Negotiable Instruments



person possessing a negotiable instrument that is payable upon demand to whoever presents it for payment

blank endorsement

empty signature on a negotiable instrument that does not specify a particular endorsee or owner of said instrument, payable to the bearer

certificate of deposit (CD)

type of negotiable instrument that is a promise to pay a sum at a future date; usually issued by a bank or other financial institution


type of negotiable instrument that is an order to pay an amount on demand or when it is presented

commercial paper

common name for short-term, unsecured negotiable instruments issued by companies

demand instrument

type of negotiable instrument that is payable when it is presented for payment or on demand


three-party negotiable instrument in which one party orders another party to pay a third party on demand; often submitted electronically


one who makes the order to pay on a check; i.e., the one who signs it


one who is ordered to pay on a check, usually a bank


signature added to a negotiable instrument to transfer ownership rights in the instrument; for example, the signature on a paycheck

holder in due course (HDC)

person in possession of a negotiable instrument received in good faith without any notice of defect


party who makes the promise to pay in a note

negotiable instrument

signed document that includes an unconditional promise or order to pay a precise amount, either on demand or at a specified time


person or organization receiving funds


person or organization that distributes funds

personal defense

defense that can be asserted against a holder of a negotiable instrument but not a holder in due course; similar to defenses for breach of contract

promissory note

two-party negotiable instrument that includes a promise to pay a specific amount at a specific time, usually in the form of a loan

qualified endorsement

method of signing a negotiable instrument when passing title to another in which the signer of the instrument disclaims any legal liability for responsibility for payment on the note, often with the notation "without recourse"

restrictive endorsement

method of signing a negotiable instrument by the payee that restricts to whom it may be transferred

special endorsement

method of signing a negotiable instrument that identifies a specific person or institution that can receive the funds when different from the one the instrument was originally made out to

time instrument

negotiable instrument that is payable at a specific future date. Examples are promissory notes and certificates of deposit with specific maturity dates.

universal defense

method to avoid payment to all holders of a negotiable instrument, including a holder in due course (HDC)