An instrument is negotiable when the rules of law allow it to be traded between parties and good faith holders (Holders in Due Course) receive the instrument free of most defenses. A promissory note, properly drafted, is a negotiable instrument.
That which is capable of being transferred by assignment; a thing, the title to which may be transferred by a sale and indorsement or delivery. A chose in action was not assignable at common law and therefore contracts or agreements could not be negotiated. But exceptions have been allowed to this rule in relation to simple contracts, and others have been introduced by legislative acts. So that, now, bills of exchange, promissory notes, bills of lading, bank notes, payable to order, or to bearer, and, in some states, bonds and other specialties, may be transferred by assignment, indorsement or by delivery when the instrument is payable to bearer.
When a claim is assigned which is not negotiable at law, such, for example, as a book debt, the title to it remains at law in the assigner, but the assignee is entitled to it in equity and he may therefore recover it in the assignor's name.