Collection endorsement occurs when an individual signs the back of a check or other negotiable document with a condition or restriction, such as “for deposit only” or “pay to Josefina Cardoza only if she has worked 8 full hours on April 13,” in order to prevent theft or fraud. Additional types of endorsements include blank endorsement (no specific payee named), special endorsement (specifying who should receive payment), and qualified endorsement (limiting the endorser’s liability if the document is dishonoured).
A collection endorsement, also known as a restrictive endorsement, includes conditions or language that restrict further negotiation of a negotiable instrument. Its purpose is to prevent theft and embezzlement of checks. For example, a “for deposit only” endorsement means the check can only be deposited into the named person’s account and not cashed by anyone else. Another example is “pay to the order of XYZ Bank,” which restricts the check to be deposited only into XYZ Bank’s account. These examples demonstrate how a collection endorsement limits the use of a negotiable instrument for its intended purpose.
A collection indorsement is a legal document that allows a party to transfer ownership of a negotiable instrument, such as a check or promissory note, to another party for the purpose of collection.
The payee or holder of the negotiable instrument can make a collection indorsement.
No, a collection indorsement is not always necessary for collecting payment. However, it can provide additional legal protection and facilitate the transfer of ownership.
No, a collection indorsement can only be made on negotiable instruments, which are documents that can be transferred to another party.
Yes, a collection indorsement can be made electronically, as long as it complies with the applicable laws and regulations governing electronic transactions.
Once a collection indorsement is made, it generally cannot be revoked unless all parties involved agree to the revocation.
Yes, a collection indorsement can be made in blank, which means that the indorser does not specify the name of the party to whom the instrument is being transferred. This allows for greater flexibility in transferring ownership.
In most cases, a collection indorsement can be made by a minor. However, the enforceability of the indorsement may depend on the specific laws and regulations of the jurisdiction.
No, a collection indorsement cannot be made on a stolen instrument. Engaging in such activity would be considered illegal and could result in criminal charges.
Yes, a collection indorsement can be challenged in court if there are disputes or issues regarding its validity, authenticity, or compliance with legal requirements. It is advisable to consult with a legal professional in such cases.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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