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Английский язык для юристов. Предпринимательское право

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An instrument is indorsed when the holder signs it, thereby indicating the intent to transfer ownership to another. Endorsements may be written in ink, typewritten, or stamped with a rubber stamp. They may be written on a separate paper (rider, or allonge) as long as the separate paper is so firmly affixed to the instrument that it becomes part of it. For convenience purposes endorsements are usually placed on the back of the instrument.

Anyone who gives value for an instrument has the right to have the unqualified endorsement of the person who transferred it unless it is payable to bearer.

The back of a check is divided into specific sections designed to protect the endorsement of the depository bank (the bank of first deposit). The first one-and-one-half inches from the trailing edge of the check is reserved for the payee's endorsement. Subsequent banks that handle the check after the depository bank should limit their endorsements to the three-inch space beginning at the opposite end (leading edge) of the check. The section between the payee's endorsement section and the subsequent banks' endorsement section must be reserved for the depository bank's endorsement. In addition, purple ink can be used only by the depository bank.

There are four commonly used types of endorsements: blank endorsements, special endorsements, restrictive endorsements, and qualified endorsements.

A blank endorsement consists of the signature alone written on the instrument. No particular endorsee (person to whom an instrument is indorsed) is named. When an instrument is indorsed in blank, it becomes payable to bearer and may be transferred by delivery alone. If the instrument is lost or stolen and gets into the hands of another holder, the new holder can recover its face value by delivery alone. For this reason, a blank endorsement should be used only in limited situations, such as at a bank teller's window.

When an instrument is made payable to a person under a misspelled name or a name other than that person's own, the payee may indorse in the incorrect name, in the correct name, or in both. Signatures in both names may be required by a person paying or giving value for the instrument.

A special endorsement (also called an endorsement in full) is made by writing the words pay to the order of or pay to followed by the name of the person to whom it is to be transferred (the endorsee) and the signature of the endorser. When indorsed in this manner, the instrument remains an order instrument and must be indorsed by the endorsee before it can be further negotiated.

The holder of an instrument may convert a blank endorsement into a special endorsement by writing the same words (pay to the order of or pay to) over the endorser's signature.

A restrictive endorsement limits the rights of the endorsee in some manner in order to protect the rights of the endorser. An endorsement is restrictive if it is conditional, purports to prohibit further transfer of the instrument, includes the words for collection, for deposit, pay any bank, or like terms signifying a purpose of deposit or collection, or otherwise states that it is for the benefit or use of the endorser or of another person.

A conditional endorsement, a type of restrictive endorsement, makes the rights of the endorsee subject to the happening of a certain event or condition.

Endorsements for deposit or collection are designed to get an instrument into the banking system for the purpose of deposit or collection. When a check is indorsed

«for deposit only» the amount of the instrument is credited to the endorser's account before it is negotiated further. Retail stores often stamp each check «for deposit only» when it is received. This wording provides protection in the event the check is stolen. Checks mailed to the bank for deposit should always be indorsed in this way.

A restrictive endorsement limits the subsequent use of the instrument. An endorsement that purports to prohibit further transfer, such as «pay John Doe only,» may be further negotiated after the directions in the endorsement are carried out. Thus, after John Doe is paid, any holder of the instrument may continue to negotiate it. A restrictive endorsement does not prevent further transfer or negotiation of the instrument.

A qualified endorsement is one in which words have been added to the signature that limit the liability of the endorser. By adding the words without recourse to the endorsement, the endorser is not liable in the event the instrument is dishonored, that is, not paid by the maker or drawer.

An accommodation party is one who signs an instrument in any capacity for the purpose of lending his or her name to another party to the instrument.

Thus, an accommodation party who signs on the front of a promissory note below the signature of the maker assumes the same liability as the maker. On the other hand, an accommodation party who signs on the back of the instrument assumes the same liability as an endorser. An accommodation party is not liable to the party accommodated. The party accommodated, however, is liable to the accommodation party if the latter pays the instrument.

If an instrument is payable to either of two payees, the endorsement of only one of the payees is necessary to negotiate it. On the other hand, if an instrument is payable to both of two payees, the endorsement of both payees is necessary for a proper negotiation.

A depository bank that has taken in an item for collection may supply any endorsement of the customer that is necessary to title. This rule is designed to speed up bank collections by eliminating the necessity to return to a depositor any items that were not indorsed. Such an endorsement may not be supplied by a bank, however, if the instrument contains the words payee's endorsement required.

Exercise 1. Comprehension questions:

1. In what case is an instrument indorsed?

2. When does an assignment of commercial paper occur?

3. What are the standards for check endorsements?

4. What are the cases when a blank endorsement should be used?

5. How can be a blank endorsement converted into a special one?

6. What does a restrictive endorsement suppose?

7. Explain what an accommodation party is.

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