Indorsements are entries written on the back of any paper, whether checks, notes or drafts. They show either a transfer of title, a giving of security, or a receipt for a payment applying on the contract indorsed.
We give here, plainly marked, the various forms of indorsements :
No. 1 is the more common and safest form. It transfers the ownership from Smith to Jones, and makes Smith responsible to Jones in case the maker or payer of the paper fails to pay it.
No. 2 transfers ownership, but relieves Smith from any responsibility if the paper is not paid when due. Only under special circumstances is this used.
No. 3 transfers the ownership to any party who may hold the paper, making it in effect payable to the bearer. Such paper should not fall in hands of strangers.
No. 4 transfers the ownership as in No. 3, except that it relieves Smith from further responsibility.
When a paper is written payable to the order of John Smith, and he wishes to transfer his title to Henry Jones, he writes on the back of the paper an order for its payment to Jones.
On negotiable papers that are likely to have several indorsements, care should be taken to write the indorsements as close together as is convenient. If the back of the paper should be covered with indorsements, other indorsements can be written on blank paper attached to the original.
No. 5 is a receipt for money paid to apply on the promise indorsed. Such indorsements need no signature as it might have the effect of a receipt in full.
No. 7 relieves bank of responsibily of serving notice and protest.