Important Points about Negotiation & Endorsement
2. If the holders are joint, the negotiation can be complete only if both the holders put their signature with an intent of negotiation.
3. The negotiation must be complete before the payment of the instrument.
4. The legal representative of an instrument cannot make delivery of the instrument and complete negotiation even if the same is signed by the deceased before his death.
5. The spellings of the person negotiating the instrument must match with those of the holder. If a cheque is payable to Mr. Avinash Srivastava and his original name is Avinash Srivastava he has to sign as Avinash Srivastava, though he can along with put his signature as Avinash Srivastava.
6. If the complete name of the holder is given he should sign complete like Avinash Srivastava and not A Srivastava.
7. Prefix and suffix are not to be included otherwise the same will make the endorsement invalid. For example Dr. Ram Charan Mishra will sign as Ram Charan Mishra however he can write after his signatures MD.
8. If the endorsement is made by an illiterate person, it must be witnessed by one literate person.
9. A person who signs in block letters cannot make endorsement and is not a valid endorsement.
10. In case holder of instrument is a partnership firm, the authorized person or partner should sign the instrument in his capacity and on behalf of partnership firm.
Example: for and on behalf of message xyz Enterprises
Or per pro XYZ Enterprises
Similarly an agent can endorse the instrument for his principal by writing on behalf of, or per pro, for and on behalf of.
Example: for XYZ company limited
12. If the endorsement is made on behalf of a company which is in liquidation, and official receiver is appointed thereof, the endorsement will be.
For XYZ company limited in liquidation
13. If the executor is appointed for deceased estate, he can endorse as follows:
Executor of the late Ram Charan Mishra
Kinds of endorsement
2. Endorsement in full: The holder of the instrument in addition to his signature adds direction for payment it is said to be endorsement in full. Say the holder of instrument Mr. A may sign on the instrument as endorser with direction to make payment to Mr. B.
3. Conversion of endorsement in Blank to endorsement in full: The holder of an instrument bearing blank endorsement can make the direction on the instrument above the signature of the previous endorsee (i.e. the endorser of the blank endorsement) and complete the endorsement without incurring any liability on himself or making himself liable to any party.
4. Conditional Endorsements: Endorsement in which the payment is to be made on the occurrence of an event is called conditional endorsement. For example Mr. Writes above his signatures pay Y after he comes to India. Though conditional endorsements do not make instrument non-negotiable they are generally not used.
5. Restrictive Endorsement: An endorsement which restricts the rights of negotiation further is called restrictive endorsement. Like pay to Mr. Avinash Srivastava only. Pay to Mr. Avinash for my use only. These endorsements make it restrictive and Mr. Avinash in possession and as holder of the instrument cannot further negotiate it.
6. Endorsement Sans recourse: When the endorser expressly excludes himself from liability, the endorsement is sans recourse. Mr. A, holder of instrument can make endorsement like pay to Mr. Avinash at his own risk or pay to Mr. Avinash without recourse to me.