A third-party check is endorsed with the signature of both the second and third parties. The second party writes instructions on the check in regards to whom is the third party. The second party signs after these instructions. The third party signs the check and can include further instructions. All endorsements must fit within the endorsement field on the check.
The second party includes instructions by writing the words "Pay to the order of" followed by the third party's name. The third party can also include that phrase followed by his bank account information, or he can include any instructions. "For deposit only" is a common instruction to prevent anyone else from cashing the check if it is stolen.
The second party should verify the policy of the check issuer, because some do not allow third-party endorsements. The third party should check with his bank to ensure the bank accepts the check. Third-party endorsements are considered high risk because of the possibility of a forgery. While third-party endorsement is legal, banks choose to accept or reject the checks at their own discretion. The bank may also put the funds on hold for a certain period of time as a precaution. As an alternative option, the second party can cash the check and pay the third party directly.