What Is Negotiable?

The word negotiable has two dist⛎inct meanings in business:

• A negotiable price is an offer that is open to discussion between a buyer and a seller and may be revised if both agree. An "asking price" is negotiable.
• A negotiable instrument is an asset that has a guaranteed cash value. The owner may swap it for goods, deposit it, or sell it. These assets also are referred to as marketable, transferable, or unregistered.

Understanding Negotiable

Many securities such as stock shares are called negotiable instruments because their ownership can easily be transferred. Nevertheless, the value of a security depends on the market and varies const🌞antl🔯y.

Other negotiable instruments, such as cash, cannot have their v൩alue modified. A $10 bill will always be worth $10 (even though the buying power of $10 can fluctuate with inflation or deflation). Still, it is aꦇ negotiable instrument because its legal ownership can be readily transferred from one party to another.

A legal docum🐎ent or instrument is termed negotiable if it is used in lieu of cash. The document represents a promise of payment at some point in the future.

In context, the word negotiable implies a cash value and comes with specific instructiꦍons about the timing of future cash flows. The term negotiable is useཧd to suggest the document comes with the same good faith commitment as cash.

Characteristics of a Negotiable Instrument

Negotiable instruments contain an uncꦏonditional promise to render payment for an exact sum, stated on the instrument. The agreement includes instructions on timing, such as on-demand or at some date in the future. Some negotiable instruments must be made out to a specific person or party.

Negotiable instruments can be redeemed for cash or transferred to another party. For a piece of paper to be as good as cash or neꦦgotiable by law, it must be a written document sign🐷ed by the entity drawing on the instrument—making it marketable or transferable.

It must also have an explicit 🍬order or promise to pay a specific amount of mone💝y.

Types of Negotiable Instruments

Several types of negotiable instruments are used in🐎 financial transactions.

Check

A check is a dated draft instructing a bank 𝐆to make a specific amount payable on demand. Checks can be written by an individual or a company stipulating an amount to be paid to the payee.

When a check is brought to a bank to be cashed or deposited, the money is withdrawn from the payor's bank account.

Certificate of Deposit

A 澳洲幸运5官方开奖结果体彩网:certificate of deposit (CD) is a negotiable instrument offered by most banks. The bank pays the customer a set amount of interest in return for depositing money for a set period ౠof t𒐪ime, which may be as little as three months or as long as five years or more.

A CD is negotiable in the sense that the custo🧜mer may withdraw the balance on demand, although that means losing some of the interest and paying penalty fees.

Promissory Note

A 澳洲幸运5官方开奖结果体彩网:promissory note is a document in which one party promises to pay another party a specific amount at a predetermined date in the future. A promissory note contains similar financial details to other negotiable instruments, including the♎ amount owed, date of issuance, interest rate, and the signature of the issuer or payor.

Promissory notes are typically used to obtain financing from a source other than a finan🤪cial institution. However, promissory notes are issued by the debtor—the person who owes the money—rather than the creditor, as is typical for most credit transactions.

Bill of Exchange and Drafts

A 澳洲幸运5官方开奖结果体彩网:bill of exchange is essentially a post-dated check that does not charge interest on the amount owed. It is a binding agreement in which one party is responsible for paying another party on demand at a future date. Bills of exchange are commonly used in international trade between importers and exporters. It 🦄is essentially a pay-on-delive🍷ry system.

A 澳洲幸运5官方开奖结果体彩网:time draft—a type of bill of exchange—makes a demand for payment at some point in the future. A time draft is typically used in inter﷽national trade and allows the buyer (the importer) time to pay the seller of the goods (the exporter).

A 澳洲幸运5官方开奖结果体彩网:sight draft is also used in international trade. In it, the importer agrees to pay the st💧ated amount as soon as the goods are delivered.

Negotiable vs. Non-Negotiable

Non-negotiable indicates that the price of a security or terms of a contract cannot be ꦺmodified. Non-negotiable can also refer to a security that cannot easily be transferred from one party to another.

Contracts

In 澳洲幸运5官方开奖结果体彩网:lease agreements, the monthly amount owed by⛄ the tenant is almost always non-negotiable. The landlord has established a fixed monthly rent or lease payment for the duration of the contract.

Other contracts might m✤ix negotiable and non-negotiable terms. An employment agreement might allow the salary to be negotiated, but the employee conduct policy would be non-negotiable.

In this case, negotiable means that a contract's terms can be modified depending on the circumstances and parties involved.

Securities

Certain securities are non-negotiable, as in the case of a 澳洲幸运5官方开奖结果体彩网:U.S. government savings bond, which can be cashed only by the bond's owner.

Negotiable securities can be transferred, exchanged, or re⭕sold betweওen different people. Coins and paper money are negotiable securities.

Liquidity

Negotiable securities are considered liquid, meaning they can easily be transferred or sold in the market. Non-negotiable instruments are considered illiquid since they cannot be resold in the market.

The Bottom Line

Negotiable instruments are legally binding documents that guarantee a stated monetary value when their ownership is transferred from one party to another. They can be exchanged for goods or cash or can be deposited by the🐽ir owners.

The term ♕negotiabl🗹e can also describe a contract or offer that is not fixed, meaning its terms are up for discussion.