Future Business Leaders of America (FBLA) Business Law Practice Exam

What is the act of placing one’s signature on an instrument to transfer it to another called?

1. Indorsement

2. Transfer

3. Endorsement

4. Acknowledgment

The correct answer is: Indorsement

The act of placing one’s signature on an instrument to transfer it to another is referred to as indorsement. This term specifically applies to the transfer of negotiable instruments, such as checks or promissory notes. When an indorser signs their name on the back of the instrument, they are effectively endorsing it, thereby conveying their rights and interests in the instrument to another party. Indorsement is distinguished from endorsement, especially in certain legal contexts, where endorsement can sometimes refer to the act of adding a signature to the front of an instrument. However, in the context of this question, indorsement precisely captures the specific legal mechanism involving the transfer through signature on the back. The other terms do not accurately describe this action: transfer is a more general term that does not specify the action of signing, endorsement can have a different connotation depending on the context, and acknowledgment generally refers to the act of recognizing something, rather than the specific act of transferring rights through signature.