Page 184 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes substantially superior to those of an assignee. When an instrument is negotiated, its transferee
gets good title irrespective of the defective title, if any, of the transferor.

Example: A, the holder of a negotiable instrument payable to bearer, delivers it to B’s
agent to keep for B. The instrument has been negotiated.

14.6.3 Endorsement

An endorsement is the mode of negotiating a negotiable instrument. A negotiable instrument
payable otherwise than to bearer can be negotiated only by indorsement and delivery. An
endorsement according to Sec.15, is “when the maker or holder of a negotiable instrument signs
the same otherwise than as such maker, for the purpose of negotiation, on the back or face thereof
or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended
to be completed as a negotiable instrument, he is said to endorse the same and is called the
endorser”. The person to whom the instrument is endorsed is called the endorsee. Usually the
endorsement is on the back of the instrument; though it may be even on the face of it. Where no
space is left on the instrument, the endorsement may be made on a slip of paper attached to it.
This attached slip of paper is called ‘Allonge’.

Example: A cheque is payable to ‘X or order’, and ‘X’ merely signs on the back of it. This
will constitute endorsement in blank. Where an endorsement in blank is subsequently followed
by an endorsement in full, the endorser in full will be liable to his immediate endorsee and
parties deriving title from him, but not to others (s.55).

Example: A cheque is endorsed in blank by ‘X’. Y, the holder of the cheque, may convert
this ‘blank endorsement’ into ‘endorsement in full’ by say, adding the words ‘Pay Z or order’,
above ‘X’s signature. Y, in this case cannot be held liable on the cheque, if it is dishonored.

14.6.4 Forged Endorsement (Sec.85)

In case an instrument is endorsed in full, it cannot be endorsed or negotiated except by an
endorsement signed by the person to whom or to whose order the instrument is payable. Thus,
if such an instrument is negotiated by way of a forged endorsement, the endorsee will acquire
no title even though he be a purchaser for value and in good faith, because the endorsement
is nullity. But where the instrument has been endorsed in blank, it can be negotiated by mere
delivery and the holder derives his title independent of the forged endorsement and can claim
the amount from any of the parties to the instrument.

Example: A bill is endorsed, “pay to X or order”. X endorses it in blank and it comes into
the hands of Y, who simply delivers it to A. A forges Y’s endorsement and transfers it to B. B,
as the holder, does not derive his title through the forged endorsement to Y, but through the
genuine endorsement of X and can claim payment from any of the parties to the instrument in
spite of the intervening forged endorsement.

14.7 Presentment

Presentment of a negotiable instrument is made for two purposes: (i) for acceptance and (ii) for
payment.
Before discussing the presentment for payment, it is necessary to refer to the maturity of the
instrument.

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