Legal Definitions - full indorsement

A full indorsement, also known as a special indorsement, is a signature on a negotiable instrument (such as a check or promissory note) that specifies the person or entity to whom the instrument is now payable. This means that for the instrument to be further transferred or cashed, the named person or entity must also sign it. It essentially directs the payment or benefit of the instrument to a particular individual or organization, making the instrument no longer payable to whoever possesses it, but only to the designated party.

• Example 1: Transferring a Check

  Imagine Sarah receives a check for $750 made out to her. Instead of depositing it herself, she wants to use it to pay her landlord, Mr. Henderson, for her monthly rent. On the back of the check, Sarah writes: "Pay to the order of Mr. Thomas Henderson" and then signs her own name, "Sarah Jenkins."

  This is a full indorsement because Sarah has specified Mr. Henderson as the new payee. The check is no longer payable to anyone who holds it; it is now specifically payable to Mr. Henderson. He must now indorse the check himself before he can cash it or deposit it into his own account.

• Example 2: Assigning a Promissory Note

  A small business, "Bright Future Consulting," holds a promissory note from a client, "Apex Solutions," for $10,000, due in six months. Bright Future Consulting needs immediate funds to purchase new equipment from "Tech Innovations Inc." Instead of taking out a loan, Bright Future Consulting decides to transfer the promissory note to Tech Innovations Inc. as part of their payment.

  On the back of the promissory note, an authorized officer of Bright Future Consulting writes: "Pay to Tech Innovations Inc." and then signs on behalf of Bright Future Consulting. This constitutes a full indorsement. The promissory note is now payable to Tech Innovations Inc., and they would need to indorse it if they wished to transfer it further or present it for payment when it matures.

• Example 3: Gifting a Certificate of Deposit

  Mr. Lee holds a transferable certificate of deposit (CD) from his bank. He wishes to gift the value of this CD to his granddaughter, Emily, for her college education. He goes to the bank and, following their procedure for transfer, writes on the back of the certificate: "Pay to Emily Wong" and signs his name, "Arthur Lee."

  This action represents a full indorsement, directing the ownership and eventual payment of the CD to Emily. Emily would then need to present the certificate with her own indorsement to the bank to claim the funds when the CD matures or to transfer it into her own name.