What is the purpose of creating a negotiable instrument?

Creating a negotiable instrument primarily serves the purpose of allowing a note to be transferred. Negotiable instruments, such as promissory notes or checks, are designed to be easily transferred from one party to another, enabling the holder to convey the rights to payment or ownership effectively. This transferability is a key characteristic that facilitates commerce, as it allows individuals or businesses to exchange value easily and exchange rights to receive payments without the need for complex legal procedures.

In contrast, while ensuring that an instrument is legally binding is important, this aspect does not specifically address the unique purpose of a negotiable instrument. Similarly, serving as proof of ownership relates more to titles or deeds rather than to the transferability of notes. Establishing a credit rating for the borrower is a separate function outside the scope of negotiable instruments, as credit ratings are based on a borrower's credit history and financial behavior rather than the nature of the instrument itself. Thus, the primary and most relevant purpose of creating a negotiable instrument is indeed to facilitate its transferability.