There are different meanings derived from endorsement. However, it is the act of the payee or owner signing his/her name on the back of the bill of exchange, check or other negotiable instruments to make it cashable/payable to another by anyone in the law of negotiable instruments such as securities and checks. An accommodation endorsement is a legal entity given to anyone to induce a lender or a bank to grant a loan to another person. It is a practice in the bank that allows acceptance of endorsements from another lender or bank.
The Uniform Commercial Code Recognizes Five Kinds of Endorsements
Also known as endorsement in blank. When the code is payable to Ken Smiles, the general endorsement only requires a signature. In case of theft, the owner can convert this endorsement to a special approval.
This endorsement is also known as an endorsement in full or direct endorsement. It specifies the person to whom the instrument is payable. This endorsement is required for further instrument negotiation. Subsequent holders get warranties from the endorser.
This allows the endorser to impose conditions to the transferee. For instance, you can pay Ken Smiles upon satisfying his contract performance. When the endorsement is conditional, the required party pays the endorsee even if the condition is not yet fulfilled. This endorsement depends on upon the conditions of fulfillment.
They are two types that constitute the endorser of the instrument. This endorsement does not destroy the instrument’s negotiability. Adding the term “Without Recourse” makes a limited warranty. It directs payment to a person or to be restricted otherwise.
This endorsement comes with the accompaniment of words, which either:
- Prohibits an instrument’s negotiation
- Constitutes the endorsee to the agent
- Vests the trust title to another person to use
This endorsement is signed on the back of the bill, note or check transferring restrictions to whomever is receiving the paper. It confers rights upon the endorsee to receive instrument’s payments, bring any action arising from the endorser or transfer the rights of the endorser as authorized by the endorsement form.
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