Which indorsement type may render a negotiable instrument non-negotiable?

Which indorsement type may render a negotiable instrument non-negotiable?

• A. Facultative indorsement
• B. Conditional indorsement
• C. Restrictive indorsement
• D. Qualified indorsement

Answer: (C)

Restrictive indorsement changes how the instrument can be used or transferred. When the indorser writes terms that limit the instrument’s future negotiation—for example, “for deposit only” or “for collection”—the holder’s rights to freely transfer the instrument to anyone else are restricted. Negotiable instruments must be freely transferable and payable to order or bearer without extra conditions or limitations. By attaching a restriction, the instrument no longer meets that standard, so it can become non-negotiable for subsequent holders. Other indorsements mainly affect who bears liability (qualified/without recourse) or add a condition, but they don’t inherently impose the broad transfer restrictions that destroy negotiability.

Restrictive indorsement changes how the instrument can be used or transferred. When the indorser writes terms that limit the instrument’s future negotiation—for example, “for deposit only” or “for collection”—the holder’s rights to freely transfer the instrument to anyone else are restricted. Negotiable instruments must be freely transferable and payable to order or bearer without extra conditions or limitations. By attaching a restriction, the instrument no longer meets that standard, so it can become non-negotiable for subsequent holders.

Other indorsements mainly affect who bears liability (qualified/without recourse) or add a condition, but they don’t inherently impose the broad transfer restrictions that destroy negotiability.