A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document. More specifically, it is a document contemplated by or consisting of a contract, which promises the payment of money without condition, which may be paid either on demand or at a future date. The term can have different meanings, depending on what law is being applied and what country it is used in and what context it is used in.
Examples of negotiable instruments include promissory notes, bills of exchange, banknotes, and cheques.
Because money is promised to be paid, the instrument itself can be used by the holder in due course as a store of value. The instrument may be transferred to a third party; it is the holder of the instrument who will ultimately get paid by the payer on the instrument. Transfers can happen at less than the face value of the instrument and this is known as discounting; this may happen for example if there is doubt about the payer's ability to pay.
Common prototypes of bills of exchanges and promissory notes originated in China. There, in the 8th century during the reign of the Tang Dynasty they used special instruments called feitsyan for the safe transfer of money over long distances.[1]
Later such document for money transfer used by Arab merchants, who had used the prototypes of bills of exchange – suftadja and hawala in 10–13th centuries, then such prototypes had been used by Italian merchants in the 12th century. In Italy in the 13–15th centuries, bills of exchange and promissory notes obtain their main features, while further phases of their development have been associated with France (16–18th centuries, where the endorsement had appeared) and Germany (19th century, formalization of Exchange Law). In England (and later in the U.S.), exchange law was different from