Legal Definitions - indorse

To indorse (also spelled endorse) means to sign a financial document, typically on the back, to either transfer its ownership to another person or entity, or to accept legal responsibility for the obligation it represents. This act is most commonly associated with 'negotiable instruments,' which are formal written promises or orders to pay a specific sum of money, such as checks or promissory notes.

• Example 1: Transferring a personal check to a third party

  Imagine Sarah receives a check for $300 from her client, David, for freelance work. Instead of depositing it into her own bank account, Sarah wants to use this check to pay her friend, Mark, whom she owes $300. Sarah turns the check over, signs her name on the back, and writes "Pay to the order of Mark Johnson."

  Explanation: By signing and adding the instruction, Sarah has indorsed the check. She has transferred the right to receive the $300 from herself to Mark, making the check payable to him instead of herself.

• Example 2: A business owner personally guaranteeing a loan

  A small bakery, "Sweet Delights LLC," applies for a business loan from a bank. The bank agrees to lend the money but requires the owner, Ms. Chen, to personally guarantee the loan. Ms. Chen signs the promissory note (the document detailing the loan terms and promise to repay) in her capacity as the business owner, and then also signs her personal name on the back of the note.

  Explanation: Ms. Chen's personal signature on the back of the promissory note means she has indorsed it. This act makes her personally responsible for repaying the loan if Sweet Delights LLC is unable to, thereby accepting legal responsibility for the financial obligation.

• Example 3: A company paying a supplier with a customer's check

  "Green Thumb Landscaping" receives a check for $1,500 from a customer, "Oakwood Estates," for services rendered. Green Thumb Landscaping owes its plant supplier, "Botanical Wholesalers," $1,500. Rather than depositing the check and then writing a new one, Green Thumb's authorized representative signs the back of the Oakwood Estates check and writes "Pay to the order of Botanical Wholesalers."

  Explanation: Green Thumb Landscaping has indorsed the check, directing the payment from Oakwood Estates directly to Botanical Wholesalers. This demonstrates indorsing an instrument to make it payable to a party other than the original payee.