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  An instrument is said to be transferable when it can be freely passed from one person to another either by delivery alone or by endorsement and delivery without the need to notify the party liable on it.
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Negotiability is the attribute of an instrument that enables the transferee to have a title superior to that of the transferor, provided he/she is a holder in due course and for value without notice of any defect in the title of the transferor. This means that the person transferring the instrument passes a title better than his/her own to the person to whom the instrument is transferred. An instrument may be transferable without being negotiable, so it is a non-negotiable instrument, and this does not imply that it can no longer be assigned to a third party; rather it means that the person to whom it is assigned cannot have a better title to it than the assignor.


Assignability refers to instruments of the change of ownership which is not valid by mere delivery but must be evidenced by a separate document such as a deed of assignment, e.g. a share certificate. Therefore, while a transferable instrument requires mere delivery, or endorsement and delivery, to be valid, it only passes the title of the transferor to the transferee, whether or not that title is defective. Negotiability, on the other hand, passes a good title to the transferee, whether or not the transferor possessed a good title. Assignability requires more than delivery to pass title in the instrument to a third party. There must be an accompanying document to establish the transfer transaction.
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Requirements For Negotiability

In order for an instrument to be negotiable, there are certain requirements that must be met. These are:
  1. Signature
  2. Unconditional order or promise
  3. A fixed amount
  4. The transfer must be for value
  5. There must be no evidence on its face to destroy negotiability
  6. The instrument must be complete and regular on the face of it at the time of transfer.
  7. It must be transferred before the instrument is overdue.
  8. The transferee must act in good faith.

Factors Not Affecting Negotiability

  1. Wrong date: it means that an instrument will remain negotiable irrespective of the date on the face of such instrument being wrong.
  2. Ante-Dating or Postdating: the instrument will remain negotiable whether the date on the face of it has passed, has not reached or falls on a Sunday.
  3. The discrepancy between Words and Numbers: where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the amount payable. Such a discrepancy will not affect the negotiability of the instrument but will be resolved by having recourse and honouring the words on the instrument over the figures.
  4. Unspecific Interest Rate: if the rate is unspecified, this will not affect the negotiability of the instrument, but interest will be calculated at the judgment rate.

Endorsement And Delivery

Endorsement is completed by delivery. Delivery is the transfer of possession, actual or constructive from one person to another. An endorsement on a bill is a written mark or signature on the bill transferring possession and all other rights attached to that bill from one person to another.

Types Of Endorsement

  1. Conditional Endorsement: a conditional endorsement is one that stipulates a condition for its fulfilment. Although the endorser of a bill may stipulate conditions in the endorsement, the payer may disregard the fulfilment or non-fulfilment of the conditions when making payment to the endorsee or holder. Therefore, a conditional endorsement does not have a legal effect on the execution of a negotiable instrument.
  2. Blank Endorsement: a blank endorsement is one that is not endorsed in favour of a specific endorsee. It is endorsed openly and may be executed by any bearer. A blank endorsement can be converted to a special endorsement by the holder. Therefore, a bill that was endorsed openly (blank) so as to make it payable to any bearer can subsequently be endorsed by the holder to make it payable to a specific person.
  3. Special Endorsement: it specifies the person to whom, or whose order, the pill is to be payable.
  4. Restrictive Endorsement: an endorsement is restrictive if it prohibits the further negotiation of the bill, or if it expresses that it is a mere authority to deal with the bill as thereby directed, and not a transfer of the ownership thereof. Therefore, while a transfer or assignment passes the title of the drawer of a bill to the holder and a negotiable bill may transfer a better title than that of the drawer, a restrictive endorsement ensures that the title passed by the endorser is limited on the face of the bill.
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This article was first published on 21st April 2021


Foluke Akinmoladun is the Managing Solicitor of Trizon Law Chambers. She has been a legal practitioner for 13 years and has experience in a wide range of commercial matters. She is a certified mediator, a member of the Chartered Institute of Arbitrators(UK), holds an Advanced Diploma in Accounting from the Association of Chartered Certified Accountants (UK) and is also a tax consultant. She is a dispute resolution expert, handling commercial disputes from negotiations all the way to litigation (if need be).

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