Do you want to know what is endorsement of negotiable instrument and what are its different types? You are on the right spot to know the answer of this question.
According to section 15 of the Negotiable Instrument Act, the endorsement has been defined as follows:
“When the maker or the holder of negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed there to, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to endorse the same, and is called the endorser”.
Simply we can say that an endorsement is an act of signing one’s name on the back of the instrument or on the slip attached with the instrument with the intention of transferring the property in it to another person and delivering it to him.
See Also: Types of Bill of Exchange
When a negotiable instrument is payable to bearer it is negotiated simply by delivery. But when it is payable to order, it cannot be negotiated without the endorsements of the instrument.
Essentials of Endorsement
The following are the essential elements of endorsements:
- A negotiable instrument must be signed by the maker or holder.
- It must be signed on back or face of the instrument or on a slip Of paper attached with the instrument.
- It must be made with the intention of transferring the instrument to a third person in such a way that he must have the right to recover the money due to under it.
- It must be either blank “or’ ‘in full” as defined in section 16.
- It must be completed by delivery of the instrument with the intention of assigning the resort in the instrument.
Types of Endorsement of Negotiable Instrument
The different types of endorsement of negotiable instrument are as under:
BLANK OR GENERAL ENDORSEMENT
When the endorser of the instrument signs on the back of- the Instrument without writing the name of the endorsee, such endorsement is known as blank or general endorsements
See Also: Features of Promissory Note
By this type of endorsements, an order instrument becomes bearer and any holder of the instrument can get a payment of the instrument.
SPECIAL OR FULL ENDORSEMENT
If the endorser of the instrument sings on the back of the instrument his name and also mentions the name of the endorsee, such endorsement is called special or full endorsements. Here the payment is made only to the specific person or his order.
RESTRICTIVE ENDORSEMENT
When the endorser of the instrument writes such words that the instrument cannot be further negotiated or endorsed by endorsee then it is called restrictive endorsements. For example, the endorser endorses it as “Pay A only” or ‘”Pay A and none”.
PARTIAL ENDORSEMENT
An endorsement which purports to transfer to the endorsee only a Part Of the amount of the instrument then it is called a partial endorsement. This type of endorsement is not supported by law and is not a valid endorsement.
CONDITIONAL ENDORSEMENT
When the endorser of the instrument attaches any condition for transferring the property In the instrument to endorsee, the endorsement is said to be a conditional endorsements.
