4. Liability on a cheque given on a consideration

which fails.

The drawer of a cheque will not be liable if the cheque is given for a consideration which subsequently fails, unless the holder has taken it without any knowledge of that circumstance, and has also given value for it. The case of Mills v. Oddy (reported in 1 Gale, 92), will illustrate the first part of this position. The following extracts from the judgment of the Court, which was delivered by Mr. Baron Parke, contains the facts of that case. "It was an action against the defendant as drawer of a cheque for £39. 18s. on the Bank of England, and the plea was, that there was no consideration or value for drawing the said cheque; the replication was, that there was, a good consideration. On the trial before me at Guildhall, it appeared that the cheque was given by the defendant for the payment of a deposit on a sale by auction of certain leasehold property by the plaintiff as auctioneer to the defendant, and which property was described in the particulars of sale by which the defendant was to be bound. One of the conditions was, that no error or mistake should avoid the sale: the jury found that there was a misdescription, and also that it was wilful, and therefore the defendant had a right, notwithstanding the condition, to repudiate the contract altogether, which he did; and having given the bank orders to dishonor his cheque, payment was

refused. In the present case, the cheque was given in lieu of money, as a deposit on a sale; the consideration for giving it by the defendant was, that the plaintiff contracted to sell leasehold property of a certain description, which property, in fact, he had not to sell. The defendant, therefore, had a right to rescind the contract, and he would be entitled to recover back the deposit if he had paid it in cash; and he might resist the payment of the cheque on the ground that the contract having been done away by fraud, there was in truth no consideration."

See also Lewis v. Cosgrave (2 Taunton). The latter part of the position flows naturally from the similar rule with regard to bills and notes, and which is thus laid down in Bayley's work, p. 499. "The want of consideration in toto, or in part, cannot be insisted upon if the plaintiff, or any intermediate party between him and the defendant, took the bill or note bona fide, and upon a valid consideration."

5. Effect of delay in presenting a cheque on the liability of the drawer.

The drawer of a cheque is not discharged by any delay in presenting it short of the six years fixed by the statute of limitations, unless he has been no party to the delay, and has sustained loss thereby.

In the following case an action was brought by the plaintiff upon a cheque dated 17th February,

1796, drawn by the defendants upon Messrs. Down, Thornton, & Co., payable to bearer, for £2,444. 14s., which was refused payment by the drawees. It appeared that the house of Muilman and Nantes having agreed to lend the defendants their acceptances, had, accordingly, on the 15th November, 1796, accepted a bill of exchange of that date, drawn on them by the defendants for £2,444. 14s. at three months' date, which would become due on the 18th of February, 1797, which bill the defendants negotiated; and, as a counter security for the purpose of enabling Muilman and Nantes to take up their acceptances when due, the defendants gave them the following cheque upon their bankers, upon which the present action was founded, and which bore date nine months before it was drawn.

"Bartholomew Lane, London, "17th February, 1796. "Messrs. Down, Thornton, Free and Cornwall, pay Mr. Dobson, or Bearer, £2,444 15s.

"STERLING, HUNTERS & Co."

Muilman died, and Nantes, his surviving partner, became a bankrupt before the day when their acceptance became due; in consequence of which, the defendants were obliged to take up their bill drawn upon that house. In the meantime, on the 20th January, 1797, before the death of Muilman, or the bankruptcy of Nantes, they had passed the defendants' draft on Down and Co. to the plaintiffs

for a valuable consideration, namely, a precedent debt, the plaintiffs being at that time ignorant of the transaction between the defendants and Muilman and Nantes. The draft, when tendered at Down and Co's., was refused payment; and in subsequent conversation on the same day between an agent for the plaintiffs and one of the defendants, the latter said that it ought not to have been presented for payment, as they had paid it on a bill of Muilman and Nantes, meaning the acceptance above mentioned, but they should wish to pay this draft provided they could prove the bill under the commission against Nantes; and that he had sent, the night before, to the plaintiffs to desire a meeting in order to accommodate this business, and was sorry they had not met, as an accommodation might have taken place; and if the plaintiffs would prove under the estate of Nantes, they, the defendants, would endevour to provide for the payment of this draft. The defendants afterwards refused to pay the draft. It was contended at the trial, on the part of the defendants, that this was like the common case where a person takes a bill of exchange from an indorser after it has become due, in which case the indorser must stand in the same situation, and subject to the same equities as the person from whom he received it. And that, as in this case, Muilman and Nantes could not have recovered against the defendants on this draft, because the consideration as between them had failed by the nonpayment of

their acceptance, so neither could the plaintiff recover, who had taken the draft from Muilman and Nantes nine months after it was due, which circumstance alone should have induced them, in common prudence, to have made inquiry concerning the occasion of the draft being so long outstanding. Lord Kenyon, however, was of opinion, that it was a question for the jury to decide, whether the plaintiffs had received this draft bonâ fide, and without knowledge of the circumstances under which Muilman and Nantes held it; and if so, he thought, though not without some doubt, that the mere circumstance of its being so long outstanding at the time, was not sufficient to exonerate the defendants from their liability under the circumstances of this case, whereupon the jury found a verdict for the plaintiffs.

On a rule for a new trial, Lord Kenyon said"At the time of this trial, I thought there was a difference betwern bankers' cheques and bills of exchange, and that the rule adopted with regard to the latter did not apply to the former; but, on further consideration, I do not think that that distinction is well founded. But the defendant's position that bankers' cheques are not considered by merchants as negotiable instruments, appears most extraordinary; for this very instrument on which the action is brought shows the contrary. It was made payable to Dobson or bearer, and instead of being given to Dobson, to whom it was