Endorsement is nothing but the process of signing one’s name or affixing an accepted rubber stamp impression on a cheque, for the purpose of transfer. Thus, it is both a contract and a transfer. The delivery of the instrument is necessary to complete its endorsement. The word endorsement can also be spelt as indorsement. It has derived from the Latin word “indorsium” which means “upon the back”. As the derivation suggests, the usual place for an endorsement is upon the back of the instrument. But there is no legal prohibition against the validity of an endorsement on the face of the instrument.
Endorsement has been defined in section 15 of the NI Act 1881 as: “Where a maker or a holder of 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…he is said to endorse the same, and is called the endorser.”
Does a Bearer Cheque require an endorsement?
Possession of a bearer cheque is conclusive evidence of the bearer’s ownership. A bearer cheque, in strict legal sense, does not require endorsement. However, in practice, bankers request the holder of a bearer cheque to endorse it, before obtaining payment. This is only for the purpose of identifying him, as the person receiving the cash and moreover, it serves as a voucher for having paid the same.
Assignment vs. Endorsement
- An assignment means the transfer of legal title to a property. Endorsement not only means the transfer of legal title, but also, it includes the assumption of liability.
- In the case of assignment, the assignee’s title is subject to the title of the assignor. But, in the case of endorsement, good title can be passed on to the endorsee, even when, there is a defective title. That is, endorsement to a holder in due course cut off defences to the instrument.
Kinds of Endorsement
- Blank Endorsement: According to section 16(1) of the NI act, the endorser signs his name only then the endorsement is blank.
- Special endorsement: It is also called as full endorsement. If the endorser adds a direction to pay the amount to the older of a certain person, then, the endorsement is said to be full.
- Restrictive Endorsement: A restrictive endorsement is one which, limits the further negotiation of an instrument.
- Conditional endorsement: It is a common form of endorsement. It may either limit the liability of the endorser or create some liability to the endorsee to receive the payment of the instrument. It is also called qualified endorsement. There are two forms : Sans Resourse endorsement , Sans Frais endorsement , Faculative endorsement, Partial endorsement, and the per pro endorsement.
- Avtar Singh- Banking and Negotiable Instruments- Easter Book Company.
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