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Unit 10: Negotiable Instruments
These are discussed as below: Notes
Endorsement in Blank or General Endorsement: In this case, the payee or endorser does
not specify an endorsee and he simply signs his name (Sec. 16, NIA).
Endorsement in Full or Special Endorsement: When the endorser specifies the person to
whom or to whose order the instrument is to be paid, the endorsement is called special
endorsement or endorsement in full. The specified person i.e. the endorsee then becomes
the payee of the instrument.
Restrictive Endorsement: When an endorsement prohibits further negotiation of a
negotiable instrument, it is said to be restrictive. Section 50 of the NI Act 1881states, “The
endorsement may, by express words, restrict of exclude the right to negotiable or pay
constitute the endorsee an agent to endorse the instrument or to receive its contents for the
endorser or for some other specified person.”
Example: If B endorses an instrument payable to barer as follows, the right of C to
further negotiate is excluded.
Pay the contents to C only
Pay C for my use
Partial Endorsement: If only a part of the amount of the instrument is endorsed, it is called
partial endorsement. An endorsement which proposes to transfer to the endorsee only a
part of the amount payable, or which aims to transfer the instrument to two or more
endorsees individually, is not valid.
Conditional Endorsement: If the endorser of a negotiable instrument, by express words in
the endorsement, makes his liability or the right of the endorsee to receive the amount
due thereon, dependent on the happening of a specified event, although such event may
never happen, such endorsement is called a conditional endorsement (Section 52 of NI
Act). Such an endorser gets the following rights:
He may make his liability on the instrument conditional on the happening of a
particular event.
He will not be liable to the subsequent holder if the specified event does not take
place to the instrument even before the particular event takes place.
Example: “Pay C if he returns from London”. Thus C gets the right to receive payment
only on the happening of a particular event, i.e. if he returns from London.
Effect of Endorsement: An unconditional endorsement of a negotiable instrument followed by
its unconditional delivery has the effect of transferring the property in that to the endorsee. The
endorsee acquires a right to negotiate the instrument further to anyone he wishes.
Section 50 of NI Act also permits that an instrument may also be endorsed so as to constitute the
endorsee an agent of the endorser.
To endorse the instrument further or,
To receive its amount for the endorser or for some other specified person.
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