Endorsement

Endorsement means, writing of a persons name on the back of the instrument or on any paper attached to it for the purpose of negotiation. The person who signs the instrument for the purpose of negotiation is called the endorser. The person to whom the instrument is transferred is called the endorsee. Endorsement is complete bye delivering the signed instrument to the endorsee

Definition
According to section 15 of Negotiable Instrument act, when the maker or holder of a negotiable instrument signs his name, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on the slip of paper attached thereto, he is said to have endorsed the instrument The purpose of endorsement is negotiation or transfer of the instrument.

Essentials of a valid endorsement

a) Endorsement must be on the back or face of the instrument b) It should be made in ink. An endorsement in pencil or rubber stamp is invalid. c) It must be made by the maker or holder of the instrument d) It must be signed by the endorser. e) Partial endorsement is not valid

Effects of endorsement
After endorsement, the endorsee gets the right, title or property in the instrument He also gets the right of further negotiation The endorser certifies the genuiness of the instrument The endorser, by endorsement promises the endorsee to pay any loss suffered due to dishonour of the instrument

Kinds of endorsement
1. 2. 3. 4. 5. Blank endorsement Special endorsement Partial endorsement Restrictive endorsement Conditional endorsement

1. Blank endorsement
Also called general endorsement When the endorser simply signs on the back of the instrument for the purpose of negotiation, the endorsement is said to be blank. The endorser does not mention the name of the endorsee and therefore it is payable to the bearer

2. Special endorsement
Also called as full endorsement Endorser not only writes his name, but also the name of the endorsee on the back of the instrument Eg: pay ramesh or order sd/ sudheer

3. Restrictive endorsement
Endorser restricts the further negotiation of the instrument The endorsee cannot further endorse such instrument Eg: pay ramesh only sd/ sudheer

4. Conditional or qualified endorsement

This type of endorsement contains a condition to pay the amount of the instrument The endorsee has to fulfill certain conditions for obtaining the payment Eg: pay ramesh or order on arrival of raju sd/ sudheer

a. Sans recourse endorsement

It is an endorsement which limits the liability of the endorser. Generally an endorser is liable to the subsequent endorsee if the instrument is dishonoured. But in sans recourse endorsement, the endorser is free from such liabilty by writing the words sans recourse or without recourse to me

b. Sans frais endorsement

sans frais means without any expense The endorser does not want any expenses to be incurred on his account on the instrument That means he is liable for the amount of the instrument only and not liable for any additional expenditure

c. Facultative endorsement
An endorsement where the endorser extends his liability or gives up some rights under a negotiable instrument Endorser makes himself liable to subsequent endorsees of the cheque even though no notice of dishonour is received from the holder. Eg: pay ramesh or order, notice of dishonour waived sd/ sudheer