75 Hour Broker Pre Licensing Practice Test

A negotiable instrument is a written document that serves as a promise or order to pay a specific amount of money to a designated person or bearer. This instrument can be endorsed or transferred from one party to another, which is a key characteristic that allows it to function effectively as a means of payment.

The ability to endorse a negotiable instrument facilitates its transferability, making it a practical tool in commerce and finance. For example, checks and promissory notes are common types of negotiable instruments that can be transferred to others through endorsement. Therefore, the definition that captures this concept is the one that describes a written order to pay a certain sum that can be endorsed.

In contrast, the other options describe concepts that do not align with the characteristics of a negotiable instrument. For instance, a contract that cannot be easily transferred lacks the essential feature of negotiability, while a receipt merely signifies that a transaction has been completed and does not function as a promise to pay. Lastly, a type of property title transfer pertains to real estate and ownership rights rather than financial instruments.