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Tuesday, 23 August 2011

Define endorsement and what are the requirements of valid endorsement and also discuss the main classifications of endorsement

Indorsement or Endorsement :
A cheque or a bill is endorsed when the transferer puts his signature on the back or on an along with a cheque and a bills as a part of negotiation. If the cheque is bearer it needs no endorsement.



Requirements Of Valid Endorsement :-
Following are the main requirements :

1. It must be signed by the holder.

2. In case of illiterate, a thumb impression should be fixed.

3. It must be on the back of the cheque or bill or on an along of them.

4. It may be in ink, print or with a stamp.

5. Partial endorsement is not valid legally it must be of the entire value of the cheque or bill.

6. If the number of payee are more then one then all the payees will sign or that person who is authorized.

7. The endorsee can also add, the proper signatures if the endorse is not clear.

8. If the payee are more than two the endorsement should be in the same order which is opened down on the back of the bill.

9. It should be completed by the delivery.

10. The intention must be clearly expressed.



Kinds of Endorsement

1. Conditional Endorsement :-
If the endorsement makes the payment of a bill subject to the fulfillment of a condition the endorsement is called conditional. The bank or payee can disregard the condition and the payment will be considered valid.

Example :- Mr. James holder of the bill , makes an endorsement on the bill saying, pay to Miss. Reema if she wins the match.


2. Blank Endorsement :-
If the endorser signs, but does not give his name to whom he wishes to transfer the cheque is called blank endorsement.

Example :- Bill is payable to "Y" "Y" signs and endorses it without mentioning the name of the endorsee. It is a blank endorsement.


3. Special Endorsement :-
An endorsement which specifies the name of the transferee for the payment of the bill is called special endorsement.

Example :- Mr. Tanu makes endorsement by writing the word "Pay to Mr. Sidu or order and signs it. It is a special or full endorsement.


4. Restrictive Endorsement :-
An endorsement which restrict the further negotiation of the bill.

Example :- "Y" the holder of the bill, makes an endorsement on the bill saying to pay "X" only. It means "X" cannot negotiate the bill further.


5. Partial Endorsement :-
If the bill purposes to be endorsed for a part of the amount payable, the endorsement is called partial. It is legally ineffective.

Example :- Mr. Anthony holds the bill for ten thousands and endorses infavour of Mr. Qazi for Rs. 5 thousand and also in favour of Mr. Hyden for Rs. 5 thousand. It is a partial and invalid.


6. Facultative Endorsement :-
Under the negotiable instrument, when an endorsee give up some of his rights it is called facultative endorsement.
The endorsee is relieved of his duty by giving the notice of dishonour to the endorser. The endorser remains liable to the endorse for non-payment.

Example :- Pay Mr. Mash or order, notice of dishonour waived is a fluctative endorsement.


7. Sans Recourse Endorsement :-
While endorsing the instrument endorser expresses that he would not be liable for any expenses incurred by indorsee or any holder, in case of dishonour of the instrument the endorsement is called sans recourse.

Example :- Mr. Jhon endorses a bill to Miss. Sarah by writing pay Miss. Sarah or order sans recourse.

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