Blank Indorsement
In a blank indorsement, the indorser signs their name on the back of the instrument without specifying the name of the indorsee (the person to whom the instrument is transferred). This type of indorsement essentially converts the instrument into a bearer instrument, which means it can be negotiated by mere delivery. The instrument becomes payable to the bearer, allowing anyone who possesses it to enforce payment.
Special Indorsement
A special indorsement involves the indorser signing their name on the back of the instrument and specifically naming the person to whom the instrument is being transferred. By including the name of the indorsee, the instrument becomes payable only to that specified person. The indorsee becomes the rightful holder of the instrument and can further negotiate or enforce payment.
Restrictive Indorsement
A restrictive indorsement is one where the indorser includes additional instructions or conditions with the indorsement. The purpose of a restrictive indorsement is to limit the further negotiation or use of the instrument. Common restrictive indorsements include phrases such as “For deposit only,” “Payees account only,” or “Not negotiable.” Such indorsements restrict the subsequent holders of the instrument from negotiating or transferring it to others.
Qualified Indorsement
A qualified indorsement is made when the indorser includes certain qualifications, disclaimers, or limitations to their liability. By making a qualified indorsement, the indorser is essentially modifying or limiting their responsibility regarding the instrument.
Example: An indorser may include a statement like “Without recourse” to indicate that they are not assuming liability in case of non-payment or other issues with the instrument.
