Irregular indorsement is a type of signature on a financial instrument, such as a check or promissory note, made by a person who does not own the instrument. This means the individual is neither the holder nor the transferor of the instrument. An irregular indorser is often referred to as an accommodation party. This type of indorsement is also known as anomalous indorsement or full indorsement.
Irregular indorsement is commonly encountered in the fields of contract law and financial transactions. It is relevant in situations where a person signs a financial instrument to assist another party without transferring ownership. This can occur in various legal contexts, including:
Users can manage related forms and procedures using templates from US Legal Forms, which are drafted by qualified attorneys.
Here are a couple of examples of abatement:
Example 1: A friend signs a check on behalf of another person who is unable to do so due to a disability. The friend is not the owner of the check and is acting as an accommodation party.
Example 2: A business partner signs a promissory note to help secure a loan for their company, even though they are not the primary borrower (hypothetical example).
Irregular indorsement is governed by the Uniform Commercial Code (UCC), particularly sections that address negotiable instruments. Specific case law, such as Spragins v. McCaleb, 237 Ala. 658 (Ala. 1939), also defines the implications of irregular indorsements.
Examples of state differences (not exhaustive):
| State | Notes |
|---|---|
| California | Recognizes irregular indorsements in commercial transactions. |
| New York | Has specific rules under the UCC regarding the liability of irregular indorsers. |
| Texas | Allows for irregular indorsements but requires clear identification of the accommodation party. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Regular Indorsement | Indorsement made by the holder of the instrument. | Involves ownership; the indorser has rights to the instrument. |
| Accommodation Indorser | A person who signs a note to help another party. | Similar to irregular indorsement but emphasizes the intent to assist. |
If you find yourself dealing with an irregular indorsement, consider the following steps:
A regular indorsement is made by the holder of the instrument, while an irregular indorsement is made by someone who does not own it.
