(a) An indorsement is effected by the signature of the payee usually on the back of the bill. Bills payable to a specified person or to his order can be negotiated only by indorsement and delivery, i.e. unless the holder signs his name on the back and delivers it, the transferee does not become a holder.
The indorser of a bill undertakes that on due presentment, the bill will be accepted and paid, and if it is dishonored, he will compensate any subsequent party who is compelled to pay it. The indorser is precluded from denying to the holder in due course the genuineness of the drawer’s signature, and all previous indorsements.
(b) If an indorsement is forged the immediate indorsee acquires no title even though he takes for value and in-good faith. But those taking the bill after the forgery will have valid rights as between one another as if the bill were valid for them.
The facts stated in the problem show that a bill payable to ‘Andrew or Order’ was stolen from his possession and the thief by forging Andrew’s signature indorsed it to B. Inspite of the fact that B obtained for value and in good faith. did not obtain a valid title to the bill, and will be obliged to return the bill to the lawful owner — Andrew.