There are seven kinds of indorsements: (1) Indorsement in blank (2) Indorsement in full (3) Partial indoresment (4) Conditional or Qualified indorsement (5) Restrictive indorsement (6) Facultative indorsement (7) Forged indorsement.
Indorsement in blank: If the indorser signs his name only, the indorsement is said to be blank. A blank indorsement is also called general indorsement. The name of endorsee is left blank. The indorser signs the instrument. Instrumental so indorsed is like an instrument payable to bearer. The property in the instrument passes by mere delivery of the instrument. Therefore where the holder of an instrument does not mention the name of any party but merely signs his name without any words, the instrumental is said to be indorsed in blank. A blank indorsement specifies no indorsee. The negotiable instrument indorsed in blank is payable to the bearer thereof even though originally payable to order. If it is delivered to any person property therein passes. It is negotiable by mere delivery and the bearer is entitled to its payment.
Specimens of Indorsements in Blank
1) Henry Brown
2) Thomson Robinson
3) Jonathan George.
Indorsement in full: If the indorser signs is name and adds a direction to pay the amount mentioned in the instruments to, or do the order of a specified person, the indorsement is said to be in full. The person so specified is called the indorsee of the instrument.
Specimens of indorsements in Full
1) Pay to Thomson Robinson or order — James Richardson.
2) Pay to George French — James Phillips
3) Pay to Jonathan George – George French
Where one person specifies the name of other person to whom money is to be paid and signs the instrument, it is a case of indorsement in full i.e. the indorser directs a specific person to whom money is to be paid. Indorsement in full is also known as special indorsement. No particular form of words is necessary. Intention to transfer the document to a particular person should be sufficient to make it a valid indorsement.
Conversion of indorsement in blank into indorsement in full: The holder of a negotiable instrument indorsed in blank may without signing his own name, by writing above the indorser’s signature a direction to pay any other person as indorsee convert the indorsement in blank into indorsement in full . The holder does not thereby incur the responsibility of an indorser.
Any holder of an instrument may put his own or someone else’s name above the signature of the indorser and convert the indorsement in blank into an indorsement in full. As the holder does not put his signature he incurs no liability.
Effects of an indorsement in blank when converted into full: If a negotiable instrument after having been indorsed in blank is indorsed in full, the amount of it cannot be clamed from the indorser in full, except by the person to whom it has been indorsed in full, or by one who derives title through such person.
The parties to the instrument cannot claim the amount from then indorser in full, but the person, who is the bearer of the instrument, can claim the amount from drawer acceptor or the indorser of that instrument in blank.
Thus, a negotiable instrument indorsed in blank, even after being converted in full, remains a bearer instrument and is negotiable by delivery thereof.
Partial indorsement: 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. But where such amount has been partly paid, a note to that effect may be indorsed o the instrument, when may then be negotiated for the balance.
As a rule, where part of the amount due to the negotiable instrument is to be transferred by an indorsement, such indorsement is a partial indorsement and is invalid. This is because a personal contract cannot be apportioned. Only when the amount is partly paid; and such fact is noted on the instrument the balance can be negotiated by indorsement.
The maker of a promissory note for Rs 5,000 pays Rs 2000 and the act is noted on the instrument. The holder can negotiate the note for the balance amount of Rs 3,000.
But take a case like this:
A is the holder of a bill of Rs 1,000. A indorsees it thus Pay B or order Rs 500. This is partial indorsement and invalid for the purpose of negotiation.