Future Business Leaders of America (FBLA) Business Law Practice Exam

What is a negotiable instrument?

1. A contract for future services

2. A written document with legal rights transferrable by endorsement

3. An agreement to sell assets

4. A type of employment agreement

The correct answer is: A written document with legal rights transferrable by endorsement

A negotiable instrument is defined as a written document that guarantees the payment of a specific amount of money either on demand or at a set time. It is transferable by endorsement, which means that the holder can sign it over to another party, thus transferring their rights to receive payment. This characteristic of being easily transferable is essential, as it allows for the fluid exchange of financial instruments in commerce. This concept is fundamental in understanding how certain financial transactions are executed. Instruments like checks, promissory notes, and bills of exchange fall under this category. They are designed to circulate within the business and financial environments, providing a mechanism for settling debts and facilitating trade. The other choices presented do not fit the definition of a negotiable instrument. A contract for future services does not involve a monetary claim that is easily transferred. An agreement to sell assets pertains more to the transfer of ownership of goods or property rather than a financial instrument. Lastly, a type of employment agreement relates specifically to the terms of employment between an employer and an employee, which is not a financial document intended for negotiation or transfer of rights.