'Negotiable Instruments' is explained in detail and with examples in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Negotiable instruments are documents which agree to provide payment to a particular individual known as the assignee. The individual who receives this payment is called the payee. This party usually has to be named or somehow mentioned on the instrument itself. One type of negotiable instrument is a check. Checks are negotiable instruments that can be transferred. These signed documents promise that they will pay the check bearer the specified amount on demand or on a future specified date.
There are other types of negotiable instruments that individuals and businesses use. Some of these are promissory notes, bills of exchange, certificates of deposit, and drafts. These negotiation instruments can be transferred which is part of what makes them so popular. The holder is allowed to receive the funds in cash or to utilize them in a different manner as they see fit.
The dollar amount specified on these documents comes with notes regarding the exact amount that has been promised by the payer. The funds have to be rescinded in full as specified or on demand. Negotiable instruments are allowed to be transferred from one individual to the next. After the instrument is fully transferred, the bearer gains complete legal title to the instrument and its promised funds.
Such documents can not be set with additional conditions or instructions regarding payment beyond the date and sum to be paid by order of the instrument. They do not deliver any additional promise from the group or person issuing the negotiable instrument besides the promise to pay that specific amount.
After nearly 150 years of existence, the check still remains the most typical form of negotiable instruments. This draft is payable by the financial institution of the payer once received and for the precise amount that is clearly mentioned. There are various other kinds of checks too. Cashier’s checks also do the same task. They require that the funds be set aside or allocated for the person who will receive them before the check itself can be issued. They are guaranteed funds in essence and not simply a promise to pay someone an amount. Money orders are much like checks.
The main difference is that they might or might not be issued by the financial institution of the payer. As with cashier’s checks, the money has to be paid in from the payer to the issuer in advance of the money order being printed up and finally issued. After the money order is in the hands of the payee, it can be changed in for cash according to the terms, policies, and conditions of the issuer in question.
Traveler’s checks are yet another form of negotiable instruments. They have a tighter security mechanism than the other forms of instruments. Their system requires two full signatures in order for the transaction to be completed. These types of checks can also be replaced if they are lost or stolen. When the traveler’s checks are first issued, the payer has to sign on the document itself to offer a signature sample.
After the payer decides to whom he or she will issue the payment, the individual must offer a countersignature in order for the payment to be made. These negotiable instruments are most often utilized when the payer is traveling abroad and needs a more secure form of payment which delivers a higher security feature in case they are stolen or defrauded while out of the country.

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