What characterizes a qualified endorsement?

A qualified endorsement is characterized by the endorser signing “without recourse,” which means that the endorser is not guaranteeing payment of the instrument in case the maker or drawer defaults. This type of endorsement limits the liability of the endorser and provides a level of protection; the endorser is indicating that they are transferring the title of the instrument but are not responsible for its payment if it is not honored.

In financial instruments such as checks, this is significant because it allows individuals to endorse a check without taking on the risk of it being unpaid. For example, if the check is dishonored, the recipient cannot pursue the endorser for payment.

In contrast, the other options do not accurately define a qualified endorsement. The notion of an endorsement being transferable to anyone is more characteristic of a blank endorsement, while adding a specific payment amount doesn't align with general endorsement practices and is more specific to certain transactions. Finally, the requirement for a witness signature is not a necessary characteristic of qualified endorsements, as endorsements typically do not require a witness.