The ownership or property of the negotiable instruments can be transferred by way of writing the name of the person in whose favor the said instrument is being transferred. Such writing can be done on the back or on the face of the negotiable instrument. This transfer of the property is called endrosement. Sometimes, endorsement can be done by attaching a piece of paper alongwith the negotiable instrument.
Parties involved in Endorsement
There are two parties involved in the endorsement transaction, the person who endorses the instrument is called the endorsee while the person in whose favour, the instrument is being transferred is called the endorsee.
Features of Endorsement
Following are the key features of endorsement:
Purpose
The overall purpose of the endorsement is the negotiation of a bill of exchange, promissory note or a cheque.
Requirement
In order to complete the process of endorsement, only the maker or holder of the negotiable instrument has to sign on the face or on the back or paper attached to the negotiable instrument. The paper attached is called Allonge.
Outcome
The outcome or result of endorsement are as follows:
endorser transfers the property or ownership of the instrument,
accepts the liability of the instrument by appending/ signing his name.