Types of Endorsement | Business Law

Types of Endorsements

1. Blank or General Endorsement
2. Special or Full Endorsement
3. Partial Endorsement
4. Restrictive Endorsement
5. Conditional or Qualified Endorsement

What is Endorsement?

Endorsement means, “the writing of one’s name on the back of the instrument or any paper attached to it with the intention of transferring the rights therein“. – Negotiable Instruments Act

Thus, an endorsement is signing a negotiable instrument for the purpose of negotiation.

• Person who effects an endorsement is called an “endorser”
  
• Person to whom the negotiable instrument is transferred by endorsement is called the “endorsed”

Endorsement Meaning

Signing

• on the face or back of negotiable instrument; or
• on a slip of paper annexed to the negotiable instrument

By

• the holder of negotiable instrument

For the purpose of

• negotiating such negotiable instrument

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Types of Endorsement

5 different types of endorsement are discussed below:

1. Blank or general endorsement
2. Special or full endorsement [Sec. 16]
3. Partial endorsement [Sec. 56]
4. Restrictive endorsement [Sec. 50]
5. Conditional or qualified endorsement
   • Sans recourse
   • Facultative
   • Contingent

Blank or General Endorsement

It is a type of endorsement when the endorser just signs on the instrument without mentioning the name of the person in whose favour the endorsement is made.

Endorsement in blank specifies no endorsee. It simply consists of the signature of the endorser on the endorsement.

Example: A bill is payable to X. X endorses the bill by simply affixing his signature. This is an endorsement in blank by X. In this case the bill becomes payable to bearer.

There is no difference between a bill or note endorsed in blank and one payable to bearer. They can both be negotiated by delivery.

Special or Full Endorsement

In this type of endorsement contains not only the signature of the endorser but also the name of the person in whose favour the endorsement is made, then it is an endorsement in full.

In Special or Full Endorsement an endorsement, it is only the endorsee who can transfer the instrument.

Example: A is the holder of a bill endorsed by B in the blank. A writes over B’s signature the words “Pay to C or order.” A is not liable as an endorser but the writing operates as an endorsement in full from B to C.

Partial Endorsement

A partial endorsement is a type of endorsement in which purports to transfer to the endorsee a part only of the amount payable on the instrument. Such an endorsement does not operate as a negotiation of the instrument.

Example: A is the holder of a bill for Rs.1000. He endorses it “pay to B or order Rs.500.” This is a partial endorsement and invalid for the purpose of negotiation.

Restrictive Endorsement

A restrictive endorsement is one which either by express words restricts or prohibits the further negotiation of a bill or which expresses that it is not a complete and unconditional transfer of the instrument but is a mere authority to the endorsee to deal with bill as directed by such endorsement.

Example: “Pay C,“ “Pay C for my use,“ “Pay C for the account of B“ are instances of restrictive endorsement. The endorsee under a restrictive endorsement acquires all the rights of the endorser except the right of negotiation.

Conditional or Qualified Endorsement

A type of endorsement where the endorsee limits or negatives his liability by putting some condition in the instrument is called a conditional endorsement.

A conditional endorsement, unlike the restrictive endorsement, does not affect the negotiability of the instrument. It is also sometimes called a qualified endorsement.

Sans recourse

Endorser relieves himself from the liability to all subsequent endorsees.

Facultative

The endorser waives any of his rights

Contingent

The endorser makes his liability dependent upon happening of some event.

Example: The holder of bill endorse it- ‘pay A or order on his marrying B’. In such case, the endorser will not be liable until A marry to B.

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Business Law Notes

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Business Law Book References

1. Goel, P. K. (2006). “Business Law for Managers” Wiley
2. Sheth, T. (2017). “Business Law” (2ed.) Pearson.
3. Kuchhal. M.C. & Prakash. “Business Legislation for Management” (2ed.) Vikas Publishing.

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