LAW 603 Study Guide - Bearer Instrument, Negotiable Instrument, Promissory Note

• School: Ryerson University
• Department: Law and Business
• Course: LAW 603
• Professor: Gil Lan

Document Summary

Negotiable instruments flow free of the equities and they are governed by special rules that are intended to make the business world operate efficiently. By definition, a negotiable instrument consists of a contract that contains an obligation to pay; it is a contract that is intended to eventually result in the payment of money. Many rules that normally govern contracts do not apply in the same way to negotiable instruments, there are three important differences. The assignee cannot be in a better position than the assignor. A negotiable instrument is more valuable that a simple contract because it is negotiable. It can be easily transferred from one party to another in a way that may remove any defects. On the down side it carries the major risk that is associated with every contract: non-performance. If a cheque is created by a person who has no assets, it may be a worthless piece of paper.