The commercial bank can safely advance loans against fully negotiable securities. The negotiable securities are those which are transferable or negotiable by endorsement or delivery or merely by delivery. The new owner has a clear title to the securities provided he takes such securities in good faith and for value, According to the provisions of the negotiable instruments.
There are three main forms of negotiability.
Negotiability by statute:
Certain instruments may be given negotiability by statute law as is the case with bills of exchange, promissory notes by cheque.
Negotiability by custom:
There are certain instruments which are negotiable by prevailing mercantile custom and are judicially recognized in the country of the origin. The fully negotiable instruments by custom are Bearer bonds; Scrip to bearer; Share warrants payable to bearer; and Treasury bills.
Negotiability by estoppel:
The instruments which are not strictly negotiable may become transferable in certain cases by the law of estoppel, provided the instrument itself, on the face of it, purports to be transferable either by delivery or by endorsement and delivery or provided its former holder represented it to be as such. The principal is stopped from denying its negotiability against a transferee who taken it in good faith and for value.
There are three main forms of negotiability.
Negotiability by statute:
Certain instruments may be given negotiability by statute law as is the case with bills of exchange, promissory notes by cheque.
Negotiability by custom:
There are certain instruments which are negotiable by prevailing mercantile custom and are judicially recognized in the country of the origin. The fully negotiable instruments by custom are Bearer bonds; Scrip to bearer; Share warrants payable to bearer; and Treasury bills.
Negotiability by estoppel:
The instruments which are not strictly negotiable may become transferable in certain cases by the law of estoppel, provided the instrument itself, on the face of it, purports to be transferable either by delivery or by endorsement and delivery or provided its former holder represented it to be as such. The principal is stopped from denying its negotiability against a transferee who taken it in good faith and for value.
