Endorsement and its Types

1. Types of
Endorsement
L. PRAKASH KANNAN, M.COM., M.PHIL.,
(PH.D.), ASSISTANT PROFESSOR,
S. J. MONISHA II B.COM.,

2. ENDORSEMENT
– A negotiable instrument may be negotiated by mere delivery or endorsement.
The term negotiations means “ transfer of ownership of the instrument from
one person to another”. A bearer instrument can be negotiated by mere
delivery. But an order instrument can be negotiated only by endorsement and
delivery. The endorsement is nothing but signing at the back of instrument of
the purpose of negotiation.

3. Definition
– Section 15 of the Negotiable Instruments Act defines endorsement as follows:
when the maker or holder of a negotiable instruments 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 sign for the same
purpose a stamped paper intended to be completed as a negotiable instrument,
he is said to have endorsed the same and is called endorser”.

4. Conditional or
Qualified
Blank or
General
Full or
Special
Restrictive
Per Pro
PartialTYPES
OF
ENDORSEMENT

5. Blank or General Endorsement
– An endorsement is said to be blank when the endorser simply signs on the back
of an instrument without mentioning anything. It make an order instrument as
a bearer one and it can be transferred by mere delivery.
– Example:
A cheque payable to Shankar or order is simply signed by him on the back.

6. Full or Special Endorsement
– An endorsement is said to be in full when an instrument is signed by the
endorser with a direction to pay the amount to or to the order of a certain
person. Any holder of an instrument may convert the blank endorsement into
full endorsement by inserting the name of endorse in the endorsement.
– Example:
A cheque payable to Shankar or order is endorsed in the following manner:
‘Pay to Ram’
Shankar

7. Partial endorsement
– A endorsement is said to be partial when an instrument is endorsed only for a
part of its amount. Such partial endorsement is not valid in cash for a cheque.
But in case of a bill of exchange, it is valid when it is made in respect of a
balance due after paying a part of bill.

8. Restrictive endorsement
– An endorsement said to be restrictive when its prohibits the endorse for further
negotiation of the instrument.
– Example:
A cheque payable to Shankar is endorsed by him with an one of the following
directions:
i. ‘Pay Ram only’
ii. ‘Pay Ram for my use’
iii. ‘Pay Ram or order for the account of Arun’

9. Conditional Endorsement or
Qualified Endorsement
– An endorsement is said to be conditional under the following cases:
i. If it limits the liability of endorser
ii. If it imposes certain conditions upon the endorsee to receive payment on the
instrument.
– Example:
A cheque payable to Shankar is endorsed by him in the following manner:
‘Pay to Ram or order on his marriage with Seetha’

10. A conditional may be in any of
the following forms:
i. Sans Recourse Endorsement:
– An endorsement is said to be Sans recourse when it contains the words ‘sans recourse’ or
‘without recourse to me’ after the name of the endorsee. The endorsement frees the
endorser for the liabilities arising out of the dishonour of instrument towards the endorsee
or any subsequent holder.
– Example:
‘Pay to Ram, without recourse to me’
Shankar

11. ii. Sans Frais Endorsement:
– An endorsement is said Sans frais when it contains the words ‘sans frais’ or ‘without expense
to me’ after the name of the endorsee. This endorsement is made when the endorser does
not want the endorsee or any subsequent holder to incur any expense on his account on the
instrument.
– Example:
‘Pay to Ram or order, without expense to me’
Shankar
iii. Facultative Endorsement:
– An endorsement is said to be facultative when the endorser, by express words, waives (gives
up) of his rights or increases his liabilities under the instrument.
– Example:
“Pay to Ram or Order – Notice of dishonour waives”.
Shankar

12. Per Pro Endorsement
– When an endorsement is made by an agent, it is known as ‘Per Pro
Endorsement’. The term ‘Per Pro’ denotes that the person making
endorsement is acting on behalf of another. In such a case, the banker must be
informed in advance regarding the delegation of authority to the agent.
– Example:
An endorsement made by Muthu on behalf of Shankar in the following manner:
‘Pay to Ram order’
Muthu
Per Pro Shankar

13. THANK YOU