Meaning of Endorsement -
Endorsement means signing at the back of the instrument for the purpose of negotiation. The act of the signing a cheque, for the purpose of transferring to the someone else, is called the endorsement of Cheque. The endorsement is usually made on the back of the cheque. If no space is left on the Cheque, the Endorsement may be made on a separate slip to be attached to the Cheque. There are six Kinds of Endorsement i) Endorsement in Blank / General ii) Endorsement in Full / Special iii) Conditional Endorsement iv) Restrictive Endorsement v) Endorsement Sans Recourse vi) Facultative Endorsement.
Definition of Endorsement -
According to Section 15 of the Negotiable Instruments Act 1881, When the maker or holder of a negotiable instrument 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 signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to endorse the same, and is called the “endorser”.
Essentials of Endorsement -
There are following Essentials of a valid endorsement -
(1) Endorsement must be on the instrument itself. If no space is left on the instrument, it must be on a separate slip of paper and entered to the instrument.
(2) Endorsement may be made by the Endorser either by merely signing his name on the instrument or by specifying his name on the instrument or by specifying in addition to his signature on the person to whom on to whose order the instrument is payable. No particular form of words is necessary for the endorsement.
(3) Endorsement must be completed by the delivery of possession of the instrument. The delivery of possession of the instrument with intention of passing the property to endorsee is important. It is worth mentioning that the delivery of possession must be made by the endorser himself or by someone on his behalf.
(4) Endorsement must contain an order to pay. In need not contain any complementary prefixes and suffixes.