What is a restrictive endorsement?

A restrictive endorsement is a type of endorsement that limits the use of a negotiable instrument, such as a check, to a specific purpose or restricts the payment of the instrument to a particular person or organization.

For example, if someone writes "For deposit only" on the back of a check and then signs their name, they are using a restrictive endorsement. This means that the check can only be deposited into the designated person's account and cannot be cashed or transferred to another party.

Restrictive endorsements are often used by businesses or individuals who want to ensure that a check is only used for a specific purpose or by a specific party. This can help prevent fraud or misuse of the funds.

It is important to be aware of the restrictions placed on a negotiable instrument through a restrictive endorsement, as failure to comply with the restrictions may result in financial or legal consequences.