Word ’’Endorsement” is extracted from the Latin Word “Indorsum. In Latin language, word “In” means “on” and “Dorsum” stands for “back”. Thus Indorsum means “on back”. It means, the writing on the back of the paper is called ’Endorsement’.
A Bearer cheque does not need endorsement while a crossed and order cheque requires endorsement. The person who endorses the cheque is called “Endorser” and the person to whom the cheque is transferred is called “Endorsee”.
DEFINITIONS:
- When the drawer of a cheque transfers the cheque to another person, he signs on the back of cheque, this process is called ‘Endorsement of the cheque”. The rights of receiving the amount of cheque are transferred to that person whose name return on the back of cheque by this process.
- Endorsement means such writing on the back of a cheque, which reveals the responsibility in any transferring matter.
Endorsement means to write his name with or without words on the back of a paper or documentfor confirmation or certification.
Main Points of Definition
- Writing his name with or without words.
- On the back of a cheque, paper or document.
- For transferring the rights of receiving the amount.
- To another person.
TYPES OF ENDORSEMENT
Followings are the main types of endorsement.
Types of Endorsement
General Endorsement
Special Endorsement
Conditional Endorsement
Partial Endorsement
Restricted Endorsement
Faculative Endorsement
- General Endorsement:
If owner / holder of the cheque only signs on the back of cheque in order to transfer then it is called general endorsement. In this endorsement the name of the person to whom cheque is transferred, is not written. If a crossed or order cheque is endorsed then it becomes a bearer cheque.
Endorser’s
Signature
- Special or Complete Endorsement:
While transferring the cheque to a person, if the owner or holder writes the name of endorsee before his signature then the endorsement is said to be “complete”.
“Pay the amount of this cheque to Waqar”.
Endorser’s
Signature
- Conditional Endorsement:
If endorser of the cheque puts a condition for the transfer of cheque I hen it is called conditional endorsement. The process of endorsement completes after the fulfillment of that condition. Such endorsement has no legal value.
“The amount of this cheque is paid to Adnan when he completes the construction of this house.
Endorser’s Signature
- Partial Endorsement:
It means, endorsement of a part of the amount mentioned on the cheque. Such endorsement has also no legal value, because endorsement is id ways done for the full amount of the cheque.
“Pay Rs. 5000 to Amani from the amount of this cheque”.
Endorser’s Signature
- Restricted Endorsement:
It means the endorsement after which the cheque cannot be endorsed further. So, only that person can receive the amount in whose favour endorsement is made.
“Pay the amount of this cheque only to Rehman”.
Endorser’s
Signature
- Facula tive Endorsement:
In case of dishonour of cheque, a notice is given to endorsers to bear the responsibility of loss. However, in case of faculative endorsement, if notice is not given even then the endorsers cannot be exonerated.
“Pay the amount of this cheque to Mr. Khurram, notice of dishonour not required.”
Endorser’s Signature
Cheques have been a popular method of payment for decades, providing a convenient and secure way to transfer funds. However, the process of endorsing a cheque and understanding the different types of endorsements can sometimes be confusing. In this article, we will explore the various types of cheque endorsements, their significance, and how they can be used.
What is a Cheque Endorsement?
A cheque endorsement is a signature or stamp on the back of a cheque that signifies the transferring of the cheque to another party. It is a crucial step in the cheque clearing process, confirming that the payee has given their consent to transfer the funds to a third party. An endorsement is typically required when the payee wants to cash or deposit the cheque into their own account.
Common Types of Cheque Endorsements
Blank Endorsement
A blank endorsement is the most straightforward and common type of endorsement. It involves simply signing the back of the cheque without designating a specific payee. By endorsing the cheque in this way, the payee authorizes anyone who possesses the cheque to negotiate or cash it. It is important to note that a blank endorsement should be done in a controlled manner to prevent unauthorized individuals from accessing the funds.
Special Endorsement
A special endorsement, also known as an endorsement in full, involves the payee signing the back of the cheque and specifying the name of the person or entity to whom they are transferring the funds. This type of endorsement restricts the cheque to be negotiated only by the specified payee or their authorized representative. It is often used when the payee wants to transfer the cheque to someone else, such as when making a payment to a vendor or settling a debt.
Restrictive Endorsement
A restrictive endorsement places limitations on how the cheque can be used. Instead of providing a specific payee, the endorsement includes instructions on how the funds should be handled. Common examples of restrictive endorsements include “For Deposit Only” or “Pay to Account of Payee.” These endorsements ensure that the funds are deposited directly into the payee’s account and cannot be cashed or transferred to another individual.
Importance and Benefits of Cheque Endorsements
Secure and Traceable Transactions
Endorsing a cheque adds an extra layer of security to the payment process. By requiring signatures, it becomes easier to trace and track the movement of funds, reducing the risk of fraud or unauthorized use. Additionally, endorsements create a paper trail that can be helpful for record-keeping and resolving any discrepancies.
Clearance and Verification
Banks and financial institutions use endorsements to verify the legitimacy of the cheque and ensure that the rightful payee is receiving the funds. Without proper endorsements, banks may refuse to accept or honor the cheque, causing inconvenience and delays.
Peace of Mind for Recipients
For individuals or businesses receiving cheques, endorsements provide peace of mind. They can be confident that the cheque has been properly endorsed, minimizing the risk of fraudulent or unauthorized transactions.
Tips for Proper Cheque Endorsements
To ensure a smooth and hassle-free transaction, here are some essential tips for proper cheque endorsements:
- Sign the cheque on the designated endorsement line.
- Use the signature that matches the one on the front of the cheque.
- Be cautious while endorsing blank cheques and consider using special endorsements instead.
- Avoid endorsing the cheque until you are ready to deposit or cash it to prevent unauthorized use.
- Double-check the amount and payee before endorsing the cheque to avoid mistakes.
Conclusion
Understanding and correctly utilizing the various types of cheque endorsements is crucial for smooth and secure financial transactions. Whether it’s a blank endorsement, special endorsement, or restrictive endorsement, each serves a purpose in ensuring the safe transfer and tracking of funds. By following the tips mentioned above, individuals and businesses can confidently navigate the cheque endorsement process and maintain financial integrity. So remember, when dealing with cheques, endorsement matters.
