Funeral Service Education (FSE) National Board Practice Exam

The term for an indorsement that limits the liability of the endorser is a qualified indorsement. In this context, a qualified indorsement includes specific wording that restricts the endorser's liability for the payment of the instrument. For example, an endorser might write “without recourse” on the instrument, which signifies to the party receiving the endorsement that the endorser does not take on the responsibility for payment should the maker default. This allows the endorser to transfer the instrument while minimizing their exposure to future liability.

In contrast, other types of endorsements do not impose such limitations on liability. A blank indorsement converts the instrument into a bearer instrument and does not limit the endorser's liability. A restrictive indorsement places certain restrictions on how the check or note may be negotiated (for example, it may specify that it is only to be deposited into a specific account), but it does not limit liability. A special indorsement identifies the person to whom the instrument is payable, thereby transferring it to that individual, without altering the liability terms. Thus, the correct identification of a qualified indorsement reflects its specific function in limiting liability for the endorser.