Printable Format84-3-109. Payable to bearer or to order. (a) A promise or order is payable to bearer if it:
(1) States that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
(2) does not state a payee; or
(3) states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
(b) A promise or order that is not payable to bearer is payable to order if it is payable (1) to the order of an identified person or (2) to an identified person or order. A promise or order that is payable to order is payable to the identified person.
(c) An instrument payable to bearer may become payable to an identified person if it is specially endorsed pursuant to K.S.A. 84-3-205(a). An instrument payable to an identified person may become payable to bearer if it is endorsed in blank pursuant to K.S.A. 84-3-205(b).
History: L. 1991, ch. 296, § 9; February 1, 1992.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text, and is a modified form of prior provisions of 84-3-110 and 84-3-111. To be an instrument (an Article 3 negotiable instrument), the instrument must be payable to order or bearer (unless the single exception allowed by 84-3-104(c) applies, discussed below).
Subsection (a). Bearer paper includes those instruments which are payable to anyone, bearer, cash, or no designated person. In a simplifying change to former law, the bearer language controls if an instrument is payable both to order and to bearer. Strangers to the original transaction are thus contemplated holders.
Subsection (b). Order paper (paper that can be further negotiated only by a named person) will normally be payable to "the order of [a named person]" or "to [a named person] or order." These are the words of negotiability. The prior 84-3-110, the predecessor to this section, expressly permitted such language as "assigns" or a conspicuous label of "exchange" to serve as words of negotiability, but these express references have been omitted from the new provisions. The only safe course to assure negotiability is to use "order" language contemplated in the 1995 Official Text of 84-3-109. The second paragraph of Official Comment 2 to 84-3-104 expressly talks of the uncertainty of using alternative phrases.
The sole exception to the requirement that the instrument be payable to order or to bearer is contained in 84-3-104(c), which provides that a check is negotiable whether or not it contains order or bearer language. Thus all checks are negotiable. See 84-3-104 Official Comment 2. As a result, a note reading "Pay to Patty Payee" would not be negotiable, there could not be a holder in due course, and all of the maker's defenses would be preserved. A check stating "Pay to Patty Payee" would be negotiable, and a holder in due course could enforce it.
Subsection 3. A holder can convert order paper into bearer paper by a blank indorsement, such as the payee's signature. Bearer paper can be converted into order paper by specially indorsing it. See 84-3-205. Converting bearer paper to order paper (or use of a restrictive indorsement (84-3-206)) is useful to lessen the risk of loss if the instrument is stolen or otherwise lost.
Revisor's Note:
Former section 84-3-109 was repealed by L. 1991, ch. 296, § 111 and the number reassigned to the current text.