In the world of finance and business, the word “negotiable” often appears, especially when discussing prices, contracts, or certain documents. However, is it true that it always means “negotiable”?

A proper understanding of this term is very important so that you don’t make a mistake when making transactions, whether in buying and selling goods, business cooperation, or managing financial documents.

This article will help you understand the meaning of “negotiable” in the context of everyday life and financial transactions.

What is Negotiable?

The term negotiable means something that can be negotiated or modified, depending on the agreement between the parties involved.

In the context of price or contract, negotiable indicates that the value is not final and is still open to bargaining.

For example, the price of an item called negotiable means that the buyer can make a lower offer and may be accepted by the seller.

However, in the financial world, negotiable also refers to a document or legal instrument that has value and can be transferred, such as a check or promissory note (promissory note).

This document guarantees payment of a certain amount of money and can be transferred to another party.

Although the value remains the same, such as cash whose nominal value does not change, the document is called negotiable because it can be legally transferred without additional conditions.

In other words, negotiable can refer to two things, namely something that can still be negotiated, and a legal instrument that has value and is easily transferred.

Basically, this understanding is important to know when you can negotiate or make transactions flexibly.

Use of Negotiable in Everyday Life

The term negotiable is often found in various contexts outside the formal financial world. This word indicates that something can still be discussed again or adjusted based on mutual agreement.

Here are some examples of its use in everyday life, including:

1. Car price

When an advertisement says “Rp120,000,000 (negotiable)”, it means that the price of the car is not fixed and can still be negotiated.

The seller gives the buyer room to negotiate the price according to the condition of the vehicle or the market situation, before reaching a final agreement.

2. Salary

In job vacancies, phrases such as “Negotiable salary based on experience” indicate that the company does not set an absolute salary figure. The amount of salary can change depending on the candidate’s experience, abilities, or background so that the recruitment process becomes more flexible.

3. Employment contract

An employment contract may have negotiable sections. For example, prospective employees can request adjustments to salary, benefits, or working hours.

However, there are also parts that are non-negotiable, such as internal company regulations or established codes of ethics.

4. Property rental

In property advertisements, the term negotiable can refer to various things, from the amount of the deposit, the duration of the rental, to maintenance costs.

If the property owner states that the provisions are negotiable, the tenant can submit a special request before signing the rental agreement.

The Meaning of Negotiable in the World of Finance & Law

In finance and law, the term negotiable has a more technical and complex meaning than simply being negotiable or re-negotiable.

This term refers to negotiable instruments, which are legal documents that represent a promise of payment and have the same legal force as cash. Some of the main characteristics of negotiable instruments include the following:

• Guarantees payment of a certain amount of money

This document lists a certain value that must be paid by the issuer to the legal holder, either directly or at a certain time in the future.

• Can be exchanged for cash or goods

The holder of the document can cash the value into money or use it in other transactions, such as purchasing goods or services.

• Can be legally transferred to another party

Ownership of this instrument can be easily transferred to another person without the need for complicated procedures, as long as it is in accordance with applicable legal requirements.

Examples of negotiable instruments include checks, money orders, and promissory notes. The value is fixed, but ownership can change hands.

For example, cash is a negotiable instrument because whoever holds it legally owns its value, even though its nominal value cannot be changed.

Thus, in the world of finance and law, negotiability is not only about bargaining, but also relates to the legal aspects, ownership, and eligibility of the instrument as a legal means of payment or transaction.

Negotiable Instrument Characteristics

Negotiable instruments or negotiable instruments have a number of important characteristics that make them valid and valuable in the financial world.

This document is not just a writing, but a means of payment that has legal force and can be transferred. The following is an explanation of each of its characteristics, namely:

1. In the form of a written document

This instrument must be presented in physical or digital form that can be printed, such as a check or promissory note. The document is written evidence of the payment obligation between two parties, and must be clear and legible.

2. Signed by the maker

In order to have legal force, this document must be signed by the entity or individual who issued it. The signature shows a legal commitment to make payments according to the contents of the instrument.

3. Contains a definite promise to pay money

It contains an unconditional promise or order to pay a certain amount of money. The amount must be specific, not an estimate, and not dependent on additional terms or conditions.

4. Can be cashed or transferred

Negotiable instruments can be cashed into cash by their holders, or transferred to others. This transfer of ownership process is legally valid, making it a flexible and reliable transaction tool.

5. Considered liquid because it is easy to trade

Because it can be easily exchanged, sold, or used in various financial transactions, this instrument is classified as a liquid asset. This makes it very useful in trading, banking, and investment activities.

Also read related articles: 10 Investment Characteristics That Traders Must Understand

Types of Negotiable Instruments

In financial transactions, there are several types of negotiable instruments.

Each has its own specific functions and characteristics, but all are legally valid and can be transferred to another party. The following are some of the most commonly used types, including:

1. Check

A check is a dated document that serves as an order to the bank to pay a certain amount of money to the recipient (payee).

Checks can be issued by individuals or companies and signed by the account holder from which the funds will be withdrawn. Checks can be cashed or deposited into the recipient’s bank account.

Although their popularity has declined due to the development of online banking, checks are still used for certain payments, including cashier’s checks for which the funds have been prepared in advance by the bank.

2. Certificate of Deposit (CD)

A certificate of deposit is a financial instrument issued by a bank as proof that a customer has deposited a certain amount of money for a certain period of time, for example 6 months or 1 year.

During this period, the bank pays a fixed interest rate to the customer. Although funds on a CD generally cannot be withdrawn before maturity, under certain conditions the CD can be cashed in early (negotiated), but usually subject to a penalty.

CDs are considered negotiable because they can be traded or transferred on the secondary market.

3. Promissory Note

A promissory note is a written document that contains an unconditional promise from one party to pay a sum of money to another party on a specific date in the future.

This instrument usually includes the amount of debt, interest rate, maturity date, and signature of the debtor.

Promissory notes are often used outside the banking system, for example in borrowing and lending transactions between individuals or companies that do not involve financial institutions.

4. Bill of Exchange & Time Draft

A bill of exchange is a written order that binds one party to pay a sum of money to another party, either directly (a bill of exchange at sight) or at a specific time in the future (a bill of exchange at time).

This instrument is often used in international trade, for example between exporters and importers. Sight drafts are paid immediately after the goods are received, while time drafts give the buyer time to pay later.

A draft is used as a guarantee that payment will be made after the goods or services are received.

Negotiable vs. Non-Negotiable Differences

In the world of finance and legal contracts, it is important to understand the difference between negotiable and non-negotiable.

This difference determines whether a price, condition, or instrument can be changed or transferred. Here is an explanation of each in bullet points, namely:

Negotiable

1.Contracts

In an employment agreement, for example, some things like salary, benefits, or working hours can be discussed again before being agreed upon. This means that the contents of the contract are open to change according to the agreement of both parties.

2.Securities

Examples include checks, certificates of deposit (CDs), promissory notes, and even cash. These instruments can be transferred, sold, or cashed by anyone who legally holds them.

3.Price

The price of a car, property, or other item listed as negotiable indicates that the figure is not the final price, and the buyer can make another offer.

Non-negotiable

1.Fixed-price leases

In a lease agreement, for example, the monthly rent is usually determined from the start and cannot be changed until the contract ends.

Some points in an employment contract, such as ethical rules or company policies, are also non-negotiable.

2.US government bonds that can only be cashed by the owner

An example is the US government savings bond, which can only be cashed by its official holder. This type of security cannot be sold or transferred to another party.

3.Instruments without an option to transfer ownership

Because they cannot be traded or transferred, non-negotiable instruments tend to be illiquid and cannot be freely used in market transactions.

You may also be interested in this: Apa Itu Likuiditas? Pahami Jenis dan Pentingnya di InvestasiWhat is Liquidity? Understand the Types and Importance in Investment

Liquidity and Legal Transfer

It is important to note that negotiable instruments are known to have high liquidity in the financial world.

This means that these instruments are easily converted into cash or used in transactions because of their flexible and legal nature. This liquidity arises for the following reasons, namely:

1. Can be resold quickly

Instruments such as checks, promissory notes, or certificates of deposit can be traded on the secondary market without having to go through a complicated process, so they can be quickly cashed when needed.

2. Can be transferred between individuals

Ownership of these instruments can be legally transferred from one party to another, with only a simple procedure such as signing or endorsement.

3. Considered equivalent to cash if it meets legal requirements

As long as it meets legal requirements, negotiable instruments are treated almost the same as cash. This means that they can be accepted in transactions as legal tender.

To achieve this status, an instrument must meet several main requirements, namely:

• Written: must be in the form of a physical or digital document that is legally valid.
• Valid: must be signed by the issuing party and does not contain additional conditions that make payment uncertain.
• Guarantee payment of money: must contain a clear and unconditional promise or order to pay a certain amount of money to its legal holder.

If all these conditions are met, the instrument is considered negotiable and can act as a liquid asset in the financial system.

Negotiable in the Crypto World

Although the crypto world is based on technology and automation, the concept of negotiable remains relevant and is applied in various forms of digital asset transactions.

The flexibility that is usually found in the traditional financial world also appears in blockchain systems and decentralized platforms. Here are some examples, namely:

1. In the P2P market

In the P2P platform, users can directly transact with each other without intermediaries.

The selling or buying price of crypto assets, such as Bitcoin or USDT, is usually negotiable, depending on the agreement between users. This process is similar to bargaining in the marketplace.

2. In DeFi

In the DeFi ecosystem, interest rates, loan amounts, and tenors can be negotiated automatically through smart contracts.

Some protocols allow users to set their own borrowing or fund placement terms so that flexibility becomes the main value.

3. In CEX

On centralized exchanges, prices cannot be negotiated manually.

However, prices are very dynamic because they are determined by the order book mechanism, namely supply and demand from all users. In other words, the price remains flexible even though it is not through direct negotiation.

Risks & Tips when Dealing with Negotiable

Although the term negotiable gives the impression of being flexible and profitable, you still need to be careful in interpreting it.

Not everything that is said to be negotiable really provides fair bargaining space. Here are some risks and tips that you need to pay attention to, including:

1. Don’t immediately believe “negotiable price”

This label is tempting, but you need to first explore the upper and lower limits of the price offered. Sometimes, sellers stick to a certain price and only give a small discount so that the impression of being negotiable is false.

2. Understand which parts of the contract are negotiable

In a work or rental contract, not all points are negotiable. Salary or duration can be flexible, but the code of ethics or legal rules usually remain. Therefore, read carefully before agreeing.

3. Make sure the negotiable document has legal force

If you receive a document such as a check or promissory note, make sure it meets the legal requirements: written, signed, and guaranteeing payment. Without legal validity, negotiable claims may be invalid or high risk.

4. Beware of marketing gimmicks

Some parties use the word negotiable only as a strategy to attract attention, without any intention of providing real negotiation space. If you feel you are not given the opportunity to discuss, then it is likely just an empty label.

Conclusion

Well, that was an interesting discussion about Negotiable, which means negotiable, which is a financial explanation that you can read in full at the Crypto Academy at INDODAX Academy.

In conclusion, negotiable means something that can be negotiated, either in the form of price, contract, or financial instrument.

This term has a broad scope and is important to understand in context, especially when you are dealing with financial transactions, business cooperation, or digital assets.

By understanding the meaning and implications of negotiable, you can be more aware of hidden risks and make better decisions in every transaction.

Oh yes, in addition to expanding your investment horizons, you can also stay updated with the latest crypto news and directly monitor the price movements of digital assets on the INDODAX Market. Don’t forget to activate notifications so that you always get the latest information about digital assets and blockchain technology only at INDODAX Academy.

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FAQ

1.What is negotiable in general?
Something that can still be discussed or negotiated before being finally agreed upon.

2.What is a negotiable instrument?
A legal document that guarantees payment and can be transferred to another party, such as a check or promissory note.

3.Are all contracts negotiable?
No. Some parts of the contract are negotiable (e.g. salary), the rest are fixed (e.g. internal rules).

4.What is the difference between negotiable and liquid?
Negotiable is more towards being negotiable or transferable, while liquid means easy to sell or cash.

5.What are examples of negotiable instruments in crypto?
DeFi tokens with flexible governance, or P2P selling prices that can be negotiated directly between users.

Author: Boy