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Transfer of a Negotiable Instrument - Explained

Transferring Commercial Paper between Holders

Written by Jason Gordon

Updated at September 26th, 2021

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Table of Contents

What is the transfer of commercial paper?Discussion QuestionPractice QuestionAcademic Research

What is the transfer of commercial paper?

An instrument is transferred when it is delivered by a person (other than its issuer) with the purpose of bestowing the right to enforce the instrument pursuant to its terms. Transfer vests in the transferee the rights of the transferor to enforce the instrument. While the transferee receives the rights of the transferor, it means the transferee may also be subject to any defenses the payor may have to payment of the instrument. That is, the transferee stands in the same position as the transferor with regard to the payors defenses against payment.

Note: As previously discussed, once transferred, the recipient of the bearer paper is a holder of the note. Even if the transfer is involuntary (inheritance or judicial order) or wrongful (theft of bearer paper), the individual in possession of the paper is a holder of the paper.

Next Article: Indorsement of a Negotiable Instrument Back to: COMMERCIAL PAPER

Related Topics

  • How is commercial paper negotiated to a holder?
  • What is Transfer of a negotiable instrument?
  • What is Indorsement of a negotiable instrument?
  • What are the various types of indorsement?
  • Bank Endorsement
  • Blank Endorsement
  • Accommodation Endorsement
  • Accommodation Endorser

Discussion Question

What do you think about the mental intent necessary for transfer of an instrument? Why do you think the definition requires the intent to transfer the right to present and receive payment of the instrument?

Practice Question

Connie issues a promissory note that is payable to bearer. She gives the note to Todd. Todd then delivers the note to Judy. Do we have valid transfers of the instrument? What issues might Judy face in presenting the instrument for payment?

Academic Research


negotiable instrument transfer

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