Assignment takes place where the holder of an instrument transfers it to another so as to confer a right on the transferee to receive the payment of the instrument.
All negotiable instruments are chose in action and as such are transferable by assignment without endorsement under sections 130-132 of the Transfer of property act. Assignment of a negotiable instrument is effected by writing without endorsement. The main feature of assignment is that the assignee obtains the right of the assignor. Therefore if the assignor’s title is defective assignee’s title will also be defective.
Negotiation and assignment distinguished
1) Consideration is presumed until contrary is proved.
2) It transferee is a holder in due course he takes the instrument free from any defects.
3) Notice of transfer is not necessary.
4) Negotiation is effected by delivery in case of instruments payable to bearer and by delivery and endorsement in case of instrument payable to order.
5) Transferee can sue the third party in his own name.
6) There are a number of presumptions in favor of holder in due courses.
1) Consideration must be proved
2) Assignee’s title is always subject to defenses and equities between the original debtor and assignor.
3) Notice of assignment must be given.
4) Assignment is effected only by writing
5) Assignee cannot do so.
6) There are no such presumptions.
When the maker or holder of a negotiable instrument signs the same otherwise than as such maker, or the purpose of negotiation on the back or face thereof or on a slip of a paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instruments he is said to indorse the same, and is called an endorser.
When the maker or holder signs the instrument —
1) on the back or face of the instrument; or
2) on a slip of paper along if no space is left on the instrument; or
3) Signs a stamped paper for the same purpose but not on a copy of the instrument, he is said to have made a valid endorsement.
The person who signs the instrument is called the endorser. The person to whom the instrument is endorsed is called endorsee. Endorsement thus means writing nay thing on the face or on the back of the instrument, for the purpose of negotiation. Such writing must be signed by the endorser. Simple signature without any words will also constitute endorsement. No particular form of words is necessary for an endorsement. Any amount of endorsements may be made on the instrument. If there is no space, slip of paper may be used for further endorsement. This slip of paper is called allonage.
Essentials of valid endorsement
The endorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive. Delivery to be effectual must be made by the party indorsing the instrument, or by a person authorized by him in that behalf.
Endorsement constitutes a contract between the endorser and the endorsee. Endorser can be liable to the endorsee if endorsement is complete. Endorsement is complete only when —
1) the holder writes and /or signs the face or back of he instrument or on a separate slip of paper; or on a stamped paper;
2) the instrument is delivered to the endorsee.
3) The instruments is indorsed and delivered with an intention to transfer the property in the instruments.
In Brind v Hampshire it has been held that until delivery of the instrument the contract of the endorser is incomplete and may be revoked at any time. Forged endorsement gives no title.
Who may indorse and negotiate?
The maker or holder of a negotiable instrument may indorse, otherwise than as such maker. Every sole maker, drawer payee or endorsee or all several joint makers payees or endorsees of a negotiable instruments may, if the negotiability of such instruments has not been restricted or excluded indorse a negotiate the same.
The maker or drawer shall indorse any instruments only when he is in lawful possession or is holder thereof. Similarly a payee or endorsee shall indorse or negotiate an instrument only when he is the holder thereof. Therefore, a thief cannot indorse the instrument.