Pay to the Order of _____

Ted, former maritime lawyer and KQED listener, sent us a legal definition that comes packed with terms and conditions. Here at Says You! we’re still waiting for the money to come in. Thanks for giving our definition a raise Ted!

On your July 9 show you erred on the definition and derivation of “pay to the order of.” It does not reflect the words or implication conveyed by the payee of a check when demanding payment to herself (an act called “presentment” not “order”). “Pay to the order of . . .” means, “This is a negotiable instrument, which may be transferred to a third party by an endorsement directing payment to that party or to the order of that party.” The “order” refers to the direction from the payee or subsequent endorser to pay to another. Without the words “the order of” a check is payable only to the payee.

Another example is a bill of lading, a shipping receipt obtained by the shipper upon delivery of the cargo to a carrier for carriage. Bills of lading come in two flavors: negotiable bills of lading when made out with the words “consigned to the order of Jane Doe,” and non-negotiable when made out with “consigned to Jane Doe.” In the first case the carrier must deliver to the person to whom consignment is “ordered” by the last subsequent “order of” endorsement, if any. In the second case, the carrier may deliver the cargo only to Jane Doe, the person named as the “‘consignee”, no matter how many subsequent endorsers there might be.