Legal provisions regarding endorsements

The Negotiable Instrument Act contains many provisions regarding endorsement :

1. Effect of Endorsement. The endorsement of a negotiable instrument followed by delivery, transfers to the endorsee the property therein with the rights of further negotiation. Thus the endorsee acquires property or interest in the instrument as the holder. He can also negotiate further if not restricted by a restricted endorsement by the endorser.

2. Who can endorse. According to section 51. ‘Every sole maker, drawer, payee or endorsee or all of several joint makers, drawers, payees or endorsees, of negotiable instrument may endorse and negotiate the same’. Thus, in case the instrument is held jointly by a number of persons, endorsement by all of them is essential, one can not present the other.

3. Time. A negotiable instrument may be negotiated until its payment has been made’ by the maker drawee or acceptor at or after maturity not after its payment.

4. Endorsement for a part of the amount. The instrument must be endorsed-for its entire amount: According to section 56 ‘no writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument’.

Thus an endorsement for a part of the amount of the instrument is invalid. But in cases where an instrument has been partly paid, it may be negotiated for the balance of the amount provided a note to that effect is given on the instrument. If the endorser intends to transfer the document to two or more endorses separately, it will not constitute a valid endorsement.

5. The legal representative of a deceased person cannot negotiate by delivery only a promissory note, bill of exchange or cheque payable to order and endorsed by the deceased but not delivered. Thus if the endorser dies after endorsing the instrument payable to order but without delivering the same to the endorsee, the endorsement is not valid and his legal representative cannot complete the negotiation by mere delivery thereof.

6. Unless the contrary is proved it is presumed under section 118 that ‘the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon. It means that the endorsement which appears on the instrument first is presumed to have been made earlier to the second one.

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