Definition
Approved indorsed notes are promissory notes that carry the indorsement of a person other than the maker, added for the purpose of providing additional security to the holder or payee. The indorser's signature on the note signals creditworthiness and creates a secondary obligation: if the maker defaults, the indorser becomes liable on the instrument. The word "approved" reflects the creditor's or lender's acceptance of the indorser as a satisfactory guarantor of the debt — that is, the indorser is someone whose financial standing the creditor has vetted and found adequate to backstop the maker's promise.
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Common Language
Modern common usage (Wiktionary): "Indorse" (also spelled "endorse") commonly means to express approval or support for something, or to sign the back of a check to authorize payment.
Historical common usage (Webster's 1913): To indorse is to write upon the back of a paper or document; specifically, to write one's name on the back of a bill of exchange or promissory note, thereby becoming responsible for its payment if the original party fails to pay.
The gap here is modest but worth noting. In ordinary modern usage, "endorsing" something most often suggests a public expression of support. In the commercial and legal context of indorsed notes, indorsement is a formal legal act creating binding financial liability — not mere approval or recommendation. The word "approved" compounds the potential confusion: it does not mean the note itself has been certified or validated by a regulator, but rather that the particular indorser has been found acceptable by the creditor.
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Common Confusion
Approved indorsed notes should not be confused with guaranteed notes or accommodation paper, though the practical effect is similar. An accommodation indorser signs the instrument for the benefit of another party without receiving value, while a regular indorser typically transfers an instrument they hold. The label "approved" distinguishes these notes from indorsed notes bearing an indorser of uncertain standing — the creditor's approval of the indorser is the operative qualifier. Researchers should also take care not to conflate indorsement with aval (a civil-law guarantee written on an instrument), which performs a comparable function under different legal traditions.
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Why It Matters in Research
This term belongs almost exclusively to older commercial law contexts and appears most frequently in banking regulations, loan agreements, discount window rules, and early American commercial statutes from the nineteenth and early twentieth centuries. Researchers working in this period will encounter "approved indorsed notes" as a category of eligible collateral or discount paper — the kind of instrument a bank could present to a clearinghouse or central lending facility because a creditworthy second party had vouched for it.
The practical significance in corpus research is navigational: when this phrase appears in historical banking documents or commercial codes, it signals a collateral or credit-quality standard, not merely a description of paper-handling practice. A note being "approved indorsed" was a term of art that determined whether the instrument qualified for a particular financial transaction, discount, or loan.
Because modern commercial law under the Uniform Commercial Code has largely displaced the older vocabulary of indorsement-as-security in favor of precise categories such as accommodation parties, sureties, and guarantors, this phrase is now a historical marker. Researchers should not expect to find it in contemporary statutes or contracts. When it appears in pre-UCC materials, the applicable law will typically be found in state versions of the Negotiable Instruments Law or its predecessors.
Jurisdictional variation in the older law is also relevant: the precise obligations of an indorser for security — as distinct from a transferring indorser — were treated differently across states before the Negotiable Instruments Law brought greater uniformity, and the meaning of "approval" could depend on institutional custom as much as statute.
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Historical Dictionary Support
Both editions of Black's Law Dictionary consulted offer identical, minimal definitions: "Notes indorsed by another person than the maker, for additional security." The brevity is telling — the term was evidently understood as a working commercial phrase needing little unpacking for the legal professionals of the era. What the historical dictionaries do not address is the significance of the word "approved," which carried real institutional weight in banking practice. The approval function — identifying the indorser as creditworthy and acceptable to the creditor — was central to the term's operational meaning, yet it goes unglossed. Neither edition addresses the procedural question of how approval was established, nor the legal consequences of an indorser later proving to have been unworthy of that approval at the time of the transaction.
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Jurisdictional Note
The obligations flowing from indorsement for security were governed by state negotiable instruments law prior to UCC adoption, and the standards for what made an indorser "approved" were often set by institutional practice — bank rules, clearinghouse regulations, or lending policies — rather than statute. Researchers should identify the governing jurisdiction and applicable pre-UCC commercial law when interpreting this term in historical documents.
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