Which of the following is true regarding a special indorsement?

Which of the following is true regarding a special indorsement?

• A. It can only be used by corporations
• B. It must specify the payee
• C. It requires a bank certification
• D. It restricts all use of the instrument

Answer: (B)

A special indorsement is a specific type of endorsement on a negotiable instrument, such as a check. It designates the person to whom the instrument is to be paid, effectively creating a transfer of the payment right to that specific individual or entity. This specification of the payee is essential because it indicates who is entitled to receive the funds. In the context of the other options, the assertion that it can only be used by corporations is inaccurate, as any individual or entity that possesses the necessary rights to the instrument can utilize a special indorsement. The requirement for bank certification is also irrelevant, as not all endorsements necessitate such certification. Lastly, while a special indorsement does specify the payee, it does not restrict all use of the instrument; rather, it allows for the transfer of rights to a named individual, which permits further negotiation or transfer under certain conditions. Therefore, option B is the only accurate statement regarding special indorsements.

A special indorsement is a specific type of endorsement on a negotiable instrument, such as a check. It designates the person to whom the instrument is to be paid, effectively creating a transfer of the payment right to that specific individual or entity. This specification of the payee is essential because it indicates who is entitled to receive the funds.

In the context of the other options, the assertion that it can only be used by corporations is inaccurate, as any individual or entity that possesses the necessary rights to the instrument can utilize a special indorsement. The requirement for bank certification is also irrelevant, as not all endorsements necessitate such certification. Lastly, while a special indorsement does specify the payee, it does not restrict all use of the instrument; rather, it allows for the transfer of rights to a named individual, which permits further negotiation or transfer under certain conditions. Therefore, option B is the only accurate statement regarding special indorsements.