77 STAT. ]
PUBLIC LAW 88-243-DEC. 30, 1963
§ 28:3—^205. Restrictive indorsements An indorsement is restrictive which either (a) is conditional; or (b) purports to prohibit further transfer of the instrument; or (c) includes the words "for collection", "for deposit", "pay any bank", or like terms signifying a purpose of deposit or collection; or (d) otherwise states that it is for the benefit or use of the indorser or of another person. §28:3—206. Effect of restrictive indorsement (1) No restrictive indorsement prevents further transfer or negotiation of the instrument. (2) An intermediary bank, or a payor bank which is not the depositary bank, is neither given notice nor otherwise affected by a restrictive indorsement of any person except the bank's immediate transferor or the person presenting for payment. (3) Except for an intermediary bank, any transferee under an indorsement which is conditional or includes the words "for collection", "for deposit", "pay any bank", or like terms (subparagraphs (a) and (c) of section 28:3—205) must pay or apply any value given by him for or on the security of the instrument consistently with the indorsement and to the extent that he does so he becomes a holder for value. I n addition such transferee is a holder in due course if he otherwise complies with the requirements of section 28:3—302 on what constitutes a holder in due course. (4) The first taker under an indorsement for the benefit of the indorser or another person (subparagraph (d) of section 28:3—205) must pay or apply any value ^iven by him for or on the security of the instrument consistently with the indorsement and to the extent that he does so he becomes a holder for value. In addition such taker is a holder in due course if he otherwise complies with the requirements of section 28:3—302 on what constitutes a holder in due course. A later holder for value is neither given notice nor otherwise affected by such restrictive indorsement unless he has knowledge that a fiduciary or other person has negotiated the instrument in any transaction for his own benefit or otherwise in breach of duty (subsection (2) of section 28:3—304). § 28:3—^207. Negotiation effective although it may be rescinded (1) Negotiation is effective to transfer the instrument although the negotiation is (a) made by an infant, a corporation exceeding its powers, or any other person without capacity; or (b) obtained by fraud, duress or mistake of any kind; or (c) part of an illegal transaction; or (d) made in breach of duty. (2) Except as against a subsequent holder in due course such negotiation is in an appropriate case subject to rescission^ the declaration of a constructive trust or any other remedy permitted by law. § 28:3—208. Reacquisition Where an instrument is returned to or reacquired by a prior party he may cancel any indorsement which is not necessary to his title and reissue or further negotiate the instrument, but any intervening party is discharged as against the reacquiring party and subsequent holders not in due course and if his indorsement has been cancelled is discharged as against subsequent holders in due course as well.
679
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