Endorsement

Summary of Endorsement

A signature, whether or not accompanied by other writings, on the back of a negotiable instrument. By effecting endorsement, the endorsing party usually undertakes to guarantee performance of the instrument, commonly the payment of a specified sum of money at a date prescribed in the instrument. The endorsement of an instrument plus delivery to the new holder constitute negotiation, i.e., transfer of ownership in the paper, plus goods or money represented by the paper. Most commonly, negotiable paper takes the form of drafts, bills of exchange, checks, bills of lading, warehouse receipts, and such debt obligations as notes and bonds. The characteristic of negotiability, i.e., that the instrument may be endorsed and transferred to another party, is often revealed by the words to order in conjunction with the name of the payee or owner of the instrument; by drawing a document “to order,”the parties to the original agreement that gives rise to the instrument are stating that the named payee may order that another be paid in his stead, and the person so designated as the new payee reserves the right to endorse and deliver the instrument to yet another party in his order or direction.

The Uniform Commercial Code, as adopted in the United States, recognizes five types of endorsements:

1. Blank endorsement (also known as general endorsement) consists merely of a signature. This form of endorsement makes the instrument into bearer paper, negotiable by delivery alone; ownership of the instrument is vested in whoever possesses it.

2. Special endorsement (also known as endorsement in full and direct endorsement) specifies a particular party to whom the instrument is payable; the endorsement of that party is essential to subsequent negotiation.

3. Conditional endorsement imposes stipulated conditions upon the party to whom the instrument is endorsed, e.g., that a bill of exchange be paid to the order of John Smith upon transfer of title to certain merchandise. John Smith, upon subsequent negotiation of the bill, would warrant to all subsequent holders that the prescribed conditions had been fulfilled. This form of endorsement is not employed frequently.

4. Without recourse endorsement is a qualified endorsement that limits the warranties of the endorser. By endorsing an instrument with the words without recourse above the signature, the instrument is negotiated with the express understanding on the part of the new holder that he may not look to the prior holder for relief in the event the instrument is subsequently dishonored by the drawee or maker.

5. Restrictive endorsement is a qualified endorsement that prohibits further negotiation of the instrument, makes the endorsee agent for the endorser, and transfers the instrument to the endorsee in trust for a third party. Under a restrictive endorsement, all subsequent endorsers acquire only the rights of the first endorser.

An endorser adds his name and credit to the integrity of the instrument, and subsequent holders may look to prior endorsers (excepting those who have endorsed “without recourse”or under restrictive endorsements) for settlement of the obligation that the instrument represents.

Endorsement may take the form of a manual signature, printed or stamped impressions, or any other form regarded as a legal signature; there is no limit to the number of endorsements that may appear on a negotiable instrument, unless the instrument or a restrictive endorsement provides otherwise. In those cases where the number of endorsements exceeds the capacity of the instrument to accommodate them all legibly, an attachment, known as an allonge, may be permanently affixed to the instrument.

(Main Author: William J. Miller)

Endorsement in Election Law

Document signed by a specific number of voters in support of a candidate or list which enables them to run for office. This is a requirement in certain political systems in order to limit the number of candidates and avoid 'joke' ones from running, particularly in elections for the highest offices of state.

Endorsement in International Trade

Meaning of Endorsement, according to the Dictionary of International Trade (Global Negotiator): The act of a person who is holder of a negotiable instrument in signing his or her name on the back of that instrument, thereby transferring title or ownership. An endorsement may be made if favour of another individual or legal entity, resulting in a transfer of the property to that other individual o legal entity. There are several types of endorsements:

Endorsement in blank is the writing of only the endorser's name on the negotiable instrument without designating another person to whom the endorsement is made, and with the implied understanding that the instrument is payable to the bearer.

Collection endorsement is one that restricts payment of the endorsed instrument to purposes of deposit or collection.

Conditional endorsement is one that limits time at which the instrument can be paid or further transferred or that requires the occurrence of an event before the instrument is payable.

Restrictive endorsement is one that directs a specific payment of the instrument, such as for deposit or collection only, and that precludes any other transfer of it.

Resources

See Also

• Election Law
• Electoral Laws
• Electoral Legislation