A negotiable instrument must contain words of negotiability. These stamp its character.
The intent of the parties as to the negotiability of the instrument is indicated by their use of "words of negotiability." These words must be present in every negotiable instrument. Of course they do not in themselves make an instrument negotiable, that is, are of no effect where other elements are lacking. But they, too, must be present. It contains words of negotiability when (1) it is payable to order; (2) when it is payable to bearer. In the two following sections we consider what language makes an instrument payable to order and what, payable to bearer.
"The instrument is payable to order where It is drawn payable to the order of a specified person or to him or his order."
"It may be drawn payable to the order of 1. A payee who is not maker, drawer, or drawee; or
17. Kelley v. Hemingway, 13 Illinois Reports, 604.
2. The drawer or maker; or
3. The drawee; or
4. Two or more payees, jointly; or
5. One or some of several payees; or
6. The holder of an office for the time being.
Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty." 18
Instruments to order, customarily read "Pay to the order of John Brown" or "Pay to John Brown, or order."
It will be noticed that the person to whose order it is made may be the drawer or maker himself. In connection with this provision, one should recall the provision that "Where a note is drawn to the maker's own order it is not complete until indorsed by him."
"The instrument is payable to bearer:
1. When it is expressed to be so payable; or
2. When it is payable to a person named therein or bearer; or
3. When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable; or
4. When the name of the payee does not purport to be the name of any person;
5. When the only or last indorsement is an indorsement in blank." 19
18. Uniform Negotiable Instruments Law, SEC. 8.
19. Ibid, SEC. 9.
American Commeecial Law. 59
(1) When it is expressed to be so payable.
In such a case the instrument simply reads "Pay to bearer."
(2) When It Is payable to a person named therein, or bearer.
In such a case the instrument reads "pay to John Brown, or bearer." In that event it can be transferred by mere delivery without the indorsement of John Brown.
(3) When it is payable to the order of a fictitious or non-existing person and such fact was known to the person making it so payable.
If an instrument is made payable to a fictitious person, and this is known to the person making the instrument, it is considered as payable to bearer, and may be transferred without indorsement. From the fact that the payee is fictitious, the knowledge of that fact by the maker will be rebuttably presumed.
(4) When the name of the payee does not purport to be the name of any person.
Instruments payable to "cash," "bills payable," or any impersonal payee are negotiable and payable to bearer.
(5) When the only or last indorsement is an Indorsement In blank.
If an instrument, whether payable to bearer or not, is indorsed in blank, or if the last indorsement upon it is in blank, it may then pass by delivery without indorsement. That is to say it is payable to bearer. Thus suppose an instrument is payable to John Brown, or order. Its negotiation requires indorsement by John Brown. Let us say he indorses it "Pay to William Smith, (sd) John Brown." Then its further negotiation requires the indorsement of William Smith. Suppose that William Smith endorses it in blank, that is to say, by simply writing "William Smith." Its further negotiation may be accomplished by mere delivery or, if the parties choose, by indorsement.