Final answer:
A blank indorsement should be used only for the purpose of deposit or collection, making the negotiable instrument payable to any bearer upon possession. It is not intended to impose warranty liability, reserve space, or to be used only in limited situations.
Step-by-step explanation:
A blank indorsement refers to the scenario where the holder of a negotiable instrument, such as a check, signs the back of the instrument without specifying a particular endorsee. The correct usage of a blank indorsement is a. only for the purpose of deposit or collection. This means that the instrument becomes payable to any bearer—that is, any person who possesses it may present it for payment.
A blank indorsement does not b. impose warranty liability on the maker as that pertains to the guarantees made by the indorser about the validity of the instrument. It is not used c. to reserve more space for other indorsements because additional space is not its purpose. Furthermore, blank indorsements are not d. only in limited situations; in fact, they are quite common, for instance, when depositing checks.
To change a blank indorsement to a restrictive one, the holder can simply write instructions above their signature on the back of the instrument, such as "For Deposit Only."