What type of negotiable instrument is payable to order?

Order paper is a specific type of negotiable instrument that is payable to a designated person or the person they assign. This means that the instrument includes language that indicates it can be transferred to another party by endorsement. When an order paper is created, it explicitly states that it is payable to the order of a particular individual or entity, or alternatively, it can be transferred to another party through endorsement.

This unique characteristic of order paper enhances its negotiability, as it can be passed from one person to another, allowing for fluidity in transactions. The ability to endorse and transfer the rights to the payment makes it a key instrument in financial operations involving loans and credit.

In contrast, bearer paper is payable to whoever holds it, while a promissory note is a written promise to pay a specified amount but can also be categorized as either order or bearer paper depending on its terms. A certificate of deposit, while a financial instrument, does not fall into the standard categories of order or bearer paper, as it typically represents a deposit made with a financial institution rather than a negotiable form of payment transferable by endorsement.