What is a negotiable instrument?

What is a negotiable instrument?

• A. Only cash
• B. A loan agreement
• C. All checks/drafts, money orders, and traveler's checks
• D. A service contract

Answer: (C)

A negotiable instrument is a written promise or order to pay a fixed amount of money that can be transferred to another person by endorsement and delivery. It must be payable to someone or to bearer and be capable of being negotiated to obtain the money this instrument promises. That’s why the option listing checks, drafts, money orders, and traveler's checks is the best fit: these are classic examples of negotiable instruments. They are formal written instruments used to transfer funds, and the holder can present them for payment or transfer them to someone else. Cash isn’t a negotiable instrument because it’s money itself, not a written instrument that promises payment. A loan agreement is a contract about repayment but isn’t designed to be negotiated in the same way as a negotiable instrument. A service contract is not a promise to pay money to a specific amount or to be transferable as payment to another party.

A negotiable instrument is a written promise or order to pay a fixed amount of money that can be transferred to another person by endorsement and delivery. It must be payable to someone or to bearer and be capable of being negotiated to obtain the money this instrument promises.

That’s why the option listing checks, drafts, money orders, and traveler's checks is the best fit: these are classic examples of negotiable instruments. They are formal written instruments used to transfer funds, and the holder can present them for payment or transfer them to someone else.

Cash isn’t a negotiable instrument because it’s money itself, not a written instrument that promises payment. A loan agreement is a contract about repayment but isn’t designed to be negotiated in the same way as a negotiable instrument. A service contract is not a promise to pay money to a specific amount or to be transferable as payment to another party.