Page 165 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes Blank or General Endorsement (Sections 16 and 54)

It is an endorsement when the endorser merely 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. A negotiable
instrument even though payable to order becomes a bearer instrument if endorsed in blank.
Then it is transferable by mere delivery. An endorsement in blank may be followed by an
endorsement in full.

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 indorsed in blank and one payable to bearer. They
can both be negotiated by delivery.

Special or Full Endorsement (Section 16)

When the 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. Thus, when
endorsement is made by writing the words "Pay to A or A's order," followed by the signature of
the endorser, it is an endorsement in full. In such an endorsement, it is only the endorsee who
can transfer the instrument.
Conversion of endorsement in blank into endorsement in full: When a person receives a
negotiable instrument in blank, he may without signing his own name, convert the blank
endorsement into an endorsement in full by writing above the endorser's signature a direction
to pay to or to the order of himself or some other person. In such a case the person is not liable
as the endorser on the bill. In other words, the person transferring such an instrument does not
incur all the liabilities of an endorser. (Section 49).

Example: A is the holder of a bill endorsed by B in blank. A writes over B's signature the
words "Pay to C or order." A is not liable as endorser but the writing operates as an endorsement
in full from B to C. Where a bill is endorsed in blank, or is payable to bearer and is afterwards
endorsed by another in full, the bill remains transferable by delivery with regard to all parties
prior to such endorser in full. But such endorser in full cannot be sued by any one except the
person in whose favour the endorsement in full is made. (Section 55).

Example: C the payee of a bill endorses it in blank and delivers it to D, who specially
endorses it to E or order. E without endorsement transfers the bill to F. F as the bearer is entitled
to receive payment or to sue the drawer, the acceptor, or C who endorsed the bill in blank but he
cannot sue D or E.

Partial Endorsement (Section 56)

A partial endorsement is one 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.

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