JOHN SMITH.
8. Indorsements in blank.—If Wilson indorses by simply signing his name, the instrument is said to be indorsed in blank, and becomes payable to bearer. It may be negotiated by delivery. If, however, Ar thur Jones comes into possession of it by delivery to him, and indorses it as follows, "Pay to the order of W. Hardy," it cannot be again negotiated until Hardy indorses it. Hardy is presumed to have come into possession of the note before maturity. A holder may thus change an indorsement in blank to a spe cial indorsement, by writing above the indorser's signature a direction to pay the bill to, or to the order of himself or some other person. If, however, he in dorses the bill to himself, he must indorse it again in order to negotiate it.
9. Special we have just seen, a special indorsement specifies the person to whom or to whose order the bill is to be payable. It is more than an indorsement in blank, because the indorser not only signs his name, but gives the direction, "Pay to A. B." or "Pay to the order of A. B." A holder may strike out several blank indorse ments; he cannot strike out a special indorsement in order to insert his own name.
10. Qualified indorsements, or indorsements with out John Wilson indorses as follows, "Pay to Arthur Hardy, without recourse, John Wil son," or simply "Without recourse, John Wilson," his indorsement is said to be qualified. He may use the French expression, "Sans recours," or "At the en dorsee's own risk." It is necessary for him to use • words showing his intention to qualify his indorse ment. His contract on the bill is that he negotiates the bill by indorsement, but he does so on condition that he will not be liable to a subsequent bolder.
11. Conditional John Wilson in dorses as follows, "Pay to Arthur Hardy, unless be fore payment I give you notice to the contrary, John Wilson," the indorsement is conditional. A condi tional indorsement does not hinder the negotiation of the note. True, the indorser has added a condition to his liability, but the Act states that a bill purports to be indorsed conditionally, the condition may be disregarded by the payer, and payment to the indorsee is valid, whether the condition has been ful filled or not. Another example of a conditional in
dorsement—a condition precedent, the former ex ample being a condition subsequent—would be the following, "Pay to A or order, if he lives until he is twenty-one," or "If he is alive when the bill becomes due." The reason for the rule is that it was deemed unfair that a person who accepted a note as indorsee, for example, should have thrust upon him the burden of finding out whether or not the condition had been fulfilled. He might pay, and, if the condition were not fulfilled, be compelled to pay a second time; or had he refused he might be protested. MacLaren points out that the rule does not entitle the holder to compel payment if the condition is not fulfilled; it merely has the effect of releasing the person who pays without knowing whether the condition is fulfilled.
12. Restrictive indorsements.—An indorsement is restrictive which contains terms making it restrictive ; thus, an indorsement is restrictive which prohibits the further negotiation of the bill, or which expresses that it is a mere authority to deal with the bill as thereby directed, and is not a transfer of the ownership thereof ; as, for example, if a bill is indorsed "Pay D only," or "Pay D for the account of X," or "Pay D or order for collection." By indorsing in any of these ways, John Wilson, the indorser, notifies the world that, tho he may part with the instrument itself for the purpose mentioned, he does not part with the title thereto. Whoever receives payment is not a holder in due course, but receives payment subject to the claims of John Wilson.
A restrictive indorsement makes the indorsee an agent. He may receive payment and may sue any party on the bill that his indorser could have sued, hut he cannot sell or pledge the bill, and he cannot transfer his rights as indorsee unless the indorse ment expressly authorizes him to do so. If the re strictive indorsement authorizes further transfer, subsequent indorsees take the note with the same rights and subject to the same liabilities as the first indorsee under the restrictive indorsement.