How do negotiable instruments differ from ordinary contracts in terms of transferability and rights?

• A. Negotiable instruments are transferable and create a movable claim to payment; contracts are generally non-transferable unless assigned.
• B. Negotiable instruments cannot be transferred.
• C. Negotiable instruments are not enforceable in courts.
• D. Contracts are always freely transferable.

Answer: (A)

The crucial idea is that negotiable instruments are designed to be transferred by negotiation, not by merely handing over a document. When you endorse and deliver a promissory note or a check, you pass the right to receive payment to the holder, and that holder can enforce payment against the maker or drawee. The instrument itself embodies a movable claim to payment, so rights pass through possession and proper negotiation, often even to a holder in due course, without needing the other original party’s consent.

Ordinary contracts, on the other hand, bind the original parties and aren’t automatically transferable by mere possession. Transferring rights under a contract typically requires an assignment or a novation, and the new party generally takes the rights subject to the original contract’s terms and defenses. The contract itself isn’t negotiable in the same way; the transfer isn’t automatic and often requires formal steps.

So the best choice highlights that negotiable instruments are transferable and create a movable claim to payment, whereas contracts are generally non-transferable unless specifically assigned.