National Check Professional (NCP) Certification Practice Test

What is the characteristic of a negotiable instrument regarding payment demand?

1. Only to the bearer

2. On demand or at a fixed future time

3. Random payment schedule

4. Requires assertion of demand

The correct answer is: On demand or at a fixed future time

A negotiable instrument is characterized by its ability to facilitate the transfer of payment in a clear and defined manner. One of the key features of negotiable instruments, such as checks, promissory notes, and bills of exchange, is that they can either be payable on demand or at a specified future time. This flexibility allows the holder of the instrument to present it for payment whenever they wish, or to wait until a predetermined date for payment to be made. This characteristic is crucial because it provides certainty to both parties involved. For instance, if an instrument states that it is payable on demand, the holder can simply present it to the issuer for payment at any moment. Conversely, if it is set to pay at a future date, all parties understand when the payment is expected, which aids in financial planning and management. The other options do not accurately reflect the established principles of negotiable instruments. The concept of "only to the bearer" is too restrictive since many instruments are made to specific payees. A "random payment schedule" contradicts the fundamental properties of negotiable instruments, which are designed to have clear and unambiguous terms. Lastly, requiring assertion of demand is not a standard feature of negotiable instruments, as their defining characteristic is