What is the purpose of an endorsement?

What is the purpose of an endorsement?

• A. To make a check into a legal binding contract.
• B. To restrict the use of funds.
• C. To identify the payee.
• D. To cancel the check.

Answer: (A)

Endorsement is the signature on the back of a check that authorizes the transfer of the payment to another party. By signing, the payee or current holder shows the intent to transfer the right to receive the funds, allowing the check to be cashed or deposited by someone else or negotiated to another person. It does not create a binding contract, nor is it primarily about identifying the payee or canceling the check. Some endorsements can be restrictive (like “deposit only” to a specific account), but the general purpose is to negotiate the check and move the funds to a new holder.

Endorsement is the signature on the back of a check that authorizes the transfer of the payment to another party. By signing, the payee or current holder shows the intent to transfer the right to receive the funds, allowing the check to be cashed or deposited by someone else or negotiated to another person. It does not create a binding contract, nor is it primarily about identifying the payee or canceling the check. Some endorsements can be restrictive (like “deposit only” to a specific account), but the general purpose is to negotiate the check and move the funds to a new holder.