The holder of an instrument wants that instrument to be paid to a particular person,wants to be sure that the proceeds from the instrument are deposited in that individual's account,and does not want to be liable to that person in the event that the instrument is not paid.What can the holder do to accomplish this?
A) give a blank, qualified, restrictive indorsement
B) give a special, qualified, restrictive indorsement
C) give a special, qualified, unrestrictive indorsement
D) give a special, qualified, restrictive indorsement, but it will not be possible to require the deposit of the proceeds into a bank account
E) give a special, qualified, restrictive indorsement, but it will not be possible to eliminate the liability in the event of nonpayment of the instrument

Question

Quizplus · Accepted Answer

A special, qualified, restrictive indorsement is necessary when the holder wants to specify the particular person to whom the instrument should be paid. By using a qualified indorsement, the holder is transferring the instrument with certain restrictions, such as the requirement that the proceeds be deposited into a specific account. A restrictive indorsement further limits the negotiability of the instrument, meaning that it can only be transferred to the specified individual or entity. A special indorsement is used when the holder specifically designates the person to whom the instrument is payable. By using a qualified, restrictive indorsement, the holder limits liability in case the instrument is not paid. Therefore, option B is the most appropriate for this situation.

The Holder of an Instrument Wants That Instrument to Be