The act of a person who is holder of a negotiable instrument in signing his or her name on the back of that instrument, thereby
transferring title or ownership. An endorsement may be made if favour of another individual or legal entity, resulting
in a transfer of the property to that other individual o legal entity. There are several types of endorsements:
Related entries
Categories:
Types of Endorsements
- Blank or General Endorsement
- Special or Full Endorsement
- Partial Endorsement
- Restrictive Endorsement
- Conditional or Qualified Endorsement
Endorsement means, “the writing of one’s name on the back of the instrument or any paper attached to it with the intention of transferring the rights therein“. – Negotiable Instruments Act
Thus, an endorsement is signing a negotiable instrument for the purpose of negotiation.
- Person who effects an endorsement is called an “endorser”
- Person to whom the negotiable instrument is transferred by endorsement is called the “endorsed”
Table of Contents
- 1 Types of Endorsements
- 2 What is Endorsement?
- 3 Endorsement Meaning
- 4 Types of Endorsement
- 4.1 Blank or General Endorsement
- 4.2 Special or Full Endorsement
- 4.3 Partial Endorsement
- 4.4 Restrictive Endorsement
- 4.5 Conditional or Qualified Endorsement
- 4.5.1 Sans recourse
- 4.5.2 Facultative
- 4.5.3 Contingent
- 5 Business Law Notes
- 6 Business Law Book References
Endorsement Meaning
Signing
- on the face or back of negotiable instrument; or
- on a slip of paper annexed to the negotiable instrument
By
- the holder of negotiable instrument
For the purpose of
- negotiating such negotiable instrument
Types of Endorsement
5 different types of endorsement are discussed below:
- Blank or general endorsement
- Special or full endorsement [Sec. 16]
- Partial endorsement [Sec. 56]
- Restrictive endorsement [Sec. 50]
- Conditional or qualified endorsement
• Sans recourse
• Facultative
• Contingent
Blank or General Endorsement
It is a type of endorsement when the endorser just 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.
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 endorsed in blank and one payable to bearer. They can both be negotiated by delivery.
Special or Full Endorsement
In this type of 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.
In Special or Full Endorsement an endorsement, it is only the endorsee who can transfer the instrument.
Example: A is the holder of a bill endorsed by B in the blank. A writes over B’s signature the words “Pay to C or order.” A is not liable as an endorser but the writing operates as an endorsement in full from B to C.
Partial Endorsement
A partial endorsement is a type of endorsement in 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.
Restrictive Endorsement
A restrictive endorsement is one which either by express words restricts or prohibits the further negotiation of a bill or which expresses that it is not a complete and unconditional transfer of the instrument but is a mere authority to the endorsee to deal with bill as directed by such endorsement.
Example: “Pay C,“ “Pay C for my use,“ “Pay C for the account of B“ are instances of restrictive endorsement. The endorsee under a restrictive endorsement acquires all the rights of the endorser except the right of negotiation.
Conditional or Qualified Endorsement
A type of endorsement where the endorsee limits or negatives his liability by putting some condition in the instrument is called a conditional endorsement.
A conditional endorsement, unlike the restrictive endorsement, does not affect the negotiability of the instrument. It is also sometimes called a qualified endorsement.
Sans recourse
Endorser relieves himself from the liability to all subsequent endorsees.
Facultative
The endorser waives any of his rights
Contingent
The endorser makes his liability dependent upon happening of some event.
Example: The holder of bill endorse it- ‘pay A or order on his marrying B’. In such case, the endorser will not be liable until A marry to B.
Business Law Notes
[Click on Topic to Read]
- What is Business Law?
- Indian Contract Act 1872
- Types of Contract
- Offer: Types, Elements
- Elements of a Valid Contract
- Performance of a Contract
- Discharge of Contract
- Sales of Goods Act 1930
- Goods & Price: Contract of Sale
- Conditions and Warranties
- Doctrine of Caveat Emptor
- Transfer of Property
- Rights of Unpaid Seller
- Negotiable Instruments Act 1881
- Types of Negotiable Instruments
- Types of Endorsement
- Promissory Note
- Bill of Exchange
- Cheque
- Crossing of Cheque
Business Law Book References
- Goel, P. K. [2006]. “Business Law for Managers” Wiley
- Sheth, T. [2017]. “Business Law” [2ed.] Pearson.
- Kuchhal. M.C. & Prakash. “Business Legislation for Management” [2ed.] Vikas Publishing.
FAQ
Indian Contract Act 1872
The Indian Contract Act is divisible into two parts.
The first part [Section 1-75] deals with the general principles of the law of contract and therefore applies to all contracts irrespective of their nature.
The second part [Sections 124-238] deals with certain special kinds of contracts, namely contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency.
Also Read:
1. Essential Elements of a Valid Contract
Go On, Share article with Friends
Did we miss something in Business Law Note? Come on! Tell us what you think about our article on Types of Endorsement | Business Law in the comments section.