If Jonathan indorses an instrument in blank and gives it to Lily, she _____.
A) must indorse it before it can be negotiated further
B) may negotiate it without indorsing it
C) cannot convert the blank indorsement to a special one
D) is not liable even if she indorses it as it was given to her by Jonathan

Question

Quizplus · Accepted Answer

An instrument indorsed in blank is payable to the bearer and from that act is "bearer paper." As such, the bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation. If Jonathan indorsed the check in blank and gave it to Lily, Lily would have the right to convert the blank indorsement into a special indorsement. She could do this by writing the words "Pay to the Order of Lily" above Jonathan's indorsement. Then the check would have to be indorsed by Lily before it could be negotiated further.

If Jonathan Indorses an Instrument in Blank and Gives It