What is meant by the term 'negotiable instrument'?

The term 'negotiable instrument' refers to a document that guarantees payment of a specific amount of money, either on demand or at a set time in the future. This type of financial instrument can be transferred from one person to another, meaning it can be endorsed or assigned to a new holder. Common examples of negotiable instruments include checks, promissory notes, and bills of exchange.

The defining characteristic of a negotiable instrument is its ability to be easily transferred and provide a degree of security in financial transactions, as it guarantees that the specified amount will be paid. This feature makes it distinct from legal documents for employment, corporate sharing agreements, or statements of financial performance, which do not have the same transferable and guaranteed payment attributes.