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Restrictive Indorsement

instrument transfer pay terms

The act of a payee or other holder of an instrument, such as a check, that consists of signing his or her name upon the back of the instrument in order to transfer it to another and wording the signature in such a manner as to bar the further negotiability of the instrument.

For example, the phrases Pay the contents to A only, or to A for my use, are restrictive indorsements and terminate the transferability of the document.

An indorsement is restrictive if it (1) is conditional; (2) purports to proscribe further transfer of the instrument; (3) includes the terms for collection, for deposit, pay any bank, or similar terms denoting a purpose of deposit or collection; or (4) states that it is for the benefit or use of the indorser—the one who signs the back of the instrument in order to transfer it—or of another person.

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