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Simple English definitions for legal terms
negotiability
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A quick definition of negotiability:
Term: Negotiability
Definition: Negotiability means that a special kind of paper, called commercial paper, can be transferred to someone else by simply giving it to them or by signing it over to them. This means that the new owner has the right to use it and claim it as their own. This is different from regular contracts, where the new owner takes on any problems or issues that the original owner had with the contract. With negotiability, the new owner is protected from these problems and doesn't need to tell the person who owes the money that they now own the paper.
A more thorough explanation:
Definition: Negotiability refers to the ability of commercial paper to be transferred by endorsement and delivery or by delivery alone, allowing the transferee to have a rightful claim on it. This means that the transferee can become the legal owner of the commercial paper and can enforce its terms against the issuer.
For example, a check is a type of commercial paper that is negotiable. If someone endorses and delivers a check to another person, that person becomes the legal owner of the check and can deposit it into their own bank account. The bank will then credit the funds to the new owner's account, and the original issuer of the check will be obligated to pay the new owner.
Another example of negotiable commercial paper is a promissory note. If someone endorses and delivers a promissory note to another person, that person becomes the legal owner of the note and can enforce its terms against the issuer. This means that the new owner can demand payment from the issuer according to the terms of the note.
Overall, negotiability is an important feature of commercial paper because it allows for easy transfer of ownership and provides a level of security for the new owner.