What is Negotiable?
Negotiable is familiar to describe the price of a good or security that is not firmly established. It is also used to describe a good or security, such as hard cash, whose ownership is easily transferable from one party to another. Other words used to describe negotiable are marketable, transferable or unregistered.
You often hear the term negotiable used in reference to the purchase price of a particular good or security. The appeal to price is not set in stone and can be adjusted depending on the circumstance. Most securities are negotiable; they can be easily transferred from one festival to the next, provided all proper legal documentation is included.
In the world of finance, negotiable refers to a legal document or thingummy that is used in lieu of cash. It is used to make a promise of payment, generally cash flow(s), at some peak in the future. In context, the word negotiable implies a cash value and comes with specific instructions about the be that as it maying of cash flows to be paid. The term negotiable is used to suggest the document or instrument comes with the same promise legal backing as cash under the law.
Characteristics of a Negotiable Instrument
For a piece of paper to be as good as cash, or negotiable by law, it requirement be a written document signed by the entity drawing on the instrument. This is what makes it marketable or transferable. It must also prepare an explicit order or promise to pay and state a specific amount of money. Negotiable instruments contain an unconditional promise to restate payment for an exact sum. The agreement also provides instructions on timing, such as on demand or some time in the future, and essential be made out to a specific person or entity. That said, if the instrument does not have a date, it does not impact its negotiability.
Species of Negotiable Instruments
There are several types of negotiable securities, such as checks, time drafts, sight plans and trade acceptances to name a few. A check is the most commonly used draft that orders a bank to make an amount crunch on demand. A time draft makes the demand for payment at some time in the future. This is an example of a negotiable paper known as a certificate of deposit. These can be easily bought and sold between different parties. A sight draft is upshot when presented, and a trade acceptance is used between buyers and sellers of goods. The buyer accepts the draft, portents it and returns it to the seller.