Legal Definitions - bearer instrument

A bearer instrument is a type of document or instrument that is payable to the person who holds it, rather than to a specific person. This means that whoever physically possesses the instrument can claim the payment. Bearer instruments are negotiable, which means they can be transferred to another person simply by delivering the instrument to them.

• Cash: Physical currency is a common example of a bearer instrument. Whoever holds the cash can use it to make purchases or exchange it for goods or services.
• Bearer bonds: These are debt securities that are payable to whoever holds the physical bond certificate. The bondholder does not need to be registered with the issuer, and the bond can be transferred by delivering the certificate to another person.
• Traveler's checks: These are checks that can be used as a form of payment while traveling. They are payable to the bearer, which means they can be cashed by whoever holds them.

These examples illustrate how bearer instruments work. The person who physically possesses the instrument is considered the owner and can use it to claim payment or transfer it to another person. This makes bearer instruments convenient for transactions where immediate payment is required and there is no need for formal registration or identification.