Endorse is a specific procedure for the transmission of documents that contain a right to collect a debt.
The endorsement is the statement of the creditor in front of his debtor asking him to pay the debt to another person and that is made in the document that contains the debt.
It involves transmitting the creditor’s position to another person, who will be the one who receives the payment of the debt, which originated from another person. The word endorse comes from the word back, since it is necessary to sign the document by the person transmitting the document on the back of the document.
This action of transmission of documents with collection rights is more common in figures such as bills of exchange, promissory notes and checks. The endorsement can be made at any time before the debt is paid.
Several people participate in the endorsement. The first is the person who will transmit the document with the right of payment, this person is referred to as the endorser . The person receiving this credit right will be the endorser . Whoever has the document with the right to collect (regardless of whether he had previously been an endorser) receives the name of the holder (who has the right to claim payment of the debt). And finally, the figure of the debtor who is the person who has to comply with the final payment obligation to the holder.
Requirements / Features
For the endorsement to be valid, several requirements must be met:
- Formal declaration: Certification on the transmission of the debt by the creditor in the document itself. This formal declaration is made through the signature of the endorser. By signing the endorser the document is guaranteeing the acceptance and payment of the debt contained in the document.
- Material delivery of the document: As it is the document that contains this collection right, the document itself must be transmitted to the new creditor for this endorsement to be effective.
- Indifferent role of the debtor: The debtor must not sign or accept said endorsement, he will direct the payment of the debt to the person who has the payment document that proves the debt.
- Endorsement feature: The endorsement action must be total, pure and simple, that is, not only part of the debt can be transmitted, but all of it is transferred and conditions for this transmission cannot be established.
The endorse action is used in order to achieve any of these three objectives:
- Method of financing: The creditor cannot or does not want to wait for the debt to expire so that it is settled and decides to transmit it to another person (even if it means giving up part of its amount).
- Ensure compliance with own debts: The creditor transmits the document with the right of collection to a creditor of his to ensure the payment of his own debt.
- Impossibility to collect: The creditor transmits the document with the right of collection to another person only to receive on his behalf the payment of the debt because it is impossible or uncomfortable to do it on his own.
Types of Endorsement
The types of endorsement are:
- Full endorsement: The ownership of the document with the right of payment and the ownership of all the rights incorporated in said document is transmitted. This document can be transmitted again making an endorser an endorser.
- Limited endorsement: This is the one used to achieve the purpose of simply charging on behalf of the creditor for inability to go himself, and therefore, does not transmit ownership of the document, but only transmits the right to act in the name and interest of the creditor . The same happens with the purpose of guaranteeing the fulfillment of own debts, this type of endorsement is used because the document is simply transmitted with the right of collection to ensure the payment of your own debt.
A contracts a debt with B on 01/01/2020 and they decide to sign a bill of exchange to defer debt collection to 01/01/2023.
A decides to transmit the bill of exchange (it is the document with the right of payment) to C on 01/01/2021.
C decides to transmit the bill of exchange to D on 01/01/2022.
Who should B address to pay off his debt on 01/01/2023?
B must be addressed with the debt holder on 01/01/2023, and that is D, the last creditor.