Difference Between Negotiation and Assignment

The various points of distinction between negotiation and assignment are discussed below:-

1.  Negotiation requires delivery only to constitute a transfer, whereas assignment requires a written document signed by the transferor.

2. Consideration is always presumed in the case of transfer by negotiation. In the case of assignment consideration must he proved.

3. In case of negotiation, notice of transfer is not necessary, whereas in the case of assignment notice of the transfer must be given by the assignee to the debtor.

4. The assignee takes the instrument subject to all the defects in the title of the transferor. If the title of the assignor was defective the title of the assignee is also defective.

However, in case of negotiation the transferee takes the instrument free from all the defects in the title of the transferor. A holder in due course is not affected by any defect in the title of the transferor; He may therefore have a better title than the transferor.

5. In case of negotiation a transferee can sue the third party in his own name. But an assignee cannot do so.

Effect of negotiation: 

Negotiation involves transfer of ownership of the instrument from its holder to the other person. When the instrument has been transferred by negotiation the holder who has taken it for value gets good title to the instrument notwithstanding any defect in the title of the transferor, except in the case of forgery because forgery conveys no title.

Thus, where the title of any prior endorser is defective by virtue of fraud, coercion or misrepresentation, the bona fide holder who has taken the instrument, in good faith gets a good title. Negotiation thus conveys a better title to the transferee than the transferor, when the holder is a holder in due course.

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By Hassham

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