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

Ishaan, the payee of a promissory note, signs his name on the back of the note and delivers it to Jatin. Which type of endorsement is this, and what is its effect?

This is an endorsement in blank. Ishaan only signed and named no endorsee, so the note becomes payable to bearer and Jatin can transfer it further by mere delivery without any further endorsement.

  1. AConditional endorsement; Jatin can claim only when a condition is met
  2. BEndorsement in blank; the note becomes payable to bearerCorrect
  3. CRestrictive endorsement; Jatin cannot transfer the note
  4. DEndorsement in full; the note stays payable only to Jatin's order

Explanation

When the endorser only signs his name without naming an endorsee, it is an endorsement in blank. The instrument then becomes payable to bearer and can be passed on by delivery. No condition or restriction is stated, so the other options are wrong.

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