Indorsement, Negotiation and Transfer of Notes

Indorsement

An indorsement is a signature, other than that of a signer as maker, drawer, or acceptor, made on an instrument for the purpose of negotiating it, restricting payment, or incurring indorser’s liability (UCC § 3-204(a)).

Special and blank indorsements

A special indorsement identifies the person to whom the instrument is made payable. A blank indorsement does not identify a person; an instrument indorsed in blank becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed (UCC § 3-205).

Transfer

An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving the recipient the right to enforce it. Transfer vests in the transferee any right of the transferor to enforce the instrument (UCC § 3-203).

Allonges

For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is part of the instrument (UCC § 3-204(a)). Such a paper is commonly called an allonge.

Researching indorsement and transfer in your state

First, find the statute or rule that governs indorsement and transfer where you live. State law controls most of these questions, so the answer can change from one state to the next. Next, read recent decisions from the appellate courts in your state. They show how judges apply the law today. Also, check the local rules of the court that would hear your case. Our state procedures guide links to each state’s official rules. In addition, the Research Center explains how to confirm a source is still good law.

Sources and further reading

Official sources used on this page:

• law.cornell.edu
• law.cornell.edu
• law.cornell.edu

Related reading on Lawtopolis:

• Negotiable Instruments (UCC Article 3)
• Person Entitled to Enforce a Note
• Assignments of Notes, Mortgages and Receivables