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Endorsement

The Endorsement consists of the signature of the holder made on the back of the
negotiable instrument with the object of transferring the instrument. If there is no space
on the instrument, the Endorsement may be made on a slip of paper attached to it. This
attachment is known as Allonge.
When the maker or holder of a negotiable instrument signs the same for the purpose of
negotiation, or for the same purpose a stamped paper intended to be completed as
negotiable instrument, he is said to endorse the same, and is called the endorser.
Different types of endorsements
(a) Blank (or general): It contains only the bare signature of the endorser and no endorsee
is specified A bill so endorsed becomes payable to bearer.
(b) Special (or in full): In addition to the signature of the
the person to whom or to whose order the instrument is payable is specified.

endorser

(c) Restrictive: Such an endorsement has the effect of restricting further negotiation and
transfer. E.g. Pay to A only
(d) Conditional: Such an endorsement combines an order to pay with condition.
E.g. Pay to A on safe receipt of goods.
(e) Sans Recourse: By adding these words after the endorsement, the endorser declines
to accept any liability on the instrument of any subsequent party.
(f) Sans Frais: These words when added at the end of the endorsement indicate that no
expenses should be incurred on account of the bill.
(g) Facultative: When it is desired to waive certain right, the appropriate words are added
to indicate the fact, e.g., notice of dishonour dispensed with.
Liability for endorsement
Every endorser of a negotiable instrument is liable to every subsequent party to it
provided due notice of dishonour is given to or received by him. There are few exceptions
under section 52:
(1) Any endorser can exclude personal liability by endorsing sans recourse
(2) If the holder of a negotiable instrument, without the consent of the endorser destroys
the instrument or in any way prejudices the holder.
(3) The rule is not applicable also in the case of circuity of action
(4) The endorser may restrict his liability by endorsement by

making his liability depend upon the happening of a specified uncertain event,
making the right of the endorsee to receive the amount mentioned in the instrument
depend upon a specified uncertain event.
When an instrument is endorsed by a minor, the minor himself is not liable and the holder can
receive payment from any other party thereto.
Effect of endorsement:
(a) The endorsement of an instrument, followed by delivery, transfers to the endorsee
the property in the instrument with right of further negotiation.

(b) The endorsement may also contain express terms making it restrictive so as

to prohibit or exclude the right of further negotiation, or


to constitute the endorsee an agent to endorse the instrument; or
to entitle the endorsee to receive the contents of the instrument for the endorser
or for some other specified person.

(c) A restrictive endorsement gives the endorsee:

the right to receive payment of the instrument;


the rights of action against any other party to the instrument as the endorser had;
power, only in accordance with the express terms of his authority, to transfer the
instruments and his right there on to another.

Conversion of endorsement in blank into endorsement in full (Section 49):


The holder of a negotiable instrument endorsed in blank may, without signing his own
name, by writing above the endorsers signature a direction to pay to any other person
as endorsee, convert the endorsement in blank into an endorsement in full; and the
holder does not thereby incur the responsibility of an endorser, for his name appears
nowhere in the instrument. (Hirschfeld vs. Smith)
Effect of endorsement in full after a blank one:
If an instrument after having been endorsed in blank is endorsed in full, the actual endorser
in full does not incur the liability of an endorser, so the amount of it cannot be claimed
from him. the instrument still remains negotiable as against that endorser whose sign
appears on the instrument and all parties prior to him. He is liable to a holder who made
title directly through his endorsement and the persons deriving title through such holder.
Effect of endorsement for part of sum due (Section 56):
An endorsement purporting to transfer only a part of the amount of instrument is invalid,
but when the amount due has been paid in part, a note to that effect may be endorsed on
instrument and the instrument may then be negotiated for the balance.

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