Question

Negotiation & Assignment
A negotiable instrument may be transferred by -.
1. Negotiation
2. Assignment
3. Delivery
Select the correct answer from the options given below-

• A. 1 & 3
• B. 2 & 3
• C. 1 & 2
• D. 1, 2 & 3

Answer 1

Answer: (C)

1 & 2

Negotiation of an instrument is the process by which the ownership of an instrument is transferred from one person to another. According to Section 14 of the Act, when a note, bill or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated. Negotiation may be effected in two ways:

1. Negotiation delivery (Sec. 47): by Where a promissory note or a bill of exchange or a cheque is payable to a bearer, it may be negotiated by delivery thereof. It does not require the signature of the transferor and the transferee becomes the holder thereof by near possession.

2. Negotiation by endorsement and delivery (Sec. 48): A promissory note, a cheque or a bill of exchange payable to order can be negotiated only be endorsement and delivery. Unless the holder signs his endorsement on the instrument and delivers it, the transferee does not become a holder. If there are more payees than one, all must endorse it.