What is the act of transferring ownership of a negotiable instrument called?

The act of transferring ownership of a negotiable instrument is known as negotiation. In the context of negotiable instruments like checks or promissory notes, negotiation involves the formal process whereby the holder of the instrument transfers their rights to another party. This process typically requires the endorsement of the original holder and may also involve delivery of the instrument itself.

Negotiation is crucial because it defines the conditions under which these financial instruments can be passed along. The holder who negotiates the instrument does so under the terms laid out by the Uniform Commercial Code (UCC), which governs the transfer of such instruments in the United States. This ensures that the rights of the new holder are protected, allowing them to pursue payment or enforcement against the issuer.

In this context, while “assignment” generally refers to the transfer of rights under a contract rather than ownership of a negotiable instrument, "endorsement" refers specifically to the signature that must be placed on the back of the instrument to authorize the negotiation. "Conveyance" more commonly pertains to the transfer of real property and does not apply in this context. Thus, negotiation is the most appropriate term for this process.