Q. What do you mean by endorsement? Discuss the different types of endorsement with endorsement effect also.
Endorsement: An endorsement is
the mode of negotiating a negotiable instrument. A negotiable instrument
payable otherwise than to a bearer can be negotiated only by endorsement and
delivery. An endorsement, according to sec. 15 of the NI Act is “when the maker
or holder of a negotiable instrument signs the same, otherwise than as such
marker. For the purpose of negotiation on the back or face thereof or on a slip
of paper annexed thereto, he is said to endorse the same and is called the
endorser. The person to whom the instrument is endorsed is called the endorsee.
“The word
endorsement is said to have been derived from Latin ‘en’ means ‘upon’ and
‘dorsum’ meaning ‘the back’. Thus usually the endorsement is on the back of the
instrument though it may be even on the face of it. Where no space is left on
the instrument, the endorsement may be made on a slip of paper attached to it.
This attached slip of paper is called ‘Allonge’.
Types
of Endorsement: According to the
N.I. Act, 1881 endorsement may take any of the following forms:
1.
Endorsement in blank or general
endorsement.
2.
Endorsement in full or special endorsement.
3.
Restrictive endorsement.
4.
Partial endorsement.
5.
Conditional endorsement.
Endorsement
in Blank or General Endorsement: In case of an
endorsement in blank, the payee or endorser does not specify an endorsee and he
simply signs his name (S. 16 NIA).
Endorsement
in Full or Special Endorsement: When the payee or
endorser specifies the person to whom or to whose order the instrument is to be
paid, the endorsement is called special endorsement or endorsement in full. The
specified person i.e. the endorsee then becomes the payee of the instrument.
Restrictive
Endorsement: An endorsement is
restrictive when it prohibits further negotiation of a negotiable instrument.
Sec. 50 of the NI Act 1881states. “The endorsement may, by express words,
restrict of exclude the right to negotiable or pay constitute the endorsee an
agent to endorse the instrument or to receive its contents for the endorser or
for some other specified person.”
For example, if B endorses an
instrument payable to barer as follows, the right of C to further negotiate is
excluded
·
Pay the contents to C only
·
Pay C for my use
Partial
Endorsement: If only a part of
the amount of the instrument is endorsed, it is a case of partial endorsement.
An endorsement which purports to transfer to the endorsee only a part of the
amount payable, or which purports to transfer the instrument to two or more
endorsees severally, is not valid.
Conditional
Endorsement: If the endorser of
a negotiable instrument, by express words in the endorsement, makes his
liability or the right of the endorsee to receive the amount due thereon,
dependent on the happening of a specified event, although such event may never
happen, such endorsement is called a conditional endorsement (Section 52 of NI
Act). Such an endorser gets the following rights:
He may make his liability on the
instrument conditional on the happening of a particular event. He will not be
liable to the subsequent holder if the specified event does not take place to
the instrument even before the particular event takes place.
For example, “pay C if he returns
from London”. Thus C gets the right to receive payment only on the happening of
a particular event, i.e. if he returns from London.
Effect of Endorsement: An
unconditional endorsement of a negotiable instrument followed by its
unconditional delivery has the effect of transferring the property therein to
the endorsee. The endorsee acquires a right to negotiate the instrument further
to anyone he likes.
Section
50 of NI Act also permits that an instrument may also be endorsed so as to
constitute the endorsee an agent of the endorser.
·
To endorse the instrument further or
·
To receive its amount for the endorser or
for some other specified person.
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