When the maker or holder of a negotiable instrument signs the lame otherwise than as such maker, for the purpose of negotiation on the back or face thereof or on a slip of paper annexed thereto???????? he is laid to endorse the same and is called the endorser. “Endorsement? is derived from the Latin term in “dorsum”, meaning “upon the back” which indicates that the usual place of an endorsement is back of the Instrument. Suppose the space available is not sufficient due to rapid Circulation of an instrument, a piece of paper – called allonge
Rules for endorsement or essentials of a valid endorsement:
1. The endorsement must be written on the instrument itself.
2. It must be made by the holder of the instrument and not by a Stranger.
3.? It must be signed by the endorser. The endorser must sign his name in the same spellings as appearing on the face of the cheque.
- An endorsement written on an allonge is deemed to be writ?ten on the instrument itself.
- The endorser should endorse the instrument in full and not in part.
6.? If an instrument is payable to the order of two or more payees Or endorses who are not partners, all must endorse unless the one endorsing has authority to endorse for all others
- Endorsement is complete only when the instrument is deliv?ered. The delivery must be made by the endorser himself. If the deliv?ery is conditional, endorsement is not complete until the condition is fulfilled.
- Endorsements can be made by the endorser merely by signing his name on the instrument or by adding the name of a specified per?son to whom the endorser likes to endorse.
Kind of Endorsement:
According to the Negotiable Instruments Act, 1881, endorsement may take any of the following terms:
- General or Blank Endorsement: If the endorser just puts his signature without specifying the name of the endorsee, the endorsement is said to be in blank. The effect of such an endorsement makes
the instrument payable to bearer even though originally payable to order and negotiation takes place at mere delivery. For example: A cheque payable to Mr. B. Chowdhury may be endorsed as: “B.Chowdhury” According to sec.54 a cheque which is endorsed in blank becomes payable to bearer even though it was originally payable to order.
- Special or Full Endorsement: If the name of the endorsee is specified in whose favor it is being endorsed, along with the signature of the endorser, the endorsement is called endorsement in full (Sec-
tion-16). If such an endorsement is made, the banker should make payment either to the endorsee or to his order. The instrument having such endorsements shall be negotiated by means of endorsement and deliv-
ery. An endorsement in blank may be converted into ‘endorsement in full’ by the holder by merely adding above the endorser’s signature, a direction to pay to any other person.
- 3.????? Conditional Endorsement: It is an endorsement under which the endorser lays down some condition to be fulfilled by the payee before making the payment. This type of endorsement involves a spe?cial problem because, according to the definition of a cheque, it is an unconditional order payable on demand. That is, a cheque cannot be made payable on the happening of certain conditions and therefore it ceases to be a cheque. For example, endorsement, ‘pay to X after he signs the enclosed receipt’
- Sans Recourse Endorsement: In this case, the endorser makes it clear to the endorsee that the endorser would not be liable in case the instrument is dishonored. This means that further recourse cannot be taken against the endorser. For example: Pay to X without recourse to me.
- Restrictive Endorsement: Restrictive endorsement, by writ?ten words, restricts the right of further negotiation. In this case, an en?dorser specifies that the banker should pay the amount to a particular endorsee only. Example: Pay to X only.
- Facultative Endorsement: The endorser waiving the right of ‘notice of dishonor’ of the instrument, while making the endorsement is called facultative endorsement. It means that future endorsers need not serve a notice of dishonor to the endorser who has made such facultative endorsement. In this case, the endorser makes the endorse?ment with the words, “Notice of Dishonor is waived”. Usually, when?ever a negotiable instrument is dishonored on presentation, it is the first duty of the holder of the instrument to serve a notice of dishonor to all the previous endorsers. But in this case, the endorser makes it clear that he need not be served a notice of dishonor. Example: Pay to X or order – Notice of dishonor waived.
- Partial Endorsement: If an endorsement is made for the part^ of the amount of the instrument, it is called “partial endorsement”. But such an endorsement is not valid.