Notesale: Turn your study into money

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Endorsement & its Types
Endorsement
An endorsement is when the holder of a financial instrument, like a bill of exchange or a
cheque, signs the back of it to transfer ownership to someone else
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This
process allows the endorsee to claim the payment
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Blank Endorsement
A blank endorsement is when the endorser simply signs the back of the instrument without
specifying a new payee
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Example: John writes a cheque to himself, signs the back without specifying anyone, and
gives it to Sarah
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Example: John signs the back of a cheque and writes, "Pay to Sarah," making Sarah the
only one who can claim the money
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Restrictive Endorsement
A restrictive endorsement limits how the instrument can be used, usually for specific
purposes like depositing into a bank account
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This means the cheque can only be deposited into John's account, not cashed
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Conditional Endorsement
In a conditional endorsement, the endorser attaches a condition that must be fulfilled before
the endorsee can claim the payment
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" Sarah can only get the money after the project is completed
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Partial Endorsement
A partial endorsement specifies only part of the amount on the instrument, but this type is
generally not allowed in many legal systems
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If the instrument is dishonoured (not paid), the endorser is not held
responsible
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" If the
drawee refuses to pay, Sarah cannot sue John to recover the money
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Facultative Endorsement
In a facultative endorsement, the endorser waives some rights, such as the right to receive
notice of dishonour if the bill or cheque is not paid
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