XII Banking - Question 13 - Endorsement

Q.13 (A). Define Endorsement.

Q.13 (B). What are the different kinds of Endorsement?


ENDORSEMENT

The word Endorsement has been derive from the latin word ‘’Indorsum’’ which means ‘’On the back’’. Anything written or printed on the back of a deed or instruments is called endorsement. When the member or holder signs his name on the negotiable instrument for the purpose of negotiation i.e. direction to pay the amount to another person is called Endorsement. Section 15 of the Negotiable Instrument Act 1881 defines Endorsement as

When the maker or holder of a negotiable instrument sign the same, otherwise than as such maker for the purpose of negotiation on the back or face therefore on a slip of paper or so signs for the same purpose a stamp paper intended to be completed as a negotiable instrument he is said to endorse the same and he is called the endorse.


KINDS OF ENDORSEMENT

Different kinds of Endorsement are as follows.


i. Blank or General Endorsement

When the endorser simply put his signature on the back of the instrument without specifying the name of the endorsee, it is said to be general endorsement. The holder can convert it in full endorsement by writing the name of the payee above the signature of the endorsee.


ii. Special or Full Endorsement

It specifies in addition to the signature of the endorser the person to whom or to whose order the instrument is payable.


iii. Restrictive Endorsement

An endorsement which prohibited further negotiation of the instrument is called restrictive endorsement. For instance if a cheque is endorsed saying "Pay A only" or "Pay A for A/C of B" the endorsed has no power to transfer his right further.


iv. Partial Endorsement

An endorsement which makes the transfer of the instrument from the endorser to the endorsee after the fulfillment of stated conditions is called Partial Endorsement.


Sans Recourse

When a person wants to exclude his liability to the endorse or any subsequent holder in case of dishonour of the instrument. The Endorser fees himself from his liability on a negotiable instrument by writing the words SANS RECOURSE after the name of the endorsee. He should make it clean that he endorsee or the holder should not look to him for payment in case of the dishonour of the instrument. The endorsee may refuse to take an instrument with such an endorsement.