Page 101 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes
Example: Where the endorsement states “Pay ‘X’ if he reaches Delhi”. In such a case, X
can claim payment on the instrument only if he reaches Delhi.
5. Endorsement ‘sans recourse’: An endorser of a negotiable instrument may, by express
words in the endorsement, exclude his own liability thereon (s.52). Such endorsement is
called Endorsement sans recourse; or ‘without resource to me’.

Example: Where X endorses a cheque as ‘Pay Y or order San Recourse’, or ‘Pay Y or order
without Recourse to me’, X will not be liable on the instrument if it is dishonoured.

6. Facultative endorsement: Where such words are added to an endorsement whereby the
endorser waives his right to receive notice of dishonour, the endorsement is termed as
‘facultative endorsement’.

7. Partial endorsement (s.56): Where the negotiable instrument is endorsed for part of the
amount, it is called partial endorsement. Such endorsement is not valid.

Did u know? Negotiation Back
When a bill of exchange comes back to the acceptor by the process of negotiation, and he
becomes its holder, it is called negotiation back.

Effect of Endorsement

An unconditional endorsement of a negotiable instrument followed by its unconditional delivery
has the effect of transferring the property therein to the endorsee. The endorsee acquires a right
to negotiate the instrument to anyone he likes and to sue all parties whose names appear on it.
The effect of an endorsement in blank and delivery of an instrument originally made, drawn
payable to order is to convert it into one payable to bearer and transferable by mere delivery.
The effect of restrictive endorsement is (a) to prohibit or exclude further negotiation, or (b) to
constitute the endorsee an agent of endorser to endorse the instrument, or (c) to constitute the
endorsee as agent to receive its contents for some other specified persons.
In case joint payees are endorsees, all of them must endorse the instrument otherwise the
endorsement is rendered as invalid, even if it is made in favour of the other payee.

Notes Forged Endorsement (S.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.
For 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.

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