How does endorsing a bill of exchange transfer payment rights?

In the context of commercial transactions, a bill of exchange is a negotiable instrument that embodies a right to the payment of money. Endorsement is the formal process used to transfer these payment rights from one creditor to another.1

When a bill is payable "to order," the transferor must sign the back of the instrument—an act known as endorsement—and deliver it to the new creditor, who is referred to as the endorsee. This process functions as follows:1

• Transfer of Rights: Endorsement effectively conveys the rights held by the endorser to the new holder of the instrument.1
• Creation of Liability: By endorsing the bill, the transferor also assumes a legal obligation to pay the specified amount if the drawee fails to meet the payment when the bill reaches maturity.1
• Chain of Ownership: This mechanism allows the instrument to circulate through a long chain of parties, as each subsequent holder can further transfer the bill to satisfy their own debts or credit needs.1

If an instrument is instead payable "to bearer," the rights are transferred through simple delivery without the necessity of an endorsement.1