What is a bearer?

Published 30 Mar 2017

What is the difference between a holder and a holder in due course? Define each and explain the differences.

A holder is one

  • Who is entitled in his own name to the possession of the negotiable instrument.
  • Has right to receive or recover the amount from the parties thereto.

Under the Uniform Negotiable Instruments Act, a holder in due course is one who meets two special pre-requisites:

  • A person accepting a Third Party Check is a holder in due course, and holds legal title to the instrument before its maturity, regardless of any prior claims.; and
  • He takes it in good faith and for value, without knowledge of any claims against it or the instrument is any way defective.

What is a bearer?

A bearer instrument is a legal document which indicates that the bearer or the holder of the instrument has the title to the property such as shares or the bonds. It differs from normal registered instruments in the way that no records are kept who owns the underlying property and no new records are created when the ownership of the bearer instrument is transferred.

Whosoever holds the bearer instrument holds the underlying property. Such instruments are backed by the law.

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