Who Can Negotiate?

Every sole maker, drawer, payee or endorsee or all of several joint makers, drawers, payees or endorsees of a negotiable instrument, if the negotiability of such instrument has not been restricted or excluded mentioned in section 50), may indorse and negotiate the same (section 51)?




For example, a bill is drawn payable to A or order. A indorses it to B, the indorsement not containing the words ‘or order’ or any equivalent words, B may negotiate the instrument.

Section 51 states that if the negotiability of an instrument has not been restricted or excluded as mentioned in section 50, then: a) every sole maker, drawer, payee or endorsee, or b) all of several joint makers, drawer’s payees or endorsees of the negotiable instrument may indorse and negotiate the same. But a maker or drawer cannot indorse or negotiate an instrument, unless he is the holder thereof.

In order to affect a valid indorsement of a negotiable instrument, the indorsement must be made by the holder and strictly follow the description given in the instrument. So, where the holder is a firm, only the firm can transfer the note by indorsement.

 

Negotiation Back

In some cases, an endorser, after he has negotiated an instrument, again becomes its holder before its maturity. On such occasions the instrument is said to be negotiated back to the holder. In such cases there are some intervening endorsers and endorsees.

If a bill or note is negotiated back to a prior party, he cannot enforce payment of the instrument against an intervening party to whom he was previously liable but can enforce it against any intermediate party to whom he was not liable. Thus, if A, a holder of a bill, indorses it to B without consideration, and B indorses it to C for value, and C again indorses it to D without consideration, and the bill eventually comes back into the hands of A. Now A can enforce it against B but not against C or D.

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