Legal Definitions - blank indorsement

A blank indorsement occurs when someone signs their name on the back of a negotiable instrument, such as a check or a promissory note, without specifying a new payee. By simply signing their name, the person essentially makes the instrument payable to whoever possesses it. This transforms the instrument into a "bearer instrument," meaning it can be transferred from one person to another by mere delivery, much like cash.

Here are some examples to illustrate this concept:

• Cashing a Check: Imagine Sarah receives a check for services she provided. She needs to cash it quickly at a check-cashing service. Instead of writing "Pay to [Name of Check Cashing Service]" above her signature, she simply signs her name on the back of the check. This act constitutes a blank indorsement, making the check payable to whoever holds it. The check-cashing service can then accept the check and give her cash, as they are now the bearer of the instrument.

• Transferring a Promissory Note: Mr. Davies, a small business owner, holds a promissory note from a customer who owes him money. Mr. Davies needs to pay a supplier urgently and decides to transfer the promissory note to the supplier as payment. He signs his name on the back of the note without adding "Pay to [Supplier's Name]." By doing this, he creates a blank indorsement, allowing the supplier to take possession of the note and demand payment from the original customer when it's due, as if the note had been made out to the supplier directly.

• Gifting a Check: Laura receives a birthday check from her aunt. She wants to give the money to her younger brother, Tom, to help him buy a new video game. Instead of depositing the check herself and then giving Tom cash, Laura simply signs her name on the back of the check and hands it to Tom. This blank indorsement makes the check payable to Tom, or anyone else who holds it, allowing him to deposit or cash it as if it were originally made out to him.