A bearer instruments means an instrument, the ownership in which can be transferred from one person to another by mere delivery of the instrument. The instrument can be made originally payable to the bearer or it may be made bearer subsequently by holder making a blank endorsement. The bearer character of the instrument will not be lost ever in those cases where a blank endorsement is followed by a full indorsement. The instrument continues to be transferable by mere delivery in all such cases. However, under Sction-50, bearer instrument can legally be changed to an order one by a restrictive endorsement. In such a case the relations between endorser and endorsee are substantially those of principal and agent. The endorsee gets a right to receive payment of the instrument and to sue and party to the instrument that the endorser could
have sued, but has no power to transfer his right to any other person unless he is expressly authorized to do so.
Illustration: B signs the following endorsements on different negotiable instruments payable to bearer : (a) Pay the contest to C only
(b) Pay C for my use
(c) Pay C or order for the account of B.
In all the above cases, C cannot further negotiate the instrument. This made it obligatory for the drawee or maker to examine all endorsements before making payment.