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CHAPTER V.

THE SAME SUBJECT CONTINUED. CHEQUES. THE

CLEARING HOUSE.

1. Legal attributes of Cheques on Bankers.

2. How Cheques ought to be drawn; Address, Date, Amount, and Signature; forged Cheque.

3. They must be presented within a reasonable time, and why.

4. Obligation of banker to customer to honour his Cheque.

5. The penny Stamp.

6. How far a Cheque is payment; proof of payment thereby; tender of Cheque.

7. Drawer's death before presentment.

8. Partnership account; account in the names of several persons not partners.

9. Crossing Cheques, why and how to be done.

10. Dishonouring and cancelling Cheques and Bills. 11. Bills and Notes accepted or made payable at a Bank. 12. Custom of marking Cheques which are too late for Clearing.

13. On the nature of the business of the Clearing House. 14. Of the Country Clearing.

15. Its regulations.

16. Opinions of Counsel as to the legal effect of passing Cheques drawn on Country Bankers through the London Clearing House.

1. As nearly the whole of the money paid into a bank is withdrawn through the medium of cheques, we feel that this little work would be incomplete unless we took notice of some of the legal points connected with them.

A cheque on a banker is simply an order on the banker to pay money to the bearer on demand, or to a person named or his "order," which, when indorsed, becomes payable to bearer on demand. A cheque is therefore an inland bill of exchange payable to bearer on demand, and for this reason requires no acceptance.

2. The person signing the cheque is called the drawer.

No precise form of words is essential to constitute a cheque, but it must be—

(1.) An unconditional written order;

(2.) For the payment of a definite sum, not less than twenty shillings;

(3.) Addressed to the bankers by their usual names or firm;

(4.) Payable to bearer or order on demand; (5.) Signed by the drawer.

As to the day of the date of the cheque.

It must not bear date on a day after that on which it is issued. The drawer of such a cheque, and the banker who knowingly pays it are liable to a penalty of £100, and any person knowingly taking it is liable to a penalty of £20. The bankers cannot be allowed it in account, either against the drawer on the person for whom it was drawn.

As to the amount stated in the cheque.

The amount should be stated distinctly twice, once in words, in the body of the cheque, and again in figures at the left hand bottom corner. If there is a difference between the words and figures the bankers must pay the sum mentioned in the words.

If the words, or figures, or signature of the cheque, is fraudulently counterfeited it is a forgery, and not being the customer's cheque the banker is not only not bound to pay it, but cannot take credit for it where he has done so, for it is his business only to honour the customer's cheque.

Where a forged addition has been made to the sum for which a cheque was really made payable, a banker paying the whole cannot charge his customer for more than the original sum, unless the customer himself gave occasion to the forgery, as by drawing a cheque for £50 and leaving room for the words three hundred to be placed before the fifty. In the latter case the banker having paid the cheque bond fide, was held entitled to take credit for the payment.

But where a banker, bona fide and without negligence, cashes a cheque bearing a forged indorsement, he may take credit for it.

A cheque must bear the drawer's name in his handwriting or that of some other person known to the

banker as being authorised to sign for the customer. The usual way is to write it at the foot of the cheque, but if it appears in another part of the cheque, so as to show who it is that orders the payment, that will be sufficient. A cheque, for instance, might run as follows: "Mr. Effingham Wilson presents his compliments to Messrs. Prescott and requests them to pay M. Mazzini or order one hundred pounds."

"London, 1st January, 1859."

The banker would be bound to honour this cheque if he had funds. If he had wished to confine his customers to a particular form or to a particular kind of paper, he should have told them so. One efficient way of doing this would be to state upon the cover of the cheque-book given to each customer that the banker would not feel bound to honour cheques drawn otherwise than by filling up the blank forms therein contained.

3. As to the precise time a cheque should be presented for payment, after it has been paid away, there is some degree of uncertainty. It may, however, be collected from the numerous cases that have been decided, that a cheque on a banker or a cash note payable on demand, if given in the place where it is made payable, ought to be presented the same day it is received, or at least early the following morning, unless prevented by distance or some inevitable cause or accident.

In point of law there is no other settled rule than that the presentment must be made within a reasonable time, which, as observed by an eminent judge, "must be accommodated to other business and affairs of life; the party receiving a cheque is not bound to neglect every other transaction in order to present a cheque the same day he receives it" (see sect. 16).

4. A banker is obliged to pay cheques drawn on him by his customer, if he has money of the customer's sufficient to meet the cheque. But he would probably not be liable for refusing to pay a cheque if his customer's money had only been paid in a few minutes before the cheque was presented.

The banker must pay the cheque in the same notes or coin as would be legally used in tendering a debt, namely, Bank of England notes, gold, and silver. If he offers payment in any other way the holder of the cheque may

treat it as dishonoured, and may bring an action against the banker for the amount of the cheque, the costs, and the trouble.

The liability the banker incurs in improperly dishonouring a cheque is a liability to his customer and not to the holder of the cheque, between whom and the banker there is no contract or privity. The holder's remedy upon dishonour is against the drawer and the indorsers, if any; the drawer being in his turn at liberty to recover full compensation from the banker.

5. By an Act passed the 24th of May, 1858, drafts or orders on a banker payable to bearer on demand were in general made chargeable with a penny stamp, adhesive or impressed.

This Act is now repealed, but its provisions are repeated by "The Stamp Act, 1870," which, indeed, is more comprehensive. Under the term "Bill of Exchange payable on demand," is included every draft, order, cheque and letter of credit, and any writing entitling any person, whether named therein or not, to payment by any other person of any sum of money, or entitling any person to draw on another for any sum of money.

It will be observed that these words include all cheques, whether drawn in favour of bearer simply, or of A. B., or of A. B. or bearer, or of A. B. or order, or of "Self," or of a person designated by a number.

The stamp is one penny, and may be either impressed or adhesive, and, if adhesive, must be cancelled by the drawer writing across it the name or initials of himself or of his firm, together with the date of his so writing; otherwise, when the document is tendered in evidence, it will have to be proved that the stamp was affixed at the proper time, and, in default of this, the document will be treated as unstamped.

This law applies to the whole of the United Kingdom. 6. A cheque, unless dishonoured, is payment; i.e., a man having taken a cheque for his debt, cannot sue for the debt till he has presented the cheque and payment has been refused.

To prove that a debt has been paid by means of a cheque, the banker must be called to prove that he paid it, and it must be shown to have passed through the hands of the creditor. For this reason, when a debt is paid by cheque, the person to whom it is paid should be requested to write his name on the back.

A person who has tendered a cheque in payment of a debt is in the same position as if he had tendered money, unless the tender was objected to on the ground of its being a cheque.

7. A banker must not pay a cheque after the drawer's death; unless the banker be ignorant of the death, in which case he is justified in paying.

8. Every partner may draw cheques in the name of the firm; and, until the firm is dissolved, the banker is bound to pay such cheques, unless he have notice of a contract between the partners restricting the right to draw cheques.

The holder, if bona fide and for value, will have a right of action against the firm on the cheque, if dishonou ed, although wrongfully drawn by one partner.

Where several persons having a joint account, but not constituting a firm, draw a cheque, they must all sign, unless one has authority to sign for the others, and if one has absconded, the Court of Chancery must be applied to. The same if the executor or administrator of one of them deceased refuses to sign.

9. Cheques being payable to bearer or order on demand, it is very desirable when they are sent by post, and on other occasions, to take precautions against their falling into the hands of persons for whom they were not intended, who may present and obtain cash for them.

This can in general be effectually done by writing across them the name of a banker, or, between two transverse lines, the words "and Company," or "and Co." These words should be distinctly written across the face of the cheque. The cheque may be crossed in either of these ways by the drawer, or by any subsequent lawful holder who receives it uncrossed; and if, when the latter receives it, it is only crossed "and Company," or "and Co.," he may insert the name of any banker to or through whom he wishes the cheque to be paid. And this will have the same effect as if the crossing had been written by the drawer.

The effect of crossing the cheque will be, that the banker on whom it is drawn will not be justified in paying it except to another banker, and if he does so he not only cannot take credit for it, but is liable to an action by his customer, if the wrong person gets the money.

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