A security which can be transferred from one person to another either by directly passing from hand to hand, as in the case of money, coupon bonds, a check made payable to "bearer" or "cash," etc., or by indorsement, as in the case of a note, check, or draft, payable to the order of a person, etc.

An instrument or security which cannot be passed from hand to hand or is not good in the hands of any holder except the one to whom it was originally issued, unless by the consent of the person or corporation issuing the same, is "non-negotiable." A mileage book, issued by a railway company, in the name of John Smith, is for his special use alone, he having no right to sell or transfer it to any other person. It is, therefore, " non-negotiable." Many railroad tickets, made out in the names of the holders and sold at a discount price, are " non-negotiable." The ordinary railroad ticket, bought at the regular rate, is "negotiable," so is the theatre ticket, but a return check given to the person who leaves the theatre during the performance, permitting him to re-enter, is not supposed to be "negotiable." A note made payable to William Black with the words "or order" omitted would not be "negotiable," because William Black would not have the right to transfer his rights to any one else. To him and him only was the note made payable.

From the standpoint of finance, the formal requisites of negotiable paper are concisely put by Francis M. Burdick as follows:

"(a) It must be in writing and signed; (b) it must contain an unconditional order or promise to pay a certain sum of money; (c) it must be payable at a determinable time; (d) it must be payable to order or to bearer; (e) a bill of exchange (including check) must name or indicate the drawer."