The act of a person who is a holder of a negotiable instrument in signing his or her name on the back of that instrument, thereby transferring title or ownership is an endorsement. An endorsement may be in favour of another individual or legal entity. An endorsement provides a transfer of the property to that other individual or legal entity. The person to whom the instrument is endorsed is called the endorsee. The person making the endorsement is the endorser.
Endorsement of Instruments
Types of Endorsement
- Blank Endorsement: Where the endorser signshis name only, and it becomes payable to bearer.
- Special Endorsement: Where the endorser puts his sign and writes the name of the person who will receive the payment.
- Restrictive Endorsement: Which restricts further negotiation.
- Partial Endorsement: Which allows transferring to the endorsee a part only of the amount payable on the instrument.
- Conditional Endorsement: Where the fulfilment of some conditions is required.
- Blank Endorsement or General Endorsement
An endorsement is blank or general where the endorser signs his name only, and it becomes payable to bearer. Thus, where a bill is payable to “Mohanji or order”, and he writes on its back “Mohanji”, it is an endorsement in blank by Mohanji and the property in the bill can pass by a mere presentation.
We can convert a blank endorsement into an endorsement in full. We can do so by writing above the endorser’s signature, a direction to pay the instrument to another person or his order.
- Special or Full Endorsement
An endorsement “in full” or a special endorsement is one where the endorser puts his signature on the instrument as well as writes the name of a person to whom order the payment is to be made.
A bill made payable to Mohanji or order, and endorsed “pay to the order of Manoj” would be specially endorsed and Manoj endorses it further. We can turn a blank endorsement into a special one by adding an order making the bill payable to the transferee.
- Restrictive Endorsement
An endorsement is restrictive which restricts the further negotiation of an instrument.
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”.
- Partial Endorsement
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.
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.
- Conditional or Qualified Endorsement
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.