A special Indorsement Is one which specifies a particular Indorsee.
An indorsement to a certain person naming him in the indorsement is called a special indorsement. An instrument so indorsed cannot be further negotiated except by indorsement until it is subsequently indorsed in blank. If the special indorsee indorses in blank, the paper will then pass by delivery. (But if the instrument is payable to bearer, it may pass by delivery notwithstanding it has been specially indorsed and there is no blank indorsement.)
A blank Indorse-merit Is one which does not specify any particular indorsee.
A blank indorsement is accomplished by merely writing the name of the indorser on the back of the instrument. It may then pass by mere delivery, but the holder may convert it into a special indorsement by writing above it "Pay to John Brown."
A special indorsement and an indorsement in blank carry with them the same liability. The contract in each instance is the same. A blank indorsement is not so safe as a special indorsement, because being transferable by delivery, a thief or finder thereof could give a good title to an innocent purchaser for value before maturity.
The three following sections relate to indorsements which modify the indorser's contract. Either a special indorsement or one in blank may be qualified, restrictive, or conditional.
A special or blank indorsement may be accompanied with words qualifying, that is to say, limiting the Indorser's contract.
The indorser's contract has already been noted and will hereafter be particularly considered. The indorser may, however, if the indorsee will consent, qualify his contract. This is usually done by adding the words "without recourse," but even in such case the indorser warrants certain things, as noted later. Either a blank or special indorsement may be so limited. The qualification has no effect on the negotiable character of the instrument and it may be further negotiated with the same freedom as though not so indorsed.
A special or blank Indorsement may be~accompanted with words restricting further indorsement.
A restrictive indorsement is an indorsement made not for the purpose of transferring the title to the instrument generally, but a special purpose, that is to say, for purposes of collection, or in trust, etc. It stops further negotiation except as authorized by the terms of the indorsement or for the purpose of carrying out the restrictive indorsement.
A special or blank indorsement may be accompanied with words making its effect conditional.
One may indorse to another on some condition. The party compelled to pay the instrument may disregard the condition, whether it has been performed or not, the condition being between indorser and indorsee. But the conditional indorsee or his transferee, will hold the instrument or the proceeds thereof subject to the condition.