International Trade: Cheque and Bill Indorsements

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Questions and Answers

What is the primary characteristic of a blank indorsement?

It restricts the title to a specific person.

It entails fulfilling a condition before receipt.

It allows payment to the bearer without further specification. (correct)

It requires specific titles to be mentioned.

In which scenario is a restrictive indorsement used?

To allow a cheque to be negotiated multiple times.

To enable payment to any bearer of the cheque.

To finalize payment upon certain conditions being met.

To limit the cheque's payment to a specific account or person. (correct)

Which of the following is true regarding special indorsements?

They can only be used if the payee is misspelled.

They make the payment conditional on the indorser's title.

They are interchangeable with blank indorsements.

They specify to whom the cheque or bill is payable. (correct)

What distinguishes conditional indorsements from other types of indorsements?

They require fulfilling certain conditions before possession is granted. Signup and view all the answers

Which type of indorsement does NOT require the specific titles of payees or endorsers?

Blank Indorsement Signup and view all the answers

In the context of indorsements, what does the term 'indorsee' refer to?

The person to whom the cheque is payable. Signup and view all the answers

Which section of the BEO addresses special indorsements?

Section 34 Signup and view all the answers

What is the implication of an indorsement misspelling the payee's name?

The indorsee may correct the name but it is not mandatory. Signup and view all the answers

What is the main distinction between indorsement and endorsement in the context of financial documents?

Indorsement is a legal signature on financial documents, whereas endorsement means public support. Signup and view all the answers

What constitutes a valid indorsement on a cheque according to the content?

It must be signed in a flowing hand without gaps between letters. Signup and view all the answers

What happens if there are gaps in the letters of an indorsement on a cheque?

It distorts the name of the payee and renders it irregular. Signup and view all the answers

In what scenario would a collecting bank not guarantee the indorsement of an order cheque?

If the bank is unsure of the indorser's bona-fide title. Signup and view all the answers

What is the consequence of irregular indorsements as highlighted in the content?

The paying bank usually returns them with remarks of irregularity. Signup and view all the answers

Which of the following is NOT a requirement for a valid indorsement as stated in the content?

It can include a printed signature from the indorser. Signup and view all the answers

How is the indorsement of a cheque affected when the payee's name is written in Sinhala or Tamil?

The indorsement maintains its validity as long as there are no gaps. Signup and view all the answers

What is specified about partial indorsements in the content?

Partial indorsements are not valid. Signup and view all the answers

Study Notes

Indorsement on Cheques

Indorsement refers to the legal signature on financial documents, particularly cheques, while endorsement signifies public approval or support.
A cheque's title transfers freely upon delivery for bearer instruments or through indorsement and delivery for order instruments, contingent on regular indorsement.
Regular indorsement requires the payee’s name to be written in flowing hand without gaps; using block capital letters or having spaces negates regularity.
Irregular indorsements may lead to bank returns marked "Payee's indorsement irregular."
Valid indorsement must be on the bill and signed by the indorser; partial indorsements are invalid.
For cheques/bills payable to multiple payees, all must indorse unless one has authority to sign for others, a situation typically arising in international trade.
If the payee's name is misspelled, corrections can be made in compliance with the original bill, but aren’t mandatory.
The titles of payees or endorses are optional during indorsement (e.g., "Dr" in "Dr. R Samaranayake" can be omitted).

Types of Indorsement

Blank Indorsement: Indicates no further indorsee, making it payable to bearer if regular. Commonly encountered in branches.
Special Indorsement: Specifies the payee or order, e.g., "Pay B or to the order of B."
Restrictive Indorsement: Limits the cheque/bill to a nominated person, e.g., "Pay B only" or "Pay to the account of X only," giving only the indicated indorsee the right to payment.
Conditional Indorsement: Payment is subject to the fulfillment of specific conditions, e.g., "Pay to the order of B, only after receiving goods at the warehouse."

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Description

This quiz covers the essential aspects of cheque and bill indorsements, particularly in the context of international trade transactions. It discusses the requirements for indorsements when multiple payees are involved and the implications of misspellings in names. Test your knowledge on this important topic.