Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Assignment: Under general contract principles, a negotiable
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INDORSEMENTS
Indorsement: A signature, with or without additional words
(e.g., “for deposit only,” “payable to Jane White,” “payable
from acct. # 000001,” etc.), made by the indorser in order to
transfer her rights to the indorsee.
Blank Indorsement: An indorsement that specifies no
particular indorsee and can consist of a mere
Qualified Indorsement: An indorsement which
disclaims any contract liability on the instrument (e.g.,
“without recourse”).
Indorsers acting in a representative capacity often
RESTRICTIVE INDORSEMENTS
Restrictive Indorsement: Any indorsement on a negotiable
instrument that requires the indorsee to comply with certain
instructions regarding the funds involved.
of some event specified in the indorsement.
Indorsement for Deposit or Collection: An
indorsement that makes the indorsee a collecting agent
of the indorser, prohibiting further negotiation except by
Converting Instruments: The proper method of
negotiation depends on the nature of the instrument at
the time of negotiation. Thus, an order instrument can
be converted into a bearer instrument by, e.g., indorsing
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
converted into an order instrument by, e.g., indorsing it
in such a way as to identify a particular payee.
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
instrument, she may indorse it
(1) as it (incorrectly) appears,
(2) as it should (correctly) appear, or
(3) both.
requires the indorsement of only one of the payees.
Jointly Payable: On the other hand, an instrument payable to
two or more persons jointly (e.g., “Pay to Bob and Jill”)
requires the indorsement of both of the payees.
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
If it is unclear whether an instrument is payable to two or
more persons jointly or in the alternative, courts will construe
it as being payable in the alternative.
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
INDORSEMENTS
Indorsement: A signature, with or without additional words
(e.g., “for deposit only,” “payable to Jane White,” “payable
from acct. # 000001,” etc.), made by the indorser in order to
transfer her rights to the indorsee.
Blank Indorsement: An indorsement that specifies no
particular indorsee and can consist of a mere
Qualified Indorsement: An indorsement which
disclaims any contract liability on the instrument (e.g.,
“without recourse”).
Indorsers acting in a representative capacity often
RESTRICTIVE INDORSEMENTS
Restrictive Indorsement: Any indorsement on a negotiable
instrument that requires the indorsee to comply with certain
instructions regarding the funds involved.
of some event specified in the indorsement.
Indorsement for Deposit or Collection: An
indorsement that makes the indorsee a collecting agent
of the indorser, prohibiting further negotiation except by
Converting Instruments: The proper method of
negotiation depends on the nature of the instrument at
the time of negotiation. Thus, an order instrument can
be converted into a bearer instrument by, e.g., indorsing
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
converted into an order instrument by, e.g., indorsing it
in such a way as to identify a particular payee.
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
instrument, she may indorse it
(1) as it (incorrectly) appears,
(2) as it should (correctly) appear, or
(3) both.
requires the indorsement of only one of the payees.
Jointly Payable: On the other hand, an instrument payable to
two or more persons jointly (e.g., “Pay to Bob and Jill”)
requires the indorsement of both of the payees.
Ch. 13: Negotiable Instruments: Transferability and Holder in Due Course – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
If it is unclear whether an instrument is payable to two or
more persons jointly or in the alternative, courts will construe
it as being payable in the alternative.