Legal Definitions - indorsement

An indorsement (also spelled endorsement) refers to the act of signing one's name, typically on the back of a financial document such as a check, promissory note, or certificate of deposit. This signature serves a specific legal purpose, most commonly to transfer ownership of the document to another person or entity, to guarantee its payment, or to formally acknowledge that a payment has been received.

• Example 1: Transferring a Check

  Imagine Sarah receives a check for $300 from a client. Instead of depositing it into her own account, she wants to use it to pay her friend, Mark, for a service. Sarah signs her name on the back of the check and writes "Pay to the order of Mark Johnson."

  This illustrates an indorsement because Sarah's signature on the back of the check legally transfers her right to the funds to Mark, allowing him to deposit or cash the check.

• Example 2: Guaranteeing a Promissory Note

  A small business, "Innovate Tech," takes out a loan from a bank, documented by a promissory note. The bank requires the business owner, David Chen, to personally guarantee the loan. David signs his name on the back of the promissory note, adding "Payment Guaranteed."

  Here, David's indorsement on the promissory note means he is personally promising to repay the loan if Innovate Tech defaults, thereby guaranteeing the instrument's payment.

• Example 3: Acknowledging Partial Payment on a Debt

  Laura lent her brother, Tom, $500, and they documented it with a simple promissory note. When Tom makes a partial payment of $100, Laura signs and dates the back of the promissory note, making a note that reads, "Received $100 payment on [Date]."

  Laura's signature on the back of the promissory note acts as an indorsement, formally acknowledging that a portion of the debt has been paid, which legally reduces Tom's outstanding obligation.