When
the maker or holder of a negotiable instrument signs the same otherwise than as
such maker, for the purpose of negotiable, he is said to endorse the same. The
person who makes an endorsement is known as endorses, while the person in whose
favor it is endorsed is called endorsee.
The
endorsement must be put down by the holder or by his duly authorized agent.
When and agent endorses and instrument on behalf on his principal, he must
mention his fact in the endorsement lest he should be personally held liable
thereon. The agent must mention his power f attorney for endorsement before his
signature. The endorsee may if he likes insist upon seeing the power of
attorney in order to satisfy him that the agent has in fact got the authority
of endorsement.
It is
quite valid to put down the endorsement on the face of the instrument, though
it is not advisable as it will make the document clumsy. When an instrument is
negotiated by endorsement so many times that no space is left for further endorsement
the holder may attach a slip called alone to the instrument for further endorsement. In such case it is advisable to
put down endorsement partly on the instrument and partly on the alone so that
the alone may not be detached and attached to some other instrument.
Essentials
of valid endorsement
i.
It must be on the back or on the face of the instrument or on a slip of paper
attached to it.
ii.
It must be made by the maker or holder or drawer of the instrument or by his
duly authorized agent.
iii.
It must be signed by the maker or the holder and if by the maker, he must sign
it again then as a maker.
iv.
It can be either “in blank” or “in full”.
v.
It must be made with the intention of transferring the instrument to a third
person so as to entitle the transferee must clearly be expressed thereon.
vi.
It must be completed by delivery of the instrument with the intention of
passing the property mentioned in the instrument to a third person.
Kinds of Endorsement
Following
are the kinds of endorsement
1.
“Blank” or “General Endorsement”
A
blank or general endorsement is the one in which the endorser simply put down
his signature on the instrument, without putting down the name of the endorsee.
The effect of blank endorsement is that to make the instrument payable to
bearer so that property therein can thence forward be transferred by me on
delivery of the instrument.
This
type of endorsement is not as good as forgery to this endorsement is quite
easy.
2.
“Special Endorsement” or “Endorsement is full”
If
the endorsement contains not only the signature of the endorser but also the
name of the endorsee, it is known as special endorsement or endorsement in
full. If an instrument is endorsed in blank, its holed may without signing his
own name, by writing above the endorser’s signature a direction to pay to any
other person as endorsee, by converging the endorsement in blank into an
endorsement in full and the holder does not thereby incur the responsibility of
an endorser.
3. Restrictive Endorsement
As a
general rule, the holder of negotiable instrument has endorsement may restrict
such right, when it is known as restrictive endorsement. Such an endorsement
may (1) restrict or exclude the right of further negotiation by express words
that are “Pay Ahmad Ali only” or (2) merely constitute the endorsee and agent
to endorse the instrument or to receive its contents for the endorser or for
some other specified person.
4. Absolute Endorsement
An
endorsement is absolute when the endorsement in free from any condition
attached to it. This is the general rule of endorsement that the holder of a
negotiable instrument has right to transfer it to other s by further
negotiable. So such endorsement may be called an absolute endorsement.
5. Partial Endorsement
A
partial endorsement is one which means to transfer the document o0nly for a
part of its value ordinarily a partial endorsement is not valid. When any
amount has already been paid, a note to that effect may be endorsed on the
instrument which can then be negotiated for the balance of the said amount.
6. Conditional Endorsement
When
the endorser by express words in the endorsement, makes his own liability thereon
on the right of the endorsee to receive the amount, due thereon, depend upon
the happening of specified event, the endorsement excludes his own liability on
the instrument.
7. Forged Endorsement
As a
general rule forgery does not give a good title. But an acceptor who accepts an
instrument knowingly or having reason to believe forgery, is not relieved of
liability. If a cheque hears a forged enforcement and the banker pays it in the
ordinary course of business in good faith and proper caution, he is not liable
due to forged endorsement as the banker cannot know the signature of all the
endorsers. Simply the banker should see all the endorsements in order. Banker
is only liable if he does not care for the forged signatures of the drawer.
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