Negotiable Instruments (NI) Act 1881: Endorsement
Section 15 defines endorsement as follows: “When the maker or holder of a 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 thereto, or so signs for the same purpose a stamped paper intended to be completed as negotiable instrument, he is said to indorse the same, and is called the endorser.”
Thus, an endorsement consists of the signature of the holder usually made on the back of the negotiable instrument with the object of transferring the instrument. If no space is left on the back of the instrument for the purpose of endorsement, further endorsements are signed on a slip of paper attached to the instrument. Such a slip is called ‘along’ and becomes part of the instrument. The person making the endorsement is called an ‘endorser’ and the person to whom the instrument is endorsed is called an ‘endorse.’
Kinds of Endorsements: Endorsements may be of the following kinds:
- Blank or general endorsement: If the endorser signs his name only and does not specify the name of the indorse, the endorsement is said to be in blank. The effect of a blank endorsement is to convert the order instrument into bearer instrument which may be transferred merely by delivery.
- Endorsement in full or special endorsement: If the endorser, in addition to his signature, also adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the endorsement is said to be in full.
- Partial endorsement: Section 56 provides that a negotiable instrument cannot be indorsed for a part of the amount appearing to be due on the instrument. In other words, a partial endorsement which transfers the right to receive only a part payment of the amount due on the instrument is invalid.
- Restrictive endorsement: An endorsement which, by express words, prohibits the indorse from further negotiating the instrument or restricts the indorse to deal with the instrument as directed by the endorser is called ‘restrictive’ endorsement. The indorse under a restrictive endorsement gets all the rights of an endorser except the right of further negotiation.
- Conditional endorsement: If the endorser of a negotiable instrument, by express words in the endorsement, makes his liability, dependent on the happening of a specified event, although such event may never happen, such endorsement is called a ‘conditional’ endorsement.
In the case of a conditional endorsement the liability of the endorser would arise only upon the happening of the event specified. But the endorse can sue other prior parties, e.g., the maker, acceptor etc., if the instrument is not duly met at maturity, even though the specified event did not happen.