Endorsement of Negotiable Instruments
Endorsement of Negotiable Instruments
Endorsement of a negotiable instrument involves the holder signing their name on the back of the instrument, thereby transferring the title or ownership to another individual or legal entity. The person making the endorsement is called the endorser, and the person to whom the instrument is endorsed is called the endorsee. Endorsements facilitate the transfer of property and can be of various types.
Types of Endorsement
- Blank Endorsement (General Endorsement)
- Definition: An endorsement where the endorser signs his name only, without specifying to whom the instrument is payable. This makes the instrument payable to the bearer.
- Example: If a cheque is payable to "Mohanji or order" and Mohanji signs only his name on the back, it is a blank endorsement. The cheque can then be transferred by mere delivery.
- Conversion: A blank endorsement can be converted into a special endorsement by adding a directive above the endorser’s signature, making it payable to another person or order.
- Special Endorsement (Full Endorsement)
- Definition: An endorsement where the endorser signs his name and specifies the name of the person to whom the payment is to be made.
- Example: If a cheque is payable to "Mohanji or order" and Mohanji writes "pay to the order of Manoj" and signs his name, it is a special endorsement. Manoj can then endorse it further.
- Restrictive Endorsement
- Definition: An endorsement that restricts further negotiation of the instrument.
- Example: "Pay to Mrs. Geeta only" or "Pay to Mrs. Geeta for my use." This means the instrument can only be paid to Mrs. Geeta and not further transferred.
- Partial Endorsement
- Definition: An endorsement that transfers only part of the amount payable on the instrument to the endorsee.
- Example: If Mr. Mohan holds a bill for Rs. 5,000 and endorses it as "Pay Sohan or order Rs. 2500," it is a partial endorsement and invalid as it does not operate as a negotiation of the instrument.
- Conditional Endorsement (Qualified Endorsement)
- Definition: An endorsement where the transfer of title is subject to the fulfillment of certain conditions or the occurrence of specific events.
- Example: If an endorser writes "Pay to Ramesh if he delivers 100 bags of rice," the endorsement is conditional, and the payment is subject to the delivery of the rice.
Additional Information
- Endorser and Endorsee: The endorser is the individual who signs the back of the instrument, while the endorsee is the individual to whom the instrument is transferred.
- Transferability: Endorsements facilitate the easy transfer of negotiable instruments, maintaining the instrument’s negotiability.
- Security: Endorsements add a layer of security and accountability, as the endorser guarantees the validity of the instrument.