Page 164 - DMGT303_BANKING_AND_INSURANCE

Unit 8: Negotiable Instruments

Essentials of a Valid Endorsement Notes

The following are the essentials of a valid endorsement:
1. It must be on the instrument. The endorsement may be on the back or face of the instrument
and if no space is left on the instrument, it may be made on a separate paper attached to it
called allonage. It should usually be in ink.
2. It must be made by the maker or holder of the instrument. A stranger cannot endorse it.
3. It must be signed by the endorser. Full name is not essential. Initials may suffice. Thumb-
impression should be attested. Signature may be made on any part of the instrument. A
rubber stamp is not accepted but the designation of the holder can be done by a rubber
stamp.
4. It may be made either by the endorser merely signing his name on the instrument (it is a
blank endorsement) or by any words showing an intention to endorse or transfer the
instrument to a specified person (it is an endorsement in full). No specific form of words
is prescribed for an endorsement. But intention to transfer must be present. When in a bill
or note payable to order the endorsee's name is wrongly spelt, he should when he endorses
it, sign the name as spelt in the instrument and write the correct spelling within brackets
after his endorsement.
5. It must be completed by delivery of the instrument. The delivery must be made by the
endorser himself or by somebody on his behalf with the intention of passing property
therein. Thus, where a person endorses an instrument to another and keeps it in his papers
where it is found after his death and then delivered to the endorsee, the latter gets no right
on the instrument.

6. It must be an endorsement of the entire bill. A partial endorsement i.e. which purports to
transfer to the endorse a part only of the amount payable does not operate as a valid
endorsement.
If delivery is conditional, endorsement is not complete until the condition is fulfilled.

Who may endorse?

The payee of an instrument is the rightful person to make the first endorsement. Thereafter the
instrument may be endorsed by any person who has become the holder of the instrument. The
maker or the drawer cannot endorse the instrument but if any of them has become the holder
thereof he may endorse the instrument. (Sec. 51). The maker or drawer cannot endorse or
negotiate an instrument unless he is in lawful possession of instrument or is the holder there of.
A payee or indorsee cannot endorse or negotiate unless he is the holder there of.

8.5.2 Classes of Endorsement

An endorsement may be:
1. Blank or general.
2. Speical or full.
3. Partial.
4. Restrictive.

5. Conditional.

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