Thursday, August 27, 2020

Types of Endorsement of commercial instruments under Ethiopian law

Types of Endorsement of commercial instruments under Ethiopian law

Generally, there are four categories of Endorsement blank, special, Qualified and restrictive.

Blank endorsement

This type of endorsement is an endorsement that names no specific payee, thus making the instrument payable to the bearer and negotiable by delivery only. It consists of a mere signature


A cheque payble to “Abera Tilahun or order” can be endorsed in blank simply by having Abera’s signature written on the back of the cheque as.

A blank endorsement on an order instrument makes the instrument payable to bearer and negotiable by delivery. In other words a blank endorsement converts an order instrument in to a Bear instrument. In the above example Abera Tilahun by putting his signature on the back of the cheque can negotiate it to any person, by simple delivery. The person who received it can in turn negotiate it to subsequent 3rd party by delivery.


In the above example Abera Tilahun using blank endorsement, let’s say, has negotiated it to Almaz Fisseha by delivery who is the endorser and who is the endorsee? Again if Almaz Fisseha negotiates the cheque by delivery to Gemechu Alemayhu determine who is the endorser and endorsee?

There are two ways an instrument may endorsed in blank under the commercial code. The first and typical one is when the endorsement does not contain the name of the endorsee. i.e. mere signature of endorser (Article 725(2),748(2),825(1)(a),844(2)] secondly, by endorsing it “to bearer” followed by signature of the endorser.(Article 725(3),747(3),825(1)(a),843(3)]

Special endorsement

A special endorsement indicates the identified person to whom the endorser intends to make the instrument payable i.e. it names the endorsee. No special words of negotiation are needed.


A cheque issued to Ali Hussein may be endorsed as


Qualified endorsement

This can be defined as an endorsement that passes title to the holder of the instrument but limits the endorser’s liability to later holders if the instrument is dishonored. Typically, a qualified endorsement is made by writing the words “with out recourse “or” san recourse” over the signature.

Generally, an endorser, merely by endorsing impliedly promises to pay the holder, or any subsequent endorser, the amount of the instrument in the event that the drawer or maker defaults on the payment

A qualified endorsement is used by an endorser to disclaim or limit this liability on the instrument


Pay to Geremew Haile

Without recourse

Dawit Zergaw (sinuate

Qualified endorsements are often used by persons acting in a representative capacity. The “without recourse” endorsement absolves the agent from liability. If the instrument is dishonored, the holder cannot obtain recovery from the agent who endorsed “with out recourse.”

An instrument bearing a qualified endorsement can be further negotiated.  A qualified endorsement is accompanied by either a special or a blank endorsement that determines further negotiation. Accordingly, a special qualified endorsement makes the instrument an order instrument, and it requires an endorsement plus delivery for negotiation. A blank qualified endorsement makes the instrument a bearer instrument, and only delivery is required for negotiation. 

Restrictive endorsement

A restrictive endorsement is one that specifies the purpose of the endorsement or specifies the use to be made of the instrument. A restrictive endorsement does not prohibit further negotiation of an instrument. Among the more common restrictive endorsements are:-

Endorsement for deposit (Articles 728,753,737(3), 867,825(1)(a),851

e.g. “For deposit only” or For deposit to my account at commercial Bank of Ethiopia, Harar Bank”

v)         Endorsement for collection (Art 728,753,863, 864, 825(1)(a), 851.”For collection only” “Pay any bank”

vi)       Endorsement indicating that the endorsement if for the benefit of someone other than the person to whom it is payable. e.g. “pay to Almaz, tutor for minor Alemu”

  Generally, the person who takes an instrument with restrictive endorsement must pay or apply any money or other value he gives for the instrument consistently with the endorsement. 

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