Question

Statement X: An endorsement is restrictive which prohibits or restricts the further negotiation of an instrument.
Statement Y: An endorsement is conditional or qualified which limits or negates the liability of the endorser.
Select the correct answer from the options given below-

• A. Statement X and Statement Y both are correct
• B. Statement X and Statement Y both are incorrect
• C. Statement X is incorrect while Statement is correct
• D. Statement Y is incorrect while Statement X is correct

Answer 1

The correct option is A Statement X and Statement Y both are correct

• A restrictive endorsement is a control technique used to restrict further action in regard to a financial instrument. The result of a restrictive endorsement is that a financial instrument is no longer a negotiable instrument that can be passed from the stated payee to a third party.
  
• If the endorser of a negotiable instrument, by express words in the endorsement, makes his liability, dependent on the happening of a specified event, although such event may never happen, such endorsement is called a 'conditional' endorsement which negates liability of the endorser.