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cheques as cash before receiving the proceeds, was regarded as a holder for value, and as such liable for conversion in the case of defects in the title of his customer, he is now regarded simply as an agent of his customer for collection, and is not liable in case of defects.
The section is, however, very strictly construed, and several important cases have been decided in connection therewith. The various conditions must be rigidly fulfilled before the banker can claim to be protected. He would be guilty of negligence if he collected cheques marked "account payee" for other than the named payee, or if he omitted to notice that the indorsement was in order. The term "customer" is not defined in the Act, but it is applied presumably to anyone who has an account of some kind with the banker. The banker should, under no circumstances, collect cheques for a stranger, or even for a new customer who has not yet been reasonably introduced. The section will not apply to documents for payment, drawn on a banker, which do not comply with the legal requirements of a cheque, as for example orders, the payment of which is made dependent on the signing of a receipt. The cheques must be crossed before they are paid in for collection, and a crossing, either general or special, by the banker himself, will not protect him. As to whether the customer has a right to draw against the amount before the banker has collected it is at present doubtful.
Termination of Authority to Pay.
When a customer has issued a cheque, the banker's authority to pay it may be terminated in several ways
(1) By countermand of payment. It was held in Curtice v. London City & Midland Bank (1908) that this may be done even by telegram, if authenticated.
(2) By notice of the customer's death. But it was held in Backhouse v. Charlton (1878) that, where a firm consists of several members, the death of one does not cancel the authority of the survivors to draw cheques on the account of the firm.
(3) By notice that the customer has committed an available act of bankruptcy, or by the making of a receiving order against the customer.
(4) By notice of the customer's lunacy.
(5) By service of a garnishee order nisi, which ties up the
whole of the credit balance of the customer, even though greatly in excess of the amount of the judgment debt. Unpaid cheques drawn before the date of service cannot then be cashed.
The bankruptcy or winding-up of the bank terminates the relationship as between banker and customer.
It is frequently found in practice that the words "A/c payee or "Account A.B., etc.," are added to the crossing on the face of a cheque. These words have no legal effect as part of a crossing, as they are not authorized by the Bills of Exchange Act, 1882, and they do not therefore affect the negotiability of an order or bearer cheque. Nevertheless, disregard of such words would undoubtedly constitute negligence sufficient to deprive a collecting banker of the protection afforded to him by section 82 of the Act, and he should therefore see that in all such cases the proceeds are correctly applied to the account of the payee. A paying banker may, however, disregard such words, as it is no part of his duty to follow the money once he has paid it to the collecting banker.
Sometimes, however, an open cheque is presented to a paying banker for payment bearing the words, "Account payee only,' with or without the addition of the words, "Not transferable." In such a case payment should be refused, and the cheque marked "Form of cheque irregular."
A post-dated cheque bearing a twopenny stamp is a valid negotiable instrument under section 13 (2) of the Bills of Exchange Act, 1882, but, as it is a bill of exchange not payable on demand, it should, strictly speaking, bear an ad valorem impressed stamp in accordance with the provisions of the Stamp Act. Thus, although anyone taking such an instrument has a good title thereto, and its negotiability is not impaired because it is postdated, it would seem that a person who negotiates it before its date is liable for stamp duty in accordance with the Stamp Act. On the other hand, as no cause for action could arise on a postdated cheque before its date, it is doubtful whether the liability for extra stamp duty could be upheld.
With regard to the paying banker, he would lose his statutory protection if he paid such a cheque before its date, and would be liable to the drawer in the event of its having been paid under a forged endorsement. In this connection a further danger arises. in that the banker who has paid such a cheque is unable to debit his customer's account with the amount until the date of the cheque, but in the meantime the drawer may stop payment, and the banker would be compelled to bear the loss.
Bank notes are promissory notes, payable to bearer on demand, issued by a banker. They are not stamped, and they differ
from ordinary promissory notes in that (a) they may be reissued after payment, although actually they are not re-issued; (b) they are issued under licence by certain authorized persons only, and for certain fixed round sums; (c) their issue is limited by the law of the land; (d) they are invariably made payable to bearer; (e) they are never barred by the Statutes of Limitations; (f) they generally form part of the currency of the country (as in the case of Bank of England notes), and are freely accepted.
In England, the Bank of England has a monopoly of the right of note issue, and by the Bank of England Act, 1833, its notes were made legal tender in England and Wales for the payment of any amount above £5, except by the Bank itself or its branches. They are not, however, legal tender in Scotland or Ireland.
Bank of England notes are issued for various multiples of £5 and £10, but none are less than £5.
In Scotland and Ireland, bank notes are issued by practically all the banking institutions, but their notes are not legal tender in the respective countries.
By the Stamp Act, 1891, and various amending acts which have since been passed, the last being the Finance Act, 1918, bills of exchange, promissory notes, and cheques are required to be legally stamped before they are valid and legally enforceable. The stamp duties are as follow:
BILLS OF EXCHANGE
(1) When payable on demand, or at sight, or on presentation, or not exceeding three days after date or sight, for any amount 2d. In the case of inland bills this stamp must be adhesive or impressed. On foreign bills this stamp must be adhesive, and may consist of (a) an ordinary foreign bill stamp; (b) a twopenny postage stamp; or (c) two penny postage stamps.
£100, for each £100 or any part thereof
Inland bills under this heading must be drawn on impressed stamp paper; foreign bills must be stamped with adhesive foreign bill stamps.
EXCEPTION: (Finance Act, 1899, Section 10.)
Bills, other than those under (1), drawn and expressed to be payable out of the United Kingdom, but actually paid, or indorsed or negotiated in any manner within the United Kingdom, are stamped as inland bills if the amount of the bill does not exceed £50, but
Where it exceeds £50 and does not exceed £100
Where it exceeds £100, for every £100 or part thereof
Inland promissory notes, whether payable on demand or not, must bear ad valorem impressed stamps. Foreign notes must bear adhesive foreign bill or note stamps "' in accordance with Schedule A (2) given above.
For any amount, adhesive or impressed stamps .
General Duties in regard to Stamping.
The ad valorem stamp duty on inland bills must be impressed thereon before issue by the drawer. Usually inland bills on demand are also drawn on impressed-stamp paper. If adhesive stamps are used, they should be affixed and properly cancelled by the drawer, but if he does not do so the person to whom the instrument is presented for payment should affix and cancel the necessary stamp, charging the amount against the drawer or deducting it from the amount of the bill. A foreign bill or note must be properly stamped by the first person into whose hands the instrument comes on its arrival in this country, and such person renders himself liable to a penalty if he negotiates a foreign bill without first effectively stamping it. An instrument on which the duty is required to be denoted by adhesive stamps is not effectively stamped until such stamps are properly cancelled, and the omission of any holder to cancel the stamps where he is required to do so renders him liable to a penalty.
If, at the time a bill or note is received by a holder, it appears to have been effectively stamped, he may deem it to be properly stamped although in fact the stamps may have been affixed by the wrong person.
In the case of a bill drawn abroad in foreign currency, the stamp duty is to be calculated according to the rate of exchange for demand drafts current on the date of the bill, unless the instrument contains a statement of the current rate of exchange and it is stamped in accordance with that statement.
A bill is not invalid because it does not conform to foreign stamp laws, and only English stamp laws need be considered for legal purposes in this country.
Where a bill or note is payable with interest, only the principal need be taken into account in computing the stamp duty, unless the amount of interest is stated as a fixed sum.
Bills in a set require to be stamped on one of the parts only, the other parts being exempt provided they are not negotiated apart from the stamped bill. If the stamped part is lost, another part, although not stamped, may be admitted in evidence to prove the contents of the stamped part.
For stamping purposes the Channel Islands and the Isle of Man are deemed to be foreign countries.
SALE OF GOODS
Reference should also be made to the following:
APPENDIX D.-Factors Act, 1889, page 364.
APPENDIX E.-Sale of Goods Act, 1893, page 368.
Until the Sale of Goods Act, 1893, was passed, the law relating to the sale of goods was contained in many statutes and a large number of decided cases. This ill-digested mass was arranged and codified in the Act of 1893, which in this chapter will be referred to as the Act."
The particular sections will only occasionally be mentioned, so that reference must be made to the Act itself, which is reprinted in the Appendix.
The sale of goods, being one of the most common kinds of contracts, is very important, and mercantile persons should be well acquainted with the law on the subject. The general principles of contract already considered in Chapter 1 apply to the sale of goods, and the present chapter must therefore be read in conjunction therewith. An agreement relating to the sale of any goods, wares or merchandise does not require stamping.
The Act defines "goods" as including all chattels personal, other than things in action and money.
The term includes emblements (that is, such vegetable products as are the annual results of agricultural labour), industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. By "specific goods" is meant goods identified and agreed upon at the time a contract of sale is made. A" contract of sale" is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price; so that a contract of sale includes an agreement to sell as well as a sale. Where under the contract of