instrument. An indorsement which purports to transfer to the indorsee a
part only of the amount payable, or which purports to transfer the
instrument to two or more indorsees severally, does not operate as a
negotiation of the instrument. But where the instrument has been paid in
part, it may be indorsed as to the residue."
NEGOTIATION BY INDORSEMENT.--Reference should be made to the several
kinds of negotiation by indorsement. We have first the blank
indorsement. There the person to whom the document is payable simply
writes his name on the back in the same way as it appears on the front.
That is, if John Jones is the payee, he writes his name across the back
of the instrument "JOHN JONES." Next, there is the special indorsement.
John Jones, in this case, is the payee and wishes to transfer the note
to John Wanamaker. He writes across the back, "pay to the order of John
Wanamaker" and signs his name, JOHN JONES. A restrictive indorsement is
one where the further negotiation of the instrument is limited or
restricted altogether. For example, the payee writes across the back
"Pay to the order of John Jones only." That restricts the further
negotiation of the instrument. Another form that is commonly used is in
depositing checks in the bank in your own account; usually you indorse
"for collection" and sign your name, or you indorse "for deposit only"
and sign your name. This form of indorsement simply constitutes the bank
your agent to make collection, but not for any other purpose except that
the Act now authorizes a bank to begin suit to collect on a document
indorsed in that way. Another form of indorsement, known as the
qualified indorsement, is frequently used in the case where you wish to
indorse without incurring the usual liability of the indorser. This is
done by adding under your name the expression "without recourse." This
does not mean, as is commonly supposed, that you are free from all
liability as an indorser. We shall refer to this later.
THE HOLDER IN DUE COURSE.--As we have seen, the distinguishing feature
of the law of commercial paper is negotiability as distinguished from
assignability. The principles of negotiability are designed very largely
for the protection of the person whom we call the holder in due course.
It is essential then to bear in mind the condition under which a person
becomes such. Section 52 of the Act defines a holder in due course as
follows: