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CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Gopal, a Kochi merchant, draws a bill on Haridas payable to Iqbal. Haridas is not a party to it by acceptance yet. Iqbal needs money, so he endorses it to Jacob and writes 'sans recourse' above his signature. Haridas accepts it, but at maturity dishonours it. Which statement is correct?

Iqbal is not liable to Jacob because his 'sans recourse' endorsement excludes his own liability, but Gopal as drawer remains liable. An endorser can exclude personal liability by express words, and that protection does not extend to other parties such as the drawer.

  1. AIqbal is liable to Jacob because every endorser is liable on dishonour
  2. BIqbal is not liable to Jacob because of the 'sans recourse' endorsement, but Gopal as drawer remains liableCorrect
  3. CGopal is also freed because Iqbal excluded his liability
  4. DJacob can recover only from Haridas, as the other parties are discharged by the endorsement

Explanation

An endorser may by express words, such as 'sans recourse', exclude his own liability on the instrument. This protects only Iqbal. Gopal, the drawer, is still liable to the holder if the drawee dishonours, since his liability was not excluded. Hence Jacob can proceed against Gopal.

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