Indorsements may be "special," "in blank," "restrictive," "qualified" or "conditional." A special indorsement names the person to whom, or to whose order, the instrument is to be made payable; the indorsement of such indorsee is necessary to pass the bill to anybody else. Special indorsements are like the following: "Pay to X (signed) A"; "Pay to X or order (signed) A"; "Pay to the order of X (signed) A." A bill can be passed by indorsement only when drawn in negotiable form, usually distinguishable by making payment to the "order of" or to "bearer." "Pay to X" is not negotiable as the form of indorsement does not give X the right to transfer his title. An indorsement in blank occurs when the payee writes his name on the instrument without naming any indorsee. As long as the payee's indorsement remains "blank" the draft can be passed from one person to another by delivery and for all practical purposes can be regarded as payable to bearer. However, any one who gets hold of a draft indorsed in blank can change it from a blank to a special indorsement. A "restrictive" indorsement is one which either (1) prohibits the further passing of the bill or (2) makes the indorsee the agent of the indorser or (3) gives the title in trust to the indorsee for the benefit of some other person. "Pay to X only," "Pay to X for collection for my account" and "Pay to X for account of M" are examples respectively. To make an indorsement restrictive there must be words in the indorsement itself which specifically render it so. Indorsements making the indorsee agent or trustee of the indorser are the most common kind of restrictive indorsements. Indorsements "for collection" are perhaps the commonest form of restrictive indorsement. This sort of indorsement notifies any one who may take the bill from X that X is not the real owner, but only an agent. So if X should pass it to Y, and Y get any money on it, A would have a right to all Y had received. When A indorses a bill to X, either by a special or blank indorsement, he guarantees that if the maker or acceptor (drawee) does not pay, he will. Suppose he does not wish to assume this risk. Then he can give a "qualified" indorsement. "Without recourse" and "not holden" are examples of such indorsements. The only effect is to do away with his obligation to pay if the maker or drawee does not. The bill can still be negotiated. The qualified indorser guarantees the genuineness of the bill and that he is the rightful owner. The following would be a "conditional" indorsement: "Pay to X, or order, if I become captain in the New York Infantry within sixty days. (Signed) A." The party required to pay the instrument may disregard the condition and pay the indorsee or his transferee whether the condition has been fulfilled or not. But the indorsee would hold the bill or any money he might get from it subject to the rights of the person who indorsed conditionally. In the above case let us suppose that P, the payee, paid the amount of the note to X. A does not become a captain. He cannot collect again from P, but he can get from X the money that the latter received from P.

Examples Of Indorsements

Draft: To Carter & Co: Pay to the order of Allan

Young $500. (Signed) Wendell Burns.

Blank Indorsement: Allan Young.

Special Indorsement: Pay to order of James

Knight. Allan Young.

Qualified Indorsement: Without recourse.

Allan Young.

or

Pay to the order of James Knight, without recourse. Allan Young.

Restrictive Indorsement: Pay to James Knight only. Allan Young.

or

Pay to the order of Bank X, for collection for my account. Allan Young.

or

Pay to the order of James Knight for the use of

George Green. Allan Young.

Conditional Indorsement: Pay to James Knight or order if............ Allan Young.

Waiving conditions: Waiving protest.

Allan Young.

or

Pay to the order of James Knight, waiving protest. Allan Young.

There may be successive indorsements as follows:

Pay to James Knight or order.

Allan Young.

Pay to Herog & Kastner or order.

James Knight.

Pay to George Vincent or order.

Herog & Kastner.

etc., etc.

Or if X had not collected from P then A could get the bill from X or from anybody to whom it had come.