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Questions and Answers
What is the primary characteristic of a blank indorsement?
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?
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?
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?
What distinguishes conditional indorsements from other types of indorsements?
Which type of indorsement does NOT require the specific titles of payees or endorsers?
Which type of indorsement does NOT require the specific titles of payees or endorsers?
In the context of indorsements, what does the term 'indorsee' refer to?
In the context of indorsements, what does the term 'indorsee' refer to?
Which section of the BEO addresses special indorsements?
Which section of the BEO addresses special indorsements?
What is the implication of an indorsement misspelling the payee's name?
What is the implication of an indorsement misspelling the payee's name?
What is the main distinction between indorsement and endorsement in the context of financial documents?
What is the main distinction between indorsement and endorsement in the context of financial documents?
What constitutes a valid indorsement on a cheque according to the content?
What constitutes a valid indorsement on a cheque according to the content?
What happens if there are gaps in the letters of an indorsement on a cheque?
What happens if there are gaps in the letters of an indorsement on a cheque?
In what scenario would a collecting bank not guarantee the indorsement of an order cheque?
In what scenario would a collecting bank not guarantee the indorsement of an order cheque?
What is the consequence of irregular indorsements as highlighted in the content?
What is the consequence of irregular indorsements as highlighted in the content?
Which of the following is NOT a requirement for a valid indorsement as stated in the content?
Which of the following is NOT a requirement for a valid indorsement as stated in the content?
How is the indorsement of a cheque affected when the payee's name is written in Sinhala or Tamil?
How is the indorsement of a cheque affected when the payee's name is written in Sinhala or Tamil?
What is specified about partial indorsements in the content?
What is specified about partial indorsements in the content?
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.
