what is a negotiable instrument 
a negotiable instrument is a signed document that promises a payment to a specified person or assignee in other words it is a formalized type of iou a transferable signed document that promises to pay the bearer a sum of money at a future date or on demand common examples of negotiable instruments include personal checks cashier s checks money orders certificates of deposit cds promissory notes and traveler s checks the person receiving the payment known as the payee must be named or otherwise indicated on the instrument because they are transferable and assignable some negotiable instruments may trade on a secondary market understanding negotiable instrumentsnegotiable instruments are transferable so the holder can take the funds as cash or use them for a transaction or other way as they wish the fund amount listed on the document includes the specific amount promised and must be paid in full either on demand or at a specified time a negotiable instrument can be transferred from one person to another once the instrument is transferred the holder gains full legal title to the instrument 1these documents provide no other promise on the part of the entity issuing the instrument in addition no other instructions or conditions can be made for the bearer to receive the amount listed on the negotiable instrument for an instrument to be negotiable it must be signed with a mark or signature by the maker of the instrument the one issuing the draft this entity or person is known as the drawer of funds the term negotiable refers to the fact that the note in question can be transferred or assigned to another party non negotiable describes one that is firmly established and can t be adjusted or amended examples of negotiable instrumentsone of the more well known negotiable instruments is the personal check it serves as a draft payable by the payer s financial institution once it s received in the exact amount specified similarly a cashier s check serves the same function but it requires the funds to be allocated or set aside for the payee prior to the check being issued 1money orders are similar to checks but may or may not be issued by the payer s financial institution often cash must be received from the payer before the money order is issued once the money order is received by the recipient it can be exchanged for cash traveler s checks function differently as they require two signatures to complete a transaction at the time of issue the holder must sign the document to provide a specimen signature once the payer determines to whom the payment will be issued a countersignature must be provided for payment traveler s checks are generally used when someone is traveling to a foreign country and is looking for a payment method that provides an additional level of security against theft or fraud while traveling 2other common types of negotiable instruments include bills of exchange promissory notes drafts and cds 