Distinguish between Negotiation and Assignment.

Section 14 of the Negotiable Instrument Act defines negotiation as When a Promissory Note, Bid &Exchange or Cheque is transferred to any person, sous to constitute that person the holder thereof, the instrument is said to be negotiated-. Thus negotiation means that the negotiable instrument is transferred to another person in such a manner, that the transferee of the instrument becomes its holder, who has the right to possess the instrument in his own name and to recover the amount mentioned therein from concerned parties.

When the ownership of a negotiable instrument is transferred by writing a separate deed of transfer, it is termed as ‘assignment’. Endorsement is not required in this case. Assignment is done under Transfer of Property Act. The title of the assignee shall be the same as that of the assignor.

Distinction between Negotiation and Assignment

Negotiation

  1. It can be done by mere delivery if the instrument is a bearer one or by endorsement and delivery if the instrument is an order instrument.
  2. Consideration is presumed.
  3. The title of the transferee is better than of the transferor.
  4. Notice of transfer to debtor is not necessary.
  5. It is done under Negotiable Instrument Act.

Assignment

  1. It can be done by a written document.
  2. Consideration must be proved.
  3. The title of the assignee is the same-as that of the assignor.
  4. The debtor must be informed about the assignment.
  5. It is done under Transfer of Property Act.
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