Article 9p. 9

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

lending his name to some other person. Such a person is

liable

on

the

instrument

to

a

holder

for

value,

notwithstanding such holder at the time of taking the

instrument knew him to be only an accommodation

party.

CHAPTER III Negotiation

SECTION

30. What

Constitutes

Negotiation .

—

An

instrument is negotiated when it is transferred from one

person to another in such manner as to constitute the

transferee the holder thereof. If payable to bearer, it is

negotiated by delivery; if payable to order, it is negotiated

by the indorsement of the holder completed by delivery.

SECTION

31. Indorsement ;

How

Made .

—

The

indorsement must be written on the instrument itself or

upon a paper attached thereto. The signature of the

indorser,

without

additional

words,

is

a

sufficient

indorsement.

SECTION 32. Indorsement Must Be of Entire Instrument .

— The indorsement must be an indorsement of the entire

instrument. An indorsement which purports to transfer to

the indorsee a part only of the amount payable, or which

purports to transfer the instrument to two or more

indorsees severally, does not operate as a negotiation of

the instrument. But where the instrument has been paid

in part, it may be indorsed as to the residue.

SECTION 33. Kinds of Indorsement . — An indorsement

may be either special or in blank; and it may also be

either restrictive or qualified, or conditional.

SECTION

34. Special

Indorsement ;

Indorsement

in

Blank . — A special indorsement specifies the person to

whom, or to whose order, the instrument is to be payable;

and the indorsement of such indorsee is necessary to the

further negotiation of the instrument. An indorsement in

blank

specifies

no

indorsee,

and

an

instrument

so

indorsed is payable to bearer, and may be negotiated by

delivery.

SECTION

35. Blank

Indorsement ;

How

Changed

to

Special Indorsement . — The holder may convert a blank

indorsement into a special indorsement by writing over

the signature of the indorser in blank any contract

consistent with the character of the indorsement.

SECTION

36. When

Indorsement

Restrictive .

—

An

indorsement is restrictive which either —

(a)Prohibits the further negotiation of the instrument; or

(b)Constitutes the indorsee the agent of the indorser; or

(c)Vests the title in the indorsee in trust for or to the use of

some other persons. cdasia

But the mere absence of words implying power to

negotiate does not make an indorsement restrictive.

SECTION 37. Effect of Restrictive Indorsement ; Rights of

Indorsee . — A restrictive indorsement confers upon the

indorsee the right —

(a)To receive payment of the instrument;

(b)To bring any action thereon that the indorser could

bring;

(c)To transfer his rights as such indorsee, where the form

of the indorsement authorizes him to do so.

But all subsequent indorsees acquire only the title of the

first indorsee under the restrictive indorsement.

SECTION

38. Qualified

Indorsement .

—

A

qualified

indorsement constitutes the indorser a mere assignor of

the title to the instrument. It may be made by adding to

the indorser's signature the words "without recourse" or

any words of similar import. Such an indorsement does

not impair the negotiable character of the instrument.

SECTION

39. Conditional

Indorsement .

—

Where

an

indorsement is conditional, a party required to pay the

instrument

may

disregard

the

condition

and

make

payment to the indorsee or his transferee whether the

condition has been fulfilled or not. But any person to

whom an instrument so indorsed is negotiated will hold

the same, or the proceeds thereof, subject to the rights of

the person indorsing conditionally.

SECTION

40. Indorsement of Instrument Payable to

Bearer . — Where an instrument, payable to bearer, is

indorsed

specially,

it

may

nevertheless

be

further

negotiated by delivery; but the person indorsing specially

is liable as indorser to only such holders as make title

through his indorsement.

SECTION 41. Indorsement Where Payable to Two or

More Persons . — Where an instrument is payable to the

order of two or more payees or indorsees who are not

partners, all must indorse, unless the one indorsing has

authority to indorse for the others.

SECTION 42. Effect of Instrument Drawn or Indorsed to

a Person as Cashier . — Where an instrument is drawn or

indorsed to a person as "cashier" or other fiscal officer of a

bank or corporation, it is deemed prima facie to be

payable to the bank or corporation of which he is such

officer; and may be negotiated by either the indorsement

of the bank or corporation, or the indorsement of the

officer.

SECTION 43. Indorsement Where Name is Misspelled ,

and So Forth . — Where the name of a payee or indorsee

is wrongly designated or misspelled, he may indorse the

instrument as therein described, adding, if he thinks fit,

his proper signature.

SECTION 44. Indorsement in Representative Capacity . —

Where any person is under obligation to indorse in a

representative capacity, he may indorse in such terms as

to negative personal liability.

SECTION

45. Time

of

Indorsement ;

Presumption .

—

Except

where

an

indorsement

bears date after the

maturity of the instrument, every negotiation is deemed

prima facie to have been effected before the instrument

was overdue.

SECTION

46. Place

of Indorsement ; Presumption . —

Except where the contrary appears, every indorsement is

presumed prima facie to have been made at the place

where the instrument is dated.

SECTION 47. Continuation of Negotiable Character . —

An instrument negotiable in its origin continues to be

negotiable until it has been restrictively indorsed or

discharged by payment or otherwise.

SECTION 48. Striking Out Indorsement . — The holder

may at any time strikeout any indorsement which is not

necessary to his title. The indorser whose indorsement is

struck out, and all indorsers subsequent to him, are

thereby relieved from liability on the instrument.

SECTION 49. Transfer Without Indorsement ; Effect of . —

Where the holder of an instrument payable to his order

transfers it for value without indorsing it, the transfer

vests in the transferee such title as the transferor had

therein, and the transferee acquires, in addition, the right

to have the indorsement of the transferor. But for the

purpose of determining whether the transferee is a

holder in due course, the negotiation takes effect as of

the time when the indorsement is actually made.

SECTION

50. When

Prior

Party

May

Negotiate

Instrument . — Where an instrument is negotiated back

to a prior party, such party may, subject to the provisions

of this Act, reissue and further negotiate the same. But he

is not entitled to enforce payment thereof against any

intervening party to whom he was personally liable.

CHAPTER IV Rights of the Holder

SECTION 51. Right of Holder to Sue ; Payment . — The

holder of a negotiable instrument may sue thereon in his

own name; and payment to him in due course discharges

the instrument.

SECTION 52. What Constitutes a Holder in Due Course .

— A holder in due course is a holder who has taken the

instrument under the following conditions:

© Compiled by RGL

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