Endorsements

Endorsement means signature of the holder

(An individual who has lawfully received
possession) made with object of transferring
the document. The signature & message on
the back of a cheque to either cash it, deposit
it or to handover the rights of the cheque to
someone else

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 ENDORSEMENTS
Who may endorse
The payee of an instrument is the rightful
person to make the first endorsement.
Thereafter, the instrument may be
endorsed by any party who has become
the holder of the instrument (sec.15)
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Effect of Endorsement
The endorsement of a negotiable instrument
followed by delivery transfers to the
endorsee the property therein with the right
of further negotiation.
• The endorsement may restrict or exclude
such right.
• The endorsement may constitute the
endorsee an agent
 Illustrations

▪B signs the following indorsements on different negotiable instruments

payable to bearer,-
▫(a) "pay the contents to C only".
▫(b) "pay C for my use".
▫(c) "pay C on order for the account to B".
▪These endorsements exclude the right of further negotiation by C.
▫(e) "pay C".
▫(f) "pay C value in account with the Oriental Bank".
▫(g) "pay the contents to C, bring part of the consideration in a certain
deed of assignment executed by C to endorser and others".
▪These endorsements do not exclude the right of further negotiation by C.

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 Essential elements of
Endorsement

• Ordinarily endorsement is made on the face of the instrument but it may be made on its back also.
However, if there is no space left on the instrument itself, an endorsement may be made on an
attached slip of paper. Such a slip is known as Allonge.
• If the instrument is made with an intention of transferring the instrument but only the signature is
made thereon without any other words, it is said to be endorsement in blank.
• No particular words are necessary for an endorsement in full.
• An endorsement must be genuine and not fraud.
• If the payee’s or the endorsee’s name is spelt wrongly, he should sign the name as spelt in the
instrument and write the correct spelling within brackets.
• A negotiable instrument endorsed in blank is payable to the bearer thereof even though originally
payable to order (sec 54). But this does not apply to crossed cheques.
• The endorsement must be signed by the holder or his duly authorized agent

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 Essential elements of
Endorsement

• The maker, acceptor or endorser may, before the instrument is delivered, cancel or revoke his
signature, but not afterwards.

• Endorsements should be signed in ink.

• Where the endorser is authorized to send the instrument by post, it is deemed to have been delivered
to the endorsee as soon as it is posted.

• Complimentary prefix like Shri or Smt is usually not written in negotiable instrument.

• In case of an illiterate person, he may endorse the instrument by putting his thumb impression of his
left hand endorsed by witnesses who must also sign.

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 Types of Endorsements

1. Blank or general endorsement

2. Endorsement in full or special endorsement
3. Restrictive endorsement
4. Partial Endorsement
5. Conditional endorsement
6. Facultative endorsement

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 BLANK OR GENERAL
ENDORSEMENT

o If the endorser signs his name only and does not specify the name
of the endorsee, the endorsement is said to be in blank Sec. 16(1).

o The effect of a blank endorsement is to convert the order

instrument into bearer instrument (Sec. 54), which may be
transferred merely by delivery.

o This type of endorsement is payable to the bearer.

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 SPECIAL OR
ENDORSEMENT IN FULL

o A “special” endorsement allows a payee to make a cheque payable

to another person or entity.

o For example, if John Doe, the payee, wants to make the check
payable to his wife, Susan Doe, he would write “Pay to the order of
Susan Doe,” on the back of the check and then endorse it.

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 Restrictive Endorsement

o An endorsement is restrictive which restricts the further

negotiation of an instrument.

o Example of restrictive endorsement: “Pay to Mrs. Geeta only” or

“Pay to Mrs Geeta for my use” or “Pay to Mrs Geeta on account of
Reeta” or “Pay to Mrs. Geeta or order for collection”.

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 Partial Endorsement

o An endorsement partial is one which allows transferring to the

endorsee a part only of the amount payable on the instrument. This
does not operate as a negotiation of the instrument.

o Example: Mr. Mohan holds a bill for Rs. 5,000 and endorses it as
“Pay Sohan or order Rs. 2500”. The endorsement is partial and
invalid.

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 Conditional or Qualified
Endorsement

o Where the endorser puts his signature under such writing which
makes the transfer of title subject to fulfilment of some conditions
of the happening of some events, it is a conditional endorsement.

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 AN ENDORSEMENT MAY BE
CONDITIONAL OR QUALIFIED
IN THE FOLLOWING WAYS

o Sans recourse endorsement: When the endorser expressly excludes his

own liability on the negotiable instrument to the endorsee or any
subsequent holder in case of dishonor of the instrument, the
endorsement is known as ‘sans recourse’ endorsement. Eg: Pay A or
order Sans recourse

o Liability dependent upon a contingency: An endorser may endorse the

instrument in such a way that his liability depends upon the happening
of a specified event which may or may not happen. Eg: Pay A or order
on the arrival of the ship Nancy at Mumbai.
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 Facultative Endorsement

▪Facultative Endorsement is an endorsement where the endorser

waives some right to which he is entitled.

▪For example, by using after signature, words such as ‘notice of

dishonour dispensed with’ or ‘waiver of notice of dishonour’ or
notice of dishonour not required’. The endorsee is liable to give
notice of dishonor to the endorser and normally failure to give notice
will absolve the endorser from his liability.

▪Example : Pay A or order. Notice of dishonour waived.

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 ELEMENTS

▪A fake endorsement is one in which signature of any of the party is fake which makes the instrument
invalid.
▫ All endorsement should be made in ink only.
▫ An endorsement in block letters is not necessary.
▫ It has been held that a type written endorsement is valid under the Act.
▪Even, endorsement in printed character can be accepted but can be duplicated very easily.
▪An rubber-stamp endorsement is as valid if accompanied by the hand written signature of an
authorized officer.

▪Where an endorsement happens to be in a language which the banker is not expected to know, then,
the paying banker can refuse the payment for its confirmation. But, he should give valid reasons for the
same.
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