In researching info about commercial paper, I just learned that there are four principal types of indorsements. We usually discuss the first three listed here:
We all know about the indorsement in blank that seems to give all power to the holder to do whatever it wants to do. I have often read online that the "no recourse" words are part of the blank endorsement. But now I read that these words are part of the "qualified" indorsement.
- In blank
- Qualified indorsement
A paper containing a blank endorsement is one that has the signature of the payee but no specific endorsee is designated. A check that is made payable to the order of X is endorsed in the blank when X signs it. Once endorsed, it becomes bearer paper and is negotiable by anyone who physically holds it. A blank endorsement is changed into a special endorsement if certain words are written above the endorsee's signature, such as "pay to the order of Y."
Other searches found legal sites that said the qualified indorsement without recourse "transfers mere the title to the paper." If that is correct, would that mean the "without recourse" indorsement does not attach the security?
A qualified endorsement is one wherein liability is disclaimed by the endorser through inclusion of a phrase preceding his or her signature. Ordinarily, an unqualified endorser's liability may be either secondary, whereby the endorser is bound to pay if the individual expected to pay defaults and certain conditions are met or by warranty, by which the endorser incurs liability upon alteration of the instrument. To disclaim secondary liability, the endorser can include the words "without recourse," thereby relieving himself or herself of any responsibility to pay it.
Attorneys who are the recipients of checks drawn in settlement of the claims of their clients commonly sign their clients' checks with qualified endorsements. This type of check is ordinarily made payable to the lawyer and client jointly. It is generally endorsed by the lawyer Without Recourse and given to the client. The attorney then is not liable if the client does not receive the money promised by the terms of the check.