Negotiability and Assignability

Negotiability and Assignability

Negotiability

Negotiability refers to the transferability of all the rights and titles on an instrument by delivery or by endorsement and delivery, vesting with the bonafide transferee for value even better title that what the transferor had. This is the unique characteristics of a negotiable instrument. In short, transferability of negotiable instruments is called negotiability.

Assignability

Assignability refers to the transferability of personal properties and rights from one person to another as gift or sale or as security. The transferee gets the same as much title as the transferor has. In short, transferability of ownership of any goods other than negotiable instruments is called Assignability.

Difference between Negotiability and Assignability

Negotiability

Legal Ownership:

It passes to the transferee by mere endorsement in the case of a bearer instrument and by endorsement and delivery in the case of an order instrument.

Notice:

Notice is not necessary for the holder of negotiable instrument to claim the payment from the debtor.

Nature of title:

Holder of negotiable instrument in due course gets a better title than even the transferor. It means that the transferee gets the instrument free from any defect existing in the title of the transferor or any prior party.

Consideration:

Consideration is presumed

Assignability

Legal Ownership:

An assignment can be made by observing certain formalities. For instance, an instrument is to be made in writing, duly stamped and signed by the transferor or his agent.

Notice:

In case of actionable claim, notice of the assignment by the transferee regarding the transfer of debt to the debtor is necessary.

Nature of title:

The transferee’s title to the instrument is subject to the defects of the transferor’s title. In other words, defects in the title of the transferor pass on to the transferee too.

Consideration:

The assignee has to prove the consideration for the transfer.