Page images
PDF
EPUB

CHAPTER VI.

CERTIFIER'S CONTRACT.

THE drawee of a cheque sometimes writes upon it the word 'good,' 'accepted,' or the like, on request of the drawer, or of the payee or other holder. This is done with a

Certifying a

object.

view to using the cheque, out of ordinary course, cheque: its as a means of credit, as for instance with a view to passing it to another who under the circumstances cannot present it for payment at once, or does not desire to do so.1 act is called certification of the cheque.2

The

Certification is not in terms or by implication called for by the cheque itself, and is therefore purely a voluntary act on the part of the drawee, in the absence of any special A voluntary undertaking to certify. The result is that refusal act: refusal to certify. to certify can have no legal consequences; no notice of dishonor can be given for such refusal, since to refuse to certify is not to refuse what the cheque requires, to wit, payment. Refusal to certify a cheque is a very different thing from refusal to accept a bill of exchange, as will be seen.

On the other hand, granting the request to certify the cheque is a very different thing from granting the order to accept a bill. Sometimes done by the use of the word 'accepted,'

Differs from

and even in the Statute loosely spoken of as 'equiv- accepting a alent to an acceptance,' it is only acceptance' of

6

6

bill.

a cheque, a term to be avoided. It is only acceptance' or 'an equivalent' in the sense that it is a promise to pay the cheque.

1 Minot v. Russ, 156 Mass. 458, is one of many illustrations.

2 Sometimes promissory notes payable at bank are certified by the bank, probably with much the same effect, except as to time of payment of notes payable at a future day named.

N. I. L. § 191.

Who may certify.

1

It has been held that the teller of a bank has no authority in virtue of his office to certify cheques drawn upon his bank; that being a power to pledge the credit of the bank, which should not rest by law with an inferior officer. The contrary would be true of the president, vicepresident, or cashier.2 It is however usual in cities to confer power upon some officer of the bank, generally the cashier, it may be the teller, to certify the cheques of customers of the bank, in so far as they have funds on deposit. And of such cases it is held that certification binds the bank, in favor of an innocent holder for value, though in point of fact the drawer had at the time no funds in the bank. It matters not whether the certification in such a case was due to mistake of the bank officer or not. The certification means, not that the drawer has funds at the time of the certification, and will continue to have them when payment is demanded, but that the bank will pay the sum to the holder on demand.⭑

contract.

8

In regard to the nature of the undertaking, certification is an absolute promise to pay the sum named in the cheque, on demand, Nature of the in the absence of other terms. The promise is at maturity from delivery of the certified instrument, until the lapse of a reasonable time, when it becomes overdue. Payment may be demanded any time before the Statute of Limitations bars an action, so far as the liability of the certifier is concerned, unless the time of payment is specified in the certifi cation, an unusual thing; though parties secondarily liable (if any consented to certification) are entitled to have demand for payment made on the certifier before the expiration of a reasonable time from the certification. The certifier's contract is negotiable or not, according to the tenor of the cheque. The contract is one of custom.

1 Mussey v. Eagle Bank, 9 Met. 306. But see Farmers' Bank v. Butchers' Bank, 16 N. Y. 125.

2 Merchants' Bank v. State Bank, 10 Wall. 604.

8 Farmers' Bank v. Butchers' Bank, and Merchants' Bank v. State Bank, supra.

Mussey v. Eagle Bank, 9 Met. 306.

The incidents of the contract of certification appear to be the same in many respects as those of accepting a bill of exchange, but not in all. The acceptor of a bill cannot say Incidents differ that the drawer had no funds in the acceptor's from those of hands, and that the acceptance was given in mis- acceptance. take; while the drawee of a cheque which he has certified may, it seems, withdraw his certification, on discovering that it was given in mistake on the point of funds, unless meantime there has been a change of position by the holder.2

1

Again, certification, unlike acceptance of a bill, not being a compliance with the order of the instrument, it results that if the drawer did not procure or authorize or has not assented to the act there is no contract with him, and of course none with other secondary parties who have not authorized or assented to it. And he and they are discharged of all liability. If however the drawer procured, authorized, or assented to the certification, he cannot afterwards object or claim that his order has not been complied with; and so of other assenting parties.

8

Certification carries with it no doubt the usual presumption of consideration, but not grace because payment is due on demand.

1 Ante, p. 52.

2 Irving Bank v. Wetherald, 36 N. Y. 335. Sed qu. why there should be less duty on the part of the drawee to know the state of the drawer's funds than the genuineness of his signature? Payment on mistake as to funds is put on the same footing as certification under the like mistake. Merchants' Bank v. Eagle Bank, 107 Mass. 281, 285.

3 Minot v. Russ, 156 Mass. 458; First National Bank v. Whitman, 94 U. S. 343, 345; First National Bank v. Leach, 52 N. Y. 350; Born v. First National Bank, 123 Ind. 78; National Bank v. Miller, 77 Ala. 168; N. I. L. § 195.

Minot v. Russ, supra; Bickford v. First National Bank, 42 Ill. 238; Rounds v. Smith, id. 245; Andrews v. German Bank, 9 Heisk. 211. The reasons given by the courts vary, and are not always satisfactory.

Peculiarity of drawer's contract: like indorser's in most respects.

[blocks in formation]

FIRST, of the drawer of a bill of exchange. The contract of the drawer of a bill of exchange must be set in strong contrast to that of the maker of a promissory note; in no way are the two alike. The contract of the drawer, whether of a bill or of a cheque, is unlike that of the maker in form, in that it does not appear upon the face of the writing; it is unlike the contract of the maker in effect, in that the contract of the drawer of a bill is conditional and secondary.

The contract of the drawer of a bill of exchange is in the main like that of an indorser. The drawer stands in the position of first indorser, in order of liability; thus the order of liability of parties to an accepted bill is this: (1) acceptor; (2) drawer, virtually as first indorser; (3) payee, virtually as second indorser though literally first, or such indorser, if any, as follows negotiation; and then, (4) any subsequent indorsers in order. If the bill is not accepted, the order of parties begins with the drawer, still virtually as first indorser, and then proceeds as in the case of an accepted bill. It will be sufficient here to state the general nature of the drawer's contract, and then refer the reader to the chapter on the Indorser's Contract for details; for these, so far as the drawer's contract agrees with the indorser's, may better be considered there, once for all. The drawer, by drawing the bill, engages that on due presentment the bill shall be accepted or paid, or both, according to its tenor, and that if it be dishonored and the proper proceedings on dishonor be duly taken, he will pay the amount thereof to the holder or to any

subsequent indorser who may be compelled to pay it. But the drawer may insert in the bill a stipulation negativing or limiting his liability.' He admits, as an incident to drawing the bill, the existence of the payee and his capacity at the time to indorse.2

§ 2. RIGHT TO DRAW: REASONABLE Ground.

[ocr errors]

Differs from

tract in certain

Looking a little deeper, there are, between the contract of drawer and that of indorser, several substantial legal differences arising from the very nature of things. A man who draws a bill of exchange is naturally and indorser's conlegally supposed to have something to draw upon respects: want in the hands of the drawee, or at all events he is of funds: notice of dishonor. supposed to have a reasonable expectation that the draft will be accepted and paid by the drawee; that is, the drawer is supposed to stand in close relation to the drawee, and to have good ground accordingly for drawing. An indorser however is not ordinarily supposed to know, and, in fact, generally does not know, anything about the state of things between the drawer and the drawee; and though his indorsement is, by a useful fiction, treated as equivalent in many respects to drawing a bill, and when special, as where the indorsement itself is to 'order,' is also in form like a bill in brief, still it is not a drawing by one having or supposed to have funds with the drawee, or knowledge of the action to be taken by him; that is, the indorser as such is not supposed to stand in any special relation to the drawee.

It results from this difference of situation, that the drawing of a bill of exchange (and the same is true of a cheque) may operate as a fraud; and a drawing which may operate

[blocks in formation]

It will be otherwise where the instrument was made, drawn, or accepted for the indorser's accommodation. See N. I. L. § 87. So one who indorses for accommodation of the drawer of a bill, both knowing that there is no reasonable ground to draw, participates in the (virtual) fraud, and hence is not entitled to notice of dishonor. Farmers' Bank v. Van Meter, 4 Rand. 553.

« PreviousContinue »