Question

Fill in the blank. A holder of a promissory note endorses the note and transfers it to another party to settle a payable in lieu of cash. The promissory note is an example for a(n) ______________ instrument.

Answer 1

Negotiable Instrument

Negotiable instrument is usually a document which guarantees the payment of a specified amount either on demand or at some point of time, to the payee whose name is usually mentioned in the document. It can also be a bearer a bearer document.

Promissory note is such a document which can be endorsed to another person (Usually by mentioning the name of the person to whom it is transferred, duly signed by the holder).

In the given case the holder is having a promissory note which entails him the receipt of amount whatever is mentioned in that note. The same person is having a liability to pay to another person which is being settled by the holder of promissory note by endorsing it thereby the right to receive the amount is transferred to that another party.

Based the above it is concluded that Promissory note is a type of Negotiable Instrument.