his
George X Brown.
mark
Witness:
Robert White,
55, High Street,
Birmingham.
When the payee (the person to whom a cheque is payable) writes his name upon the back of an “order” cheque the document is said to be indorsed in blank, and becomes in effect payable to bearer. He can, however, make it payable to another person by writing above his signature: “Pay Thomas Brown or order.” Thomas Brown must then indorse the cheque. Further, any holder may write this request above the indorser’s signature, thereby converting an indorsement in blank into a special indorsement.
A restrictive indorsement gives the indorsee no power to transfer his rights. Hence a cheque indorsed to “John Smith only” prevents further negotiation of the instrument. Where a cheque is payable to, say, John Smith for R. Jones, the payee simply has to write his own name on the back.
Should the name of a fictitious or non-existing person be inserted as payee in an order cheque, the document may be treated as payable to bearer. Cheques drawn to “cash,” “house,” etc., are so treated. It is usual, however, for the drawer to indorse them, just as he would a cheque payable to “self or order.”
Any executor or administrator can indorse a cheque made payable to a deceased person, but all trustees must sign. In practice, a banker usually guarantees or confirms these indorsements.
Finally it may be added that it is not illegal to indorse a cheque in pencil, though a banker would probably decline to honour it on the plea that it becomes fainter as time progresses. Again, too, an indorsement may be made on the face as well as upon the back of a cheque, but the customer, unless he be of a peculiarly combative temperament, merely wishes to know what is usual, and we are all aware of the accepted rule in this instance.
Agents and “Per Pro” Indorsements.
A signature by procuration indicates that the agent’s power to bind his principal may be, and probably is, limited. For instance, the agent may only have authority to indorse cheques and bills, and if he sign as either drawer or acceptor, he cannot bind his principal. Moreover, as a procuration signature operates as notice of his limitations, a holder has no claim upon his principal, as he should have protected himself by demanding to see the agent’s letter of authority.
A customer, when he wishes another person to draw cheques on his behalf, gives a letter of authority to his banker, and states therein exactly what his nominee or agent may do. The authority may only allow a certain person to sign cheques on his behalf up to, say, £100, and the banker would, of course, refuse any cheque drawn in excess of that sum. Most bankers keep printed forms of this description, and the customer, if he obtain one, can, by crossing out what the agent may not do, limit his power to any extent he thinks necessary. These letters need not be stamped, and, unless previously revoked, they continue in force until the bankruptcy, insanity, or death of the principal.