Essentials of a Valid Endorsement is a crucial aspect of negotiable instruments, facilitating the transfer of all rights embodied in the instrument to another party. While the common practice involves endorsing a cheque by placing a signature on its back, it remains legally valid if the signature is positioned elsewhere, like on a separate paper known as an allonge, designed to accommodate a signature. In this chapter, our focus will be on exploring the definition, significance, and diverse types of endorsements. This understanding is essential for anyone engaging with negotiable instruments to ensure clarity in the endorsement process.
Essentials of a Valid Endorsement
- Must be on Instrument:
- The endorsement should be on the instrument, whether on the back or face. If space is lacking on the instrument, it can be made on a separate paper called an allonge. Typically, ink is the preferred medium for endorsements.
- Endorsement by Maker or Holder:
- It must be executed by the maker or holder of the instrument. A stranger to the instrument cannot endorse it.
- Signature of Endorser:
- The endorsement requires the signature of the endorser. While a full name is not mandatory, initials may suffice. Thumb impressions should be attested, and the signature can be placed on any part of the instrument.
- No Specific Form:
- An endorsement may take various forms: the endorser signing their name (black endorsement), using words indicating an intention to endorse or transfer to a specified person (blank endorsement), or using words indicating an intention to endorse or transfer to a specified person (endorsement in full). No specific wording is mandated, but the intention to transfer must be evident.
- Delivery:
- Completion of the endorsement requires the delivery of the instrument. The endorser or someone acting on their behalf must make the delivery with the intention of transferring property rights. Conditional endorsements are not complete until the specified condition is fulfilled.
- Endorsement of Entire Bill:
- The endorsement must cover the entire bill. A partial endorsement, transferring only a portion of the amount payable, does not constitute a valid endorsement.
Valid Endorsement Essentials FAQ
An endorsement must be on the instrument itself. It can be on the back or face of the instrument. If there’s no space left on the instrument, it may be done on a separate paper called an allonge.
An endorsement must be made by the maker or holder of the instrument. A stranger to the instrument cannot endorse it.
No specific form of words is prescribed. It can be made by merely signing the name (blank endorsement), using words indicating an intention to transfer (blank or special endorsement), or a combination.
The endorsement must be signed by the endorser. While a full name is not essential, initials may suffice. Thumb impressions should be attested, and the signature can be placed on any part of the instrument.
It must be completed by the delivery of the instrument. The endorser or someone on their behalf must deliver it with the intention of transferring property rights.
