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Negotiable Instrument - How is Payee Identified

Naming the Payee in a Negotiable Instrument

Written by Jason Gordon

Updated at September 26th, 2021

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Table of Contents

How is a payee identified on the negotiable instrument?Discussion QuestionPractice QuestionAcademic Research

How is a payee identified on the negotiable instrument?

A negotiable instrument is payable to the holder of the instrument. A holder may either be an individual named in the instrument (order paper) or an individual in possession of the instrument (bearer paper). An instrument that names a payee may name or identify the payee in any number of methods, including by name, identifying number, office, or account number. As a general rule, an instrument is payable to the person intended by the issuer, whether or not that persons correct name appears on the instrument. 

If the payee is identified only by account number, the instrument is payable to the owner of that account. If the payee is identified by account number and name, the instrument is payable to the named person whether or not that person owns the account. 

If the instrument is payable to either Identified Person or Identified Person (this may use the word alternatively or some derivative thereof), it may be negotiated or enforced by any or all of the named individuals. If the instrument is made out collectively to two or more individuals (not alternatively), it is payable to all of them and must be enforced by all individuals together. That is, all individuals must indorse the instrument for transfer or present it for payment. If it is ambiguous as to whether the paper is payable in the alternative, it is assumed to be payable alternatively.

Next Article: Negotiable Instrument - General Rules of Interpretation Back to: COMMERCIAL PAPER

Related Topics

  • Negotiable Instrument
  • What is Negotiability and why is it important?
  • What is required for commercial paper to be negotiable?
  • Sum Certain (Contracts)
  • Inflation Adjustment Clause
  • When does commercial paper contain an Unconditional promise to pay?
  • Backup Line of Credit
  • What is Payable on Demand or Payable on Time?
  • What is Order Paper and Bearer Paper?
  • Bearer Form
  • How is a payee identified on the negotiable instrument?
  • What rules does the court apply in determining negotiability?

Discussion Question

How do you feel about the rules for identifying a payee? Why do you think these requirements are in place? Does the fact that bearer paper does not identify a specific individual as payee affect your opinion? Should a negotiable instrument be able to identify a payee by methods other than name? Why or why not?

Practice Question

Ethan creates a promissory not and identifies the payee as George or order. He then transfers the instrument to George Smith. Is this first name sufficient as an identifiable payee to make the instrument negotiable?

Academic Research


negotiable instrument payee identification

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