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Contents
What is Negotiation?

When is an Instrument is negotiated?

Essentials of Negotiation. Modes of Negotiation What is Assignment?

The Assignment of Rights

Equitable Assignment Assignments by Operation of Law Negotiation and Assignment

Negotiation V/s Assignment

What is Negotiation?
Negotiation is a process of transferring the ownership,

right, title, interest of a person in a negotiable instrument to another person so as to give a good title to the transferee and make a transferee a holder of such instrument.

continued
Illustration

X hands over a cheque to Mr. Y here Mr. X has negotiates the instrument. But if he hands over a cheque to Mr. Y asking him to keep the same in his safe, the cheque is not negotiated to Mr. Y, Mr. Y does not become its holder but only a bailee.

When an Instrument is negotiated?

A negotiable instrument is a piece of paper which

entitles a person to a certain sum of money and which is transferable from one to another person by a delivery or by endorsement and delivery Promissory Notes Bills of Exchange Cheque

Essentials of Negotiation
There must be transfer of a negotiable instrument to

another person.
As a result of such transfer, the transferee must

become the holder of the instrument.

Modes of Negotiation
Negotiation by delivery Negotiation by endorsements Conversion of endorsement in blank into endorsement in full Holder deriving title from holder in due course Instrument acquired after dishonour or when overdue accomodation note or bill Instrument negotiable till payment or satisfaction

Modes of Negotiation.
Negotiation by delivery.
Subject to the provisions of section 58, a promissory

note, bill of exchange or cheque payable to bearer is negotiable by deliver thereof. Exception.-a promissory note, bill of exchange or cheque delivered on condition that it is not to take effect except in a certain event is not negotiable (except in the hands of a holder for value without notice of the condition) unless such event happens.

Modes of Negotiation.
Negotiation by endorsements

Subject to the provisions of section 58, a promissory

note, bill of exchange or cheque [payable to order], is negotiable by the holder by endorsement and delivery thereof Substituted by Act 8 of 1919, sec. 4, for "payable to the order of a specified person, or to a specified person or order".

Modes of Negotiation.
Conversion of endorsement in blank into endorsement in full
The holder of a negotiable instrument indorsed in

blanks may, without signing his own name, by writing above the endorser's signature a direction to pay to any other person as endorsee, convert the endorsement in full; and the holder does not thereby incur the responsibility of an endorser.

Modes of Negotiation.
Holder deriving title from holder in due course
a holder of a negotiable instrument who derives title

from a holder in due course has the rights thereon of that holder in due course.

Modes of Negotiation.
Instrument acquired after dishonour or when overdue accomodation note or bill
The holder of a negotiable instrument, who has acquired it

after dishonour, whether by non-acceptance or nonpayment, with notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor;

Continued
Illustration

The acceptor of a bill of exchange, when he accepted it, deposited with the drawer certain goods as a collateral security for the payment of the bill, with power to the drawer to sell the goods and apply the proceeds in discharge of the bill if it were not paid at maturity. The bill not having been paid in maturity, the drawer sold the goods and retained the proceeds, but endorsed the bill to A.. A's title is subject to the same objection as the drawer's title.

Modes of Negotiation..
Instrument negotiable till payment or satisfaction
A negotiable instrument may be negotiated

( except by the maker, drawee or acceptor after maturity) until payment or satisfaction thereof by the maker, drawee or acceptor at or after maturity, but not after sect payment or satisfaction.

The Assignment of Rights

The transfer of contractual rights (usually right to

receive money) to the assignee Statutory Assignments

Written and signed by assignor Complete and unconditional Written notice to promisor (debtor)

Assignee has same rights as the assignor had

(assignment is subject to equities) Debtor has same defences as against original creditor (example - set off)

Equitable Assignment
If conditions of statutory assignment are not met the

assignment is equitable Assignor must be party to any suit to recover from the debtor

Assignments by Operation of Law

Legislation assigns rights and obligations To executor/administrator upon death To trustee upon bankruptcy

Negotiation v/s Assignment

NEGOTIATION ASSIGNMENT

Negotiation can be done either by delivery or by delivery and endorsement.

Written document duly signed by the transferor is mandatory for an assignment.

The consideration in case of negotiation The consideration has to be proved in is presumed. case of an assignment. A notice of transfer to the creditor is not Informing the creditor about the mandatory. assignment is mandatory. The Act governing negotiation of negotiable instruments is the Negotiable Instruments Act, 1881 The activities concerning an assignment are regulated by the Transfer of Property Act, 1882