CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881
B holds a bearer instrument and signs an indorsement reading 'Pay C only'. Which statement is correct under Section 50?
The indorsement 'Pay C only' contains express words limiting payment to C, so it excludes C's right of further negotiation. Section 50 allows an indorsement to restrict or exclude that right through express words, unlike a simple 'Pay C'.
- AThe indorsement excludes C's right of further negotiationCorrect
- BThe indorsement does not affect C's right of further negotiation
- CThe indorsement makes C an agent of the drawee
- DThe indorsement converts the instrument into one payable to bearer again
Explanation
The illustrations to Section 50 list 'Pay the contents to C only' as an indorsement that excludes the right of further negotiation. By contrast, a plain 'Pay C' does not exclude it. So the restrictive word 'only' is what matters.
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