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THE

LAW RELATING TO CHEQUES.

CHAPTER I.

DEFINITION.

1.-A cheque is a bill of exchange drawn on a banker payable on demand. (S. 73) (a).

Cf. Hopkinson v. Forster, L. R. 19 Eq. 74. It is not an assignment of money in a banker's hands. By construing s. 73 with s. 3, which defines a bill of exchange, we get the following definition of a cheque:-"A cheque is an unconditional (b) order in

(a) A reference to a section without citing any Act is a reference to the Bills of Exchange Act, 1882, hereinafter referred to as "the Act."

(b) A cheque with a receipt form attached, with this order "Pay... provided the receipt form at foot hereof is duly signed, stamped and dated," is not a cheque within the Act, but it is brought within ss. 76 to 82 of the Act by the effect of s. 17 of the Revenue Act, 1883, see p. 61 (J. Bavins Jun. and Sims v. London and South Western Bank, 5 Com. Cas. 1).

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BILL AND CHEQUE DISTINGUISHED.

writing addressed by one person to another, being a banker, requiring the person to whom it is addressed to pay on demand a sum certain in money to or to the order of a specified person or to bearer."

The chief differences between a bill and a cheque are :

(1) Bills are payable on demand (c) or at a fixed and determinable future time, e.g., three months after date or after sight. Cheques are always payable on demand. There are thus no "days of grace" in the case of cheques. Bills are intended for circulation; cheques for immediate payment.

(2) A cheque requires no presentment for acceptance and (d) no acceptance. The addressee of a cheque is not like the addressee of a bill, who, by accepting, becomes liable, if he dishonour the bill on presentment for payment, to a holder. A banker, if he dishonour a cheque, is not liable to the holder, but only to the drawer.

(3) Notice of dishonour is rarely necessary in case

(c) Bills payable on demand, other than cheques, are practically not in use in this country.

(d) The custom of American and Canadian bankers of initialising cheques is not an acceptance. It only amounts to an admission that at the time the bank has funds enough of the drawer to meet the cheque. (See Gaden v. Newfoundland Savings Bank, 1899, A. C. 281.) Analogous is the custom of London City bankers of marking cheques as good which are presented after four o'clock. See Robson v. Bennett, 2 Taunt 388.

A CHEQUE NEGOTIABLE.

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of a cheque, as it is excused if payment is countermanded, or the banker has no effects of the customer, the two common causes of dishonour. There is no noting or protesting of cheques on dishonour.

(4) A penny stamp covers any amount on a cheque, provided it be not post-dated; but a bill requires an ad valorem stamp, if payable after sight or after date.

For further essentials of a valid bill, and by the operation of s. 73, of a cheque, the reader is referred to s. 3, which it is not thought material here to set out.

2.-A cheque is transferable in its origin unless it contains words prohibiting transfer. Where a cheque is transferable in its origin, it continues to be transferable until it has been

(a) Restrictively indorsed, or

(b) Discharged by payment or otherwise, or

A cheque transferable in its origin is also negotiable, unless it is crossed not negotiable. Where a cheque is negotiable in its origin it continues to be negotiable until it has been—

(a) Crossed not negotiable by a holder thereof, or (b) In circulation for an unreasonable length of time. (c) Restrictively indorsed but not so as to prohibit further transfer.

(Ss. 36, 76, 77, and 81.)

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The difference between a negotiable instrument and a merely transferable one is of the utmost importance. A cheque may be rendered not negotiable. It may also be made not even transferable. (e)

A negotiable instrument is such an instrument that (1) the title to it passes by delivery, with or without indorsement, as the case may be, without the need for executing a transfer or assignment. (2) A bonâ fide holder for value, who has no notice, i.e., no positive knowledge as opposed to the means of knowledge (ƒ), of any defect in the title of the transferor to him of the instrument, is not prejudiced in his rights to and upon it by reason of the existence of such a defect.

The definition in Chapter II. of the "holder's " rights will further elucidate the point.

(e) It being especially important in the case of cheques, which are capable of being crossed "not negotiable" so as still to leave them freely transferable, to keep this distinction clear, we have in s. 2 departed from the language of the Act so as to avoid confusion. The reader is referred to the Introduction for a consideration of the distinction and of the failure of the Act to observe it.

(ƒ) See Raphael v. Bank of England, 17 C. B. 161, and s. 90 defining good faith.

CHAPTER II.

PARTIES.

DRAWER-HOLDER-PAYEE-INDORSEE-INDORSEMENT

—BANKER-CUSTOMER, CAPACITY OF PARTIES

PRINCIPAL AND AGENT.

THE DRAWER.

3. The drawer of a cheque is the person who, by signing it, gives to the banker on whom it is drawn an unconditional order to pay it.

A crossing does not make the order to pay conditional, but only prescribes the mode of payment.

4. The drawer of a cheque by drawing it engages that on due presentment it shall be paid according to its tenor, and that if it be dishonoured he will compensate the holder or any indorser who is compelled to pay it, provided the requisite proceedings on dishonour be duly taken. (S. 55) (a).

That a holder may sue the indorser of a cheque

(a) Here and throughout the book the language of the Act is modified so as to be applicable to cheques alone.

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