A Practical Treatise on the Law of Bankers; Cheques, Letters of Credit, and Drafts: Comprising ...

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Preface

TO THE PEESENT EDITION.

The First Edition of this work was published more than twenty years since, and it has long been out of print.

A favourable time seems to have arrived for offering a New Edition to the public. I have tried to ma^:e the work useful to Bankers in the performance of their daily duties ; and although I am aware it is not by any means perfect, yet I believe, so far as it goes, those who are interested in the questions it discusses will find it may be relied upon.

GEORGE JOHN SHAW.

8, Fuknival's Inn, February i 1871.

Contents

ON THE FORM AND REQUISITES OF CHEQUES.

PAOR

Definition 1

Chapter I. On The Forai And Requisites Of Cheques

1. Definition of a e?ieque.

2. FUiee where cheque issued,

3. Time when cheque issued,

4. Name and address of hanker upon whom cheque drawn,

6, Person in whose favour cheque drawn.

6. The words ** or bcaru'f" " or order,"

7. The sum payable,

8. Of the time when t?t,e cheque is payable,

9. The drawer's signature, 10. The stamp.

1st. Definition of a cheque,

A CHEQUE is an unaccepted bill of exchange drawn upon a banker by his customer, and generally, but not always, against funds lodged with the banker. From this definition it follows that although a cheque is a bill of exchange, yet it has peculiar characteristics, and differs in some respects from ordinary bills of exchange. In the case of Mullick V. Hadakissen, heard in the Privy Council in 1854, the court said : — " A cheque is a peculiar sort of instrument in many respects resembling a bill of exchange, but in some entirely diflferent. 1

2 ON THE FORM AND

A cheque does not require acceptance. In the ordinary course it is never accepted. It is not intended for circulation. It is given for immediate payment. It is not entitled to days of grace, and though it is strictly speaking an order upon a debtor by a creditor to pay to a third person the whole or part of a debt, yet in the ordinary understanding of persons it is not so considered. It is more like the appropriation of what is treated as ready money in the hands of the banker ; and in giving the order to appropriate to the creditor, the person giving the cheque must be considered as the person primarily liable to pay to the drawee his debt at a particular place."

The requisites prescribed by law and custom with regard to the form of a cheque, are few and simple, but they are highly important In general, bankers supply printed cheque-books to their customers, which contain blank forms to be filled up. The common form runs as follows : —

"London, 1st January, 1870.

"West London Commercial Bank, Limited, 34, Sloane Square, — Pay [Mr. Wood] or bearer fifty pounds.

" X50. " [Edward Bright.] "

2nd The place where the cheque is issued*

It is not now necessary, although it is xisual, to state on the face of the cheque where it is or is supposed to be issued. Bankers, generally, print

REQUISITES OF CHEQUES. 6

at tlie head of tlie form tlie name of the town where they carry on business, and the drawer fills in the date of the cheque in the blank space left for that purpose. This practice gave rise to many questions under the old law. See the following oases: — JS. v. Poolet/. B. v. Perry. Waters v. Brogden, Strickland v. Mansfield. Bopart v. Hicks. Bond v. Warden. Collected in the last edition of this work. They need not now be further alluded to.

^rd. Of the time when the cheque is issued.

The cheque must bear date on or before the day on which it is issued. This was required imder the old law, and is required now by the Stamp Act (33 & 34 Vict., c. 97, s. 48), which declares that the term " bill of exchange" includes " cheque," and afterwards, in the schedule, imposes a duty of one penny on a bUl of exchange payable on demand, and other rates of duty on any other kind of bill of exchange. If a cheque bear date on a day after it is issued, it will not be payable on demand, but on the day it is dated.

Thus in Allen v. Keeves (1 East's Reports, 436), which was an action brought against a drawer of a bill of exchange, payable to bearer, for £20, bearing date the 18th day of the month, it appeared in evidence before Lord Kenyon, at the trial at Gxiildhall, that the bill, which was a common banker's cheque, was, in fact, drawn on the 14th, though bearing date four days after-

4 ON THE FORM AND

wards, and was thus post-dated, because it was not intended that it should be presented for payment till the 18th, whereupon it was objected, that in effect this was a bill payable four days after date, and therefore ought to have been upon a stamp, otherwise the Stamp Act would be entirely evaded by drawing bills of the date on which they were intended to be payable. A rule for entering a nonsuit was made absolute.

In WJiitwell v. Bennett (3 Bosanquet and Puller's Eeports, 659), the cheque was post-dated, and it was objected for the defendant, that the draft, being post-dated, was void ; and on the case coming before the Court of Queen's Bench, the counsel interested in maintaining the validity of the cheque, admitted that, after the case of Allen V. Keeves, it was impossible to contend that the cheque was valid.

Serk V. Norton (9 Meeson and Welsby, 309), was an action on a banker's cheque, dated March 19th, 1841, made by the defendant, which the plaintiff received from Wright (to whom he gave value for it), some days before the date which it bore. It was contended for the plaintiff that the cheque, though post-dated, was evidence to support a count in the declaration for money paid. The learned Judge thought otherwise, and directed a verdict for the defendant, giving the plaintiff leave to move to enter a verdict for him on the second count for the amount of the cheque. Counsel having moved accordingly —

REQUISITES OF' CHEQUES. O

Lord Abingery O.B., said : — " I think there is no ground for a rule. The case cited rests on a different principle. Suppose the case of a bond which was originally good, but was afterwards destroyed or altered, the party could not declare upon it, because he had made it void, as a security, by his consent : but it would still be evidence to show the nature of the transaction. Here the cheque could not be read at all; it was altogether void."

Alderson, B. — "This was a paper altogether inadmissible as evidence."

Ghirney^ B., concurred.

In the case of Regina v. Taylor (1 Carrington and Kirwan's Reports, 213), it was held that a post-dated cheque came within the description of an order for the payment of money.

These cases were all decided before the introduction of the penny stamp. In Whistler v. Forster (32 Law J. (O.P.) 161), it was decided that a post-dated cheque payable to order on demand was not void, although a cheque payable to bearer on demand might be, one of the judges remarking, " Whether the drawer is subject to a penalty or to be sued for the difference of stamp duty, is a question upon which it is unnecessary to offer an opinion." In Emanuel v. Roharts and Others (17 Law Times 646), a post-dated cheque, payable to order, was refused payment by the bankers the day before it was dated and marked " post-dated," and again refused payment by them on the day

6 ON THE FORM AND

on which it was dated, the Court held they were justified and said : —

" The finding of the County Court Judge is, that in the city of London there exists a custom amongst bankers not to pay cheques which are post-dated : and as, when such a cheque is presented, they give their reason for nonpayment by marking it as post-dated, so when the cheque afterwards comes again with the notification upon it that it was post-dated, they then have notice of the original defect and refuse payment. Taking the contract to be that cheques which are post-dated will not be honoured, it is dear that the contract has not been broken, by the defendant, and I am of opinion that the contract itself is not unreasonable."

It seems from this case that, independent of the Stamp Act^ there is a valid custom amongst bankers not to pay a cheque which is post-dated, and this is therefore an additional reason against post-dating.

We shall give the clauses of the new Stamp Act on which we base our conclusions when we treat of the subject of the stamp.

Wi* The name and address of the banker upon whom the cheque is drawn.

Under the old Stamp laws it was necessary that an unstamped cheque should be drawn upon a banker; Castleman v. Ray (2 Bosanquet and

REQUISITES OF CHEQUES. 7

Puller's Eeports, 383), but under the new Stamp Act there is no diflference in this respect between cheques and any other bills of exchange payable to bearer or order on demand. It may however be a question, whether it is not stiU necessary that cheques for less than 20s. should be drawn upon a banker. See 23 & 24 Yict., c. Ill, s. 19. A cheque may be drawn upon a bank where the drawer has no account where it is intended to operate as a security for a loaoi from the banker to the drawer. Cohh v. Snowden (13 Law Times, 232).

5 th. As to the person in whose favour the

cheque is drawn.

The person in whose favour the cheque is drawn is called the payee ; but it does not appear to be necessary that in a cheque payable to bearer there should be any payee, and in practice such a cheque is often made payable to some particular account, or to a number or a letter. In case the cheque is payable to order, there must be a payee who must also indorse, but we apprehend that the lawful holder of a blank cheque payable to order, may fill in his own name as payee.

6th, The words " or hearer ^^ " or order, ^^

These words which were formerly necessary (Eex V. Yates^ 1 Eyan & M., CO., 170), are not required any longer, and a cheque may now be payable to a particular person only. 33 & 34 Vict., 0. 97.

8 ON THE FORM AND

When the cheque contains the words " or order," the banker is not responsible if he should pay a forged indorsement. See 16 & 17 Yict., 0. 59, s. 19, which is still in force although the greater part of that Act has been repealed ; and see the subsequent chapter on the " The Banker " upon whom a cheque is drawn. A cheque although payable to A. B. " or bearer " may be indorsed by A. B., and in the event of its being dishonoured the holder may sue A. B. as indorser. Keene y. Beard^ 36 Law Times, 240.

7th, The sum payable.

The 23 & 24 Vict., c. Ill, s. 19, provides that notwithstanding anything in any Act of Parliament contained to the contrary, it shall be lawful for any person to draw upon his banker who shall hondfide hold money to or for his use any draft or order for the payment to the bearer or to order on demand of any sum of money less than 20s.

Sth. Of the time when the cheque is payable.

The words "on demand" are seldom inserted in practice in the cheque. The legal effect of an instrument of this kind, in which no period of payment is named, is that it is payable on demand, and therefore it is unnecessary so to express it. In America where there are no stamp laws, cheques are post-dated, or made payable at a certain time after date, and are stiU considered to be governed by the rules relating to cheques, and

REQUISITES OF CHEQUES. 9

not by those relating to bills of exchange, and therefore not to require days of grace or notice of dishonour. Mohawk Bank v. Rudmck (10 Windell's Reports. Re Broicn, 2 Storey, 502).

9th, The drawer^s signature.

This is a material part of the cheque, but it is unnecessary to consider it at any length. The drawer ought to sign his name in such a manner as to avoid giving rise to any diflSculty on that accoimt.

CHAPTER 11.

OF THE DRAWER OF A CHEQI3E.