Legal Definitions - endorsee

An endorsee is the individual or entity to whom a negotiable instrument, such as a check or a promissory note, is legally transferred by another party through an act called an "endorsement." When an instrument is endorsed, the original holder (the "endorser") signs it, typically on the back, to pass their rights and ownership of the instrument to the endorsee. The endorsee then becomes the new legal holder, entitled to demand payment or enforce the terms of the instrument.

• Example 1: Paying a Third Party with a Check
  Imagine Sarah receives a check for $300 from her employer. Instead of depositing it into her own bank account, she owes her friend, Mark, $300 for a shared utility bill. Sarah signs her name on the back of the check and writes "Pay to the order of Mark Johnson."

  In this scenario, Mark Johnson is the endorsee. Sarah, by endorsing the check, has transferred her right to receive the $300 to Mark, making him the new legal holder of the check who can now deposit or cash it.

• Example 2: Transferring a Promissory Note
  Consider "Innovate Tech Solutions," a company that holds a promissory note from a client, "Future Designs Inc.," for $15,000, payable in one year. Innovate Tech Solutions needs immediate capital and decides to sell this note to a financial institution, "Capital Funding Group." Innovate Tech Solutions formally signs the promissory note, transferring its right to collect the $15,000 to Capital Funding Group.

  Here, Capital Funding Group is the endorsee. Innovate Tech Solutions (the endorser) has legally transferred its future right to receive payment from Future Designs Inc. to Capital Funding Group, which now holds the right to collect the debt when it becomes due.