Legal Definitions - restrictive indorsement

A restrictive indorsement is when a person signs the back of a negotiable instrument, like a check, with a condition or restriction on how it can be further negotiated or transferred. The purpose of a restrictive indorsement is to prevent theft or embezzlement of the instrument.

For example, if someone writes "for deposit only" on the back of a check, it means that the check can only be deposited into the account of the person whose name is on the front of the check. Another example is if someone writes "pay to John Smith only" on the back of a check, it means that only John Smith can receive the payment.

These examples illustrate how a restrictive indorsement limits the negotiation of the instrument and ensures that it can only be used for the intended purpose.