It refers to writing of a person’s name on the back or face of a negotiable instrument or on a piece of paper attached to it for the purpose of transferring the property in the instrument.
The endorsement must be unconditional and for the entire amount of the bill or cheque. The person negotiating the instrument is called an endorser and to whom it is transferred is called an endorsee.
Kinds of Endorsement:
1. Blank Endorsement Or General Endorsement: It is made without referring to any person. It is made simply by signing the name without naming the endorsee.
2. Special Endorsement: When the endorser transfers the credit instrument to a particular person by naming him in the instrument it is known as a special endorsement.
3. Partial Endorsement: When the endorsement is made for a part of the amount rather than the full, it is known as a partial endorsement. By law such an endorsement is not acceptable.
4. Qualified or Conditional Endorsement: When endorsement is made along with a condition it is known as qualified or conditional endorsement. If the endorsee orders to pay a certain sum of money with a condition, say, the endorsee should supply him (the endorser) certain amount of goods, this type of endorsement will be known as a qualified endorsement. In practice such an endorsement does not exist.
5. Restrictive Endorsement: When an endorser transfers the credit instrument to a person and adds the word ‘only’ after his (endorsee’s) name, this endorsement is known as restrictive endorsement. For example if endorser order “Pay to Salim only”, such an endorsement is referred to restrictive endorsement. In other words further endorsement of that instrument cannot be made. In the example above Salim cannot further endorse the instrument.
6. Sans Recourse Endorsement: When endorsement is not revocable it is known as sans recourse endorsement.