prove his allegation again, this presumption would not arise where an instrument has been obtained
by any offense, fraud or unlawful consideration.