Order Instrument Law and Legal Definition

Order instrument is an instrument that is payable to a specific payee. An order instrument is also payable to any person that the payee designates. It is also termed order document or order paper.

Order instruments are papers which can be transferred by endorsement . Legal order instruments are always order instruments, even if they do not bear the «to the order of» notation. Cheques, drafts, bills of exchange, and registered shares are examples of legal order instruments. However, documents such as bills of lading and bill-like orders become negotiable only with such a notation.

The following is an example of a state law (New York) on an instrument payable to order:

NY CLS UCC § 3-110. Payable to Order

(1) An instrument is payable to order when by its terms it is payable to the order or assigns of any person therein specified with reasonable certainty, or to him or his order, or when it is conspicuously designated on its face as "exchange" or the like and names a payee. It may be payable to the order of

(a) the maker or drawer; or

(b) the drawee; or

(c) a payee who is not maker, drawer or drawee; or

(d) two or more payees together or in the alternative; or

(e) an estate, trust or fund, in which case it is payable to the order of the representative of such estate, trust or fund or his successors; or

(f) an office, or an officer by his title as such in which case it is payable to the principal but the incumbent of the office or his successors may act as if he or they were the holder; or

(g) a partnership or unincorporated association, in which case it is payable to the partnership or association and may be indorsed or transferred by any person thereto authorized.

(2) An instrument not payable to order is not made so payable by such words as "payable upon return of this instrument properly indorsed."

(3) An instrument made payable both to order and to bearer is payable to order unless the bearer words are handwritten or typewritten.