Negotiable instrument

A negotiable instrument is not a contract per se, as contract formation requires an offer, acceptance, and consideration, none of which are basics of a negotiable instrument. Unlike ordinary contract documents, the right to the performance of a negotiable instrument is connected to the possession of the document itself (with certain exceptions such as loss or theft).

The rights of the payee (or holder in due course) are better than those provide by ordinary contracts as follows: The rights to payment are not subject to set-off, and do not rely on the power of the underlying contract giving rise to the debt (for example if a cheque was drawn for payment for goods delivered but defective, the drawer is still liable on the cheque) No notice needs to be given to any prior party legally responsible on the instrument for transfer of the rights under the instrument by negotiation Transfer free of equities—the holder in due course can hold enhanced title than the party he obtains it from Negotiation enables the transferee to become the party to the contract, and to enforce the contract in his own name. Negotiation can be effect by endorsement and delivery (order instruments), or by delivery alone (bearer instruments).