"How many" people (signatures, endorsements) can legally endorse the
back of a check and what is the "correct" and "legal" verbiage to use?
Example: party A receives a check, signs it over to Party B who signs
it over to Party C who signs it over to Party D who deposits it into
his checking account & keeps the money.

bella_aria2,

Thanks for your question.  Check endorsements are covered by the
Uniform Commercial Code, which are the Federal guidelines and laws
regarding commercial transactions.  States also have their own
addendums and provisions to the UCC.  According to Part 2, Article
3-204 of the UCC, an endorsement is a signature other than that of the
person who wrote the check.  This endorsement is used to negotiate
(cash it) the check, restrict payment of the check (ie, "for deposit
only) or to provide liability for the endorser (proof of
payment/receipt/contract).

There are, according to Part 2, Article 3-205, three types of
endorsements:

Blank endorsement: This is the standard endorsement where the person
to whom the check is made out signs the check.
Restrictive endorsement: This is where there are restrictions placed
along with the endorsement, such as "For Deposit Only". Note that if
"For Deposit Only" appears on the endorsement, the payee cannot
receive cash back when depositing the check.

Special endorsement: This is where you "sign over" a check with the
comment "Pay to the order of:" the name of the person to whom you wish
to assign the check.  The signature of that person is required prior
that individual being able to negotiate the check

There are combinations of the above endorsements as well.An
endorsement can be a combination of a Restrictive and Special
Endorsement, i.e., "Pay to the order of ABC Company for deposit only"

Now, with the definitions out of the way, let's get to your questions.
 If a check is made out to more than one person, then all parties
named in the "Pay to" line have to endorse the check unless the check
is made out "Pay to the order of Person A OR Person B" in which case,
the endorsement of either will suffice.

Regarding third-party endorsements.  There is no set guideline on the
number of Special Endorsements, however, individual banks may have a
policy in place regarding acceptance of Special Endorsement checks.  I
would contact your bank if you have a situation where you may not be
sure regarding their policy.


As a side note: Notice the "Do not write below" line on checks that
appeared a few years ago?  Guess what.  You can write all you want
down there. This was based upon a proposed federal regulation for
containing the bank's information (stamp, account information, etc)
within a specific sized area of the check.  The check printers assumed
that no-one would argue with the Fed, so they began printing "Do Not
Write Below this Line" on checks.  Well, retailers complained that
there wasn't enough room to add their information on the back of a
check, so the Fed backed off and changed the regulation. However, the
printing companies had already changed their presses and they weren't
about to change them again.

Thanks again for your question.  If you need any further
clarification, please let me know.

Regards,

-THV


Search Strategy
bank guidelines for "endorsing a check"

Endorsement Types
http://www.bankersonline.com/operations/gurus_op060302i.html

Endorsement Question
http://www.bankersonline.com/articles/bhv04n03/bhv04n03a9c.html

The Endorsement Area of a Check
http://www.bankersonline.com/articles/bhv10n12/bhv10n12a19.html

Uniform Commercial Code
http://www.law.cornell.edu/ucc/ucc.table.html

Uniform Commercial Code-State Listings
http://www.law.cornell.edu/uniform/ucc.html

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Request for Answer Clarification by bella_aria2-ga on 13 Nov 2002 10:31 PST

I took a business law class, albeit 25 years ago, and I thought I
remembered the professor telling us that that if, for example, a check
is made out to Amy Smith and she signs her name (only her name) on the
back, then Susie Brown could sign her name under it(only her name)and
cash it.  Or, if I signed my name (only my name) under Susie Brown,
then I could cash it. Or, if you signed your name under mine, then you
could cash it...up to a maximum of 4? names allowed by law. I told
this to a young person yesterday and then wondered afterwards if I was
accurate.  OR would each person "be required by law" to write "Pay to
the order of" for each subsequent endorsement to be legal? Thank you.

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Clarification of Answer by tar_heel_v-ga on 13 Nov 2002 11:07 PST

According to Part 2, Article 3-205 of the UCC: "The holder may convert
a blank indorsement that consists only of a signature into a special
indorsement by writing, above the signature of the indorser, words
identifying the person to whom the instrument is made payable."

I interpet this as stating that in order for an endorsement to become
a special endorsement (which is signing over a check) it must contain
words within the endorsement to that effect.

I have found nothing in the UCC that spells out a maximum number of
special endorsements allowed per check, but will continue to check (no
pun intended :) )

I have also placed a call to the compliance officer of a local bank
and hope to get a return call.

Thanks!

-THV

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Clarification of Answer by tar_heel_v-ga on 14 Nov 2002 18:58 PST

bella_aria2,

According the the compliance officer at a local bank, she was unaware
of any regulation regarding the number of "third-party" endorsements
on a check, however, some banks may have it spelled out in their
deposit agreements that customers sign when they open an account.  The
words "Pay to the order of" would be required for each special
endorsement.  She also said that tellers are instructed to bring
anything "out of the ordinary" to the attention of the head teller or
bank manager and that a check bearing three or 4 special endorsements
would definately be out of the ordinary and that it is up to the
receiving bank to determine if they will honor the check immediately. 
She said that if that were the case, they may put a 5-7 day hold on
the funds to ensure that the check would clear the issuing bank.

I hope this answers your questions.

Regards,

-THV

Thorough and professional. Thank you very much.