by In the context of negotiable instruments (such as cheques, promissory notes, and bills of exchange), the terms negotiation and assignment refer to the transfer of rights from one person to another. However, these two methods are legally distinct in their meaning, process, and effect.
Negotiation
Definition (Section 14 of the Negotiable Instruments Act, 1881)
Negotiation means the transfer of a negotiable instrument in such a manner that the transferee becomes the holder of the instrument and is entitled to receive the payment in their own name.
Modes of Negotiation:
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By delivery (if payable to bearer): Simply handing over the instrument is sufficient.
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By endorsement and delivery (if payable to order): The transferor must sign (endorse) the instrument and deliver it to the transferee.
Features of Negotiation:
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No need for written agreement
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The transferee becomes a holder in due course if taken for value and in good faith
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Provides better title than the transferor
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Common with cheques and promissory notes
Assignment
Assignment means the transfer of ownership or rights in a negotiable instrument through a written agreement under the Transfer of Property Act, 1882. It requires a written document and often registration.
Features of Assignment:
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Must be in writing and signed by the assignor
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Governed by property law, not negotiable instrument law
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The assignee does not get better title than the assignor
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The assignee is subject to prior defects in the title
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Legal notice of the assignment must be given to the debtor
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