CHAPTER 13 Endorsement
¾ When the marker or holder of an 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 a negotiable
instrument, he is said to indorse the same, and is called the endorser.
¾ Endorsement can be made by the holder of negotiable instrument or by
the maker signing it. A payee or endorsee may endorse an instrument
only if he is the holder. If a bill or note is made payable to the drawer’s or
maker’s order, the drawer or maker should endorse it. A stranger can’t
endorse bill but however he can be held liable as a surety, if he intends to
guarantee payment.
¾ If back of the instrument is filled with endorsements, the holder to
provide space for further endorsements may tag or past a piece of paper
to is called as “allonge” Subsequent endorsements are made on the
allonge.
¾ Act does not lay down any specific form for endorsement. The only
requirement of endorsement is that transferor shall use appropriate
writing on an instrument so as to transfer his right, title and interest
therein to some person. An endorsement made by a stamp which is said
to be a copy of the payee’s signature is valid if it has been placed with the
approval of the payee.
¾ Endorsement is complete only by delivery. Delivery may be actual or
constructive. Delivery may be by endorser or his agent. Delivery must be
made with the intention of passing the property therein. Until delivery,
contract of endorsement is incomplete.
¾ In case of blank endorsement, the endorser puts his signature on the
back of the instrument without mentioning the name of any person in
whose favour endorsement is made. The endorsement in such case is
payable to bearer. It can be negotiated by mere delivery.
¾ Unlike general endorsement, in case of special endorsement name of the
person to whom it is endorsed has also been written. The instrument is
thus payable to specific person and not bearer. It can be negotiated by
further endorsement and delivery.
¾ Conditional endorsement can be of following 4 types –
• Sans Recourse – when endorser excludes his liability
• Sans frais – when the endorser does not want the endorsee or any
subsequent holder to incur any expenditure on his account on the
instrument.
•
•
Facultative – endorsee must give notice of dishonour of the instrument
to the endorser, but later may waive his duty of endorsee.
Contingent – making endorsee entitled to receive amount on
happening or non-happening of an event
¾ In the absence of a contract to the contrary, whoever indorses and
delivers a negotiable instrument before maturity without in such
endorsement, expressly excluding or making conditional his own liability,
is bound thereby to every subsequent holder, in case of dishonour by the
drawee, acceptor or maker, to compensate such holder for any loss or
damage caused to him by such dishonor, provided due notice of dishonour
has been given to, or received by, such endorser as hereinafter provided.
Every endorser after dishonour is liable as upon an instrument payable on
demand.
¾ The endorsement of an instrument followed by a delivery transfers to the
endorsee the property in the instrument with right of further negotiation.
A holder of an instrument deriving title from a holder in due course has
rights thereon of the holder in due course.