When a check is in your hands, what will be your next move? This would be the burning question posed by many newcomers dealing with checks for the first time in their life and the answer would be, you should endorse.
This means that you will have to endorse the check either to cash the check or to transfer it to another party for making a payment and to discharge any business obligations.
‘Endorser’ and ‘Endorsee’:
In usual practice, a person who endorses a check is known as the ‘endorser’ and upon whom the endorsement is made can be named as the ‘endorsee’.
It’s a negotiable instrument:
In financial world, the check is said to be a negotiable instrument and easy transferability is the essential feature of every negotiable instrument. Therefore every maker, drawer, payee, or endorsee of a check is entitled to endorse the check.
Where to endorse?
However, most of the checks bear a direction on where it should be endorsed. You may have noticed a place that says “endorse check here”. Thus, a check can be correctly endorsed by signing your name where it says “endorse check here”. But, if no place is being reserved on the check for the purpose of endorsement, it can be correctly endorsed by signing the name of the endorser on a slip of paper attached to the check.
Can you use a pencil to endorse?
While endorsing it should be remembered that the endorsement should be made in ink for it to be a valid endorsement. An endorsement made by pencil or a rubber stamp is not valid.
Another important point worth mentioning would be that, when a payee of a check wishes to endorse his check, he must sign his name using the exact spelling as it appears on the face of the check.
Can the thumb print be used?
Thus, if a payee of a check is an illiterate person, he also could endorse the check by affixing his left hand thumb impression on the same area.
When in instances where a check is payable to the order of two or more payee’s or endorsees, all must have to endorse the check so as to transfer it to a third party.
In addition to just signing or endorsing the check by writing the name, an endorsement may be made in blank or special and it may also contain terms which makes it restrictive.
Payable to the bearer:
Thus, a check can be endorsed without making any references to endorsee and such a check will become payable to bearer. But, remember not to lose the check so endorsed before cashing it. The reason for this would be, such endorsement enables anyone who gets hold of the check to cash it in.
Hence, a special endorsement means that it specifies the person to whom or to whose order check is to be payable.
For example, X, holder of a check wants to make special endorsement to the person Y. Thus he would write “pay to Y or order” and place his signature. Then only person Y is entitled to receive the payment of the check and further negotiate the check by his endorsement.