What does the term "endorsement" refer to in the context of negotiable instruments?

The term "endorsement" in the context of negotiable instruments refers to a signature indicating future control over the instrument. When an individual endorses a negotiable instrument, such as a check or a promissory note, they provide a signature on the back of the instrument or in a designated area that effectively transfers their rights to the next holder. This signature acts as authorization for the subsequent holder to negotiate or claim the instrument, establishing a clear path of ownership and control.

In this context, endorsement not only serves as a means of transferring rights but also signifies the endorser's consent for the new holder to act upon the instrument, whether that means cashing a check or enforcing a promissory note. This control is pivotal in maintaining the instrument's negotiability and ensures that subsequent transferees can rely on the endorsement as a guarantee of authority.

The other options do not accurately represent the specific legal function of an endorsement within negotiable instruments. For instance, while the transfer of property rights might loosely relate to what happens when a negotiable instrument is endorsed, it does not capture the nuance of the signature's role in transferring future control specifically. Additionally, government regulation and legal agreements between parties pertain to broader aspects of legal transactions and