Legal Definitions - restricted indorsement

A restricted indorsement is a type of indorsement that limits the negotiation or payment of a negotiable instrument, such as a check or promissory note. It can include a condition or language that restricts further negotiation or payment of the instrument.

For example, a check may have a restrictive indorsement that says "for deposit only" or "pay to the order of XYZ Bank." This means that the check can only be deposited into the account of the named payee or the named bank, and cannot be further negotiated or paid to anyone else.

Another example of a restrictive indorsement is "pay to John Smith upon completion of the project." This means that the check can only be paid to John Smith once the project is completed, and cannot be negotiated or paid to anyone else until that condition is met.

Restricted indorsements are used to prevent theft or fraud, and to ensure that the instrument is used for its intended purpose. They can also limit the liability of the indorser if the instrument is dishonored.