INDORSEMENT MUST BE OF

THE WHOLE INSTRUMENT

The general rule is that the
instrument must be of the entire
instrument.
Accordingly, an indorsement of a
part of the instrument doesn't operate as
a negotiation thereof.

EFFECT OF PARTIAL
INDORSEMENT
It doesn't operate as an indorsement.
It may constitute a valid
assignment though binding between the
parties.
The person to whom the instrument is
indorsed would not be considered an indorsee
but merely an assignee and would therefore
take the instrument subject to the defenses
available between the original parties.

EXCEPTION
But where the instrument has been
paid in part, it may be indorsed as to
the residue

TRANSFER TO TWO OR MORE

INDORSEES SEVERALLY
An indorsement which purports to
transfer the instrument to two or
more indorsees severally, doesn't
operate as a negotiation of the
instrument

Effect of partial indorsement when

unauthorized = valid assignment
binding between parties
Examples:
2 or more indorsees severally: Pay to A
P500 and B P500 - INVALID
2 or more indorsees solidarily : Pay to
A and B P500 - VALID

KINDS OF INDORSEMENT
1. Special - Also known as direct
endorsement and endorsement in full.
This endorsement specifies the person
to whom or to whose order the
instrument is payable, and the
endorsement of such endorsee is
necessary to the further negotiation of
the instrument.

Example. A, the holder of a bill of

exchange, wants to make an
endorsement in full to B, he would
write thus: Pay to B or order, SdA4.
After such an endorsement it is only the
endorsee, i.e., B, who is entitled to
receive the payment of the instrument
and to further negotiate the instrument
by his endorsement.

2. In blank - Endorsement in blank,

also known as general endorsement. It
specifies no particular endorsee, and
thereafter is payable to bearer and may
be negotiated by delivery alone.
Ex: If the instrument is payable to John
Smith, the endorsement in blank is his
simple signature without additional
words, i.e., John Smith.

3. Restrictive - Endorsement which

limits further negotiability of a
negotiable instrument. For example, the
words 'accounts payee only' on the face
or 'For deposit only' on the back of a
check block its cashing over the
counter and endorsement to another
party. Also called endorsement limiting
further endorsement.

Example:
(a) B, the holder of the bill, makes an
endorsement on the bill saying Pay C
only. It is a restrictive endorsement as
C cannot negotiate the bill further.

4. Qualified - Endorsement that adds

certain words which limit, qualify, or
restrain the endorser's liability. Adding
the term 'without recourse' to a
negotiable instrument signifies that the
endorser shall not be liable if the
instrument is dishonored.

5. Conditional - Endorsement where the

endorser attaches one or more
conditions to his or her liability on a
negotiable instrument, such as "To be
paid upon the completion of the
contract."
Example: Pay Adam Smith upon the
satisfactory performance of his
contract, (signed) Jane White.