Also known as: payable to the bearer · bearer instrument · bearer paper
Written by attorneys · grounded in primary & secondary sources — see below
A designation on a promise or order to pay that indicates the person in possession of the instrument is entitled to payment. This feature satisfies the requirement that an instrument be payable to bearer or to order for it to qualify as negotiable under the UCC.
Pedro Pacheco writes a check from his account at First Bank and leaves the payee line blank while adding the word cash. The bank teller accepts the check and pays cash to Pavel Petrov who presents it. Because the instrument meets the bearer requirement at issuance, Petrov qualifies as a holder entitled to enforce payment without further indorsement.
Precision Tools issues a promissory note that expressly states it is payable to bearer. Paul Peterson takes possession of the note after purchasing it from the company. The note's terms allow Peterson to enforce it simply by presenting the instrument, without any need for a special indorsement naming him.
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An instrument is payable to bearer when its terms state it is payable to bearer or the order of bearer, when it is payable to cash or the order of cash, or when it otherwise indicates that the person in possession is entitled to payment or does not name a specific payee.
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Yes. A check made payable to cash is treated as bearer paper because it does not identify a specific payee and indicates that the person in possession is entitled to payment.
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Yes. An instrument payable to bearer becomes payable to an identified person when it receives a special indorsement that names the person to whom it is made payable.
Supporting sources