Explain the formal requirements for negotiation of order paper and bearer paper.
What will be an ideal response?
The formal requirements for negotiation are very simple. If an instrument is payable to the order of a specific payee, it is called order paper, and it can be negotiated by transfer of possession of the instrument after indorsement by the person specified. For example, if Rachel's father gives her a check payable "to the order of Rachel Stern," then Rachel can negotiate the check by indorsing her name on the back of the check and giving it to the person to whom she wants to transfer it. Note that the check is order paper, not because the word order appears on the check but rather because it named a specific payee, Rachel Stern. If an instrument is payable to bearer or to cash, it is called bearer paper and negotiation is even simpler. An instrument payable to bearer may be negotiated by transfer of possession alone. Thus, if someone gives you a check that is made payable "to the order of cash," you can negotiate it simply by giving it to the person to whom you wish to transfer it. No indorsement is necessary to negotiate an instrument payable to bearer.
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What will be an ideal response?
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