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CH. XVI. s. 3.

Cheques on a

Banker (Act of 1882).

Revocation of banker's

authority.

Crossed

cheques.

Protection of banker and drawer.

Effect on holder.

Protection of collecting banker.

S. 75. The duty and authority of a banker to pay a cheque drawn on him by his customer are determined by

(1) Countermand of payment:

(2) Notice of the customer's death.

[Sects. 76-82, which re-enact the Crossed Cheques Act, 1876 (39 & 40 Vict. c. 81), relate to crossed cheques, sects. 80—82 being as follows:-] S. 80. Where the banker, on whom a crossed cheque is drawn, in good faith and without negligence pays it, if crossed generally, to a banker, and if crossed specially, to the banker to whom it is crossed, or his agent for collection being a banker, the banker paying the cheque, and, if the cheque has come into the hands of the payee, the drawer, shall respectively be entitled to the same rights and be placed in the same position as if payment of the cheque had been made to the true owner thereof.

S. 81. Where a person takes a crossed cheque which bears on it the words "not negotiable," he shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had.

S. 82. Where a banker in good faith and without negligence receives payment for a customer (x) of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque by reason only of having received such payment (y).

Promissory note defined.

SECT. 4.-Promissory Notes.

Sects. 83-88 of the Bills of Exchange Act, 1882, enact on this subject as follows:

S. 83.-(1) A promissory note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay on demand or at a fixed or determinable future. time, a sum certain in money, to, or to the order of, a specified person or to bearer.

(2) An instrument in the form of a note payable to maker's order is not a note within the meaning of this section unless and until it is indorsed by the maker.

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(x) A person accustomed to get cheques cashed at a bank but having no account is not a customer"; so that a bank cashing for such person a fraudulently obtained "not-negotiable" cheque which is honoured must refund to the drawer : Great Western Rail. Co. v. London and County Banking Co., [1901] A. C. 414, reversing C. A. and Bigham, J.

(y) Bankers are entitled to the protec tion of this section only in cases where they receive payment of crossed cheques as agents for customers: Gordon v. London, City and Midland Bank; Gordon v. Capital and Counties Bank, [1902] 1 K. B. 242, C. A., reversing Bucknill, J., 83 L. T. 762; aff. by H. L., [1903] A. C.

240.

(3) A note is not invalid by reason only that it contains also a pledge of collateral security with authority to sell or dispose thereof (z).

(4) A note which is, or on the face of it purports to be, both made and payable within the British Islands is an inland note. Any other note is a foreign note.

CH. XVI. s. 4.
Promissory
Notes.

S. 84. A promissory note is inchoate and incomplete until Delivery delivery thereof to the payee or bearer.

necessary.

several notes.

S. 85.-(1) A promissory note may be made by two or more Joint and makers, and they may be liable thereon jointly, or jointly and severally according to its tenor.

(2) Where a note runs "I promise to pay" and is signed by two or more persons it is deemed to be their joint and several note.

S. 86. (1) Where a note payable on demand has been Note payable indorsed, it must be presented for payment within a reasonable on demand. time of the indorsement. If it be not so presented the indorser

is discharged.

(2) In determining what is a reasonable time, regard shall be had to the nature of the instrument, the usage of trade, and the facts of the particular case.

(3) Where a note payable on demand is negotiated, it is not deemed to be overdue, for the purpose of affecting the holder with defects of title of which he had no notice, by reason that it appears that a reasonable time for presenting it for payment has elapsed since its issue.

of note for payment.

S. 87.-(1) Where a promissory note is in the body of it made Presentment payable at a particular place, it must be presented for payment at that place in order to render the maker liable. In any other case, presentment for payment is not necessary in order to render the maker liable.

(2) Presentment for payment is necessary in order to render the indorser of a note liable.

(3) Where a note is in the body of it made payable at a particular place, presentment at that place is necessary in order to render an indorser liable; but when a place of payment is indicated by way of memorandum only, presentment at that place is sufficient to render the indorser liable, but a presentment to the maker elsewhere, if sufficient in other respects, shall also suffice.

(2) And in Kirkwood v. Carroll, [1903] 1 K. B. 531, C. A., overruling Kirkwood v. Smith, [1896] 1 Q. B. 582, and approving Yates v. Evans (1892), 61 L. J., Q. B. 446, it was held that a joint and several note for payment of 1257. by instalments, the whole to become due on

default in payment of any one instal-
ment, and "no time given to or security
taken from, or composition or arrange-
ment entered into with either party
hereto" to "prejudice the rights of the
holder to proceed against any other
party," was a valid promissory note.

CH. XVI. s. 4.
Promissory
Notes.

Liability of
maker.
Application
of Part II.
to notes.

S. 88. The maker of a promissory note by making it— (1) Engages that he will pay it according to its tenor; (2) Is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.

S. 89.-(1) Subject to the provisions in this Part and, except as by this section provided, the provisions of this Act relating to bills of exchange apply, with the necessary modifications, to promissory

notes.

(2) In applying those provisions the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first indorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to drawer's order.

(3) The following provisions as to bills do not apply to notes; namely, provisions relating to

(a) Presentment for acceptance;

(b) Acceptance;

(c) Acceptance suprà protest;

(d) Bills in a set.

(4) Where a foreign note is dishonoured, protest thereof is unnecessary.

[For sects. 91 and 97, as to signature and general savings, see p. 430, ante.]

CHAPTER XVII.

GUARANTEES AND INDEMNITIES.

[See De Colyar on Guarantees, 3rd ed., A.D. 1897; Smith's Mercantile Law, 10th ed., A. D. 1890.]

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SECT. 1.-General Nature of Contract of Guarantee.

nature of the contract of

THE general nature of a contract of guarantee is sufficiently General simple. It is a collateral engagement, to answer for the debt, default, or miscarriage of another (a), as distinguished from an guarantee. original and direct engagement for the party's own act. It is therefore of the essence of this contract, that there should be some one liable as principal (b); and, accordingly, where one party agrees to become responsible for another, the former incurs no obligation as surety, if no valid claim ever arises against the principal; whilst, on the other hand, the liability of the surety upon a claim which is good as against the principal, ceases so soon as such claim is extinguished.

But the rule that a party cannot be liable upon a contract of guarantee, unless the principal be also liable, is, in some cases, true in form or words, rather than in substance. Thus, in the case of a guarantee to answer for the price of goods not necessaries, to be sold to an infant, or other person incompetent to contract, there is no doubt that the party guaranteeing, though professedly contracting only in the character of a surety, would be responsible: for, either he could not urge the incapacity of the supposed principal; or he might, by construction of law, be himself treated as the principal.

(a) See Statute of Frauds, 29 Car. 2, c. 3, s. 4, p. 76, ante.

(b) Per Lord Selborne, in Lakeman v. Mountstephen (1874), L. R., 7 H. L. 17.

CH. XVII. s. 1.
General
Nature of
Contract of

Guarantee.

Considera

tion for.

Past consideration insufficient.

Guarantee of past debt, in consideration of future advance.

Guarantee of past and future advances.

We have already seen that, in the case of every simple contract, a consideration is necessary to give it validity. And we now remark further that, in the case of a guarantee, the mere existence of the debt, default, or miscarriage, in respect of which it is given, is not a sufficient consideration to support it: so that, unless there be some further consideration for the promise of the guarantor, such promise will be void.

Thus, a promise to pay a debt already incurred by another, is not binding without some new consideration, such as forbearance (c); or without showing that such past consideration was moved at the defendant's request (d). And even in the case of a promissory note given by way of guarantee for a past debt, if it be shown that there was no consideration, such as forbearance, this will be an answer to an action on the note (e).

But a guarantee of a debt already incurred; or of such a debt and a debt to be afterwards incurred, given in consideration of a future advance of money or sale of goods, by the creditor to the original debtor, is good (ƒ). And it was probably on this ground, that the following memorandum was held to be sufficient:—“I hereby guarantee the present account of Miss H. M., due to R. T. S. & Co., of 112l.; and what she may contract from this date to the 30th September next" (g).

So where, in consideration of advances made and to be made to A. and B., the defendant guaranteed to A. and B. the repayment of the said advances, this was held to be good (h).

And a guarantee will be good, although it may be doubtful whether it referred to a past or a future credit-provided it appear from all the circumstances that the parties contemplated the latter (i); and evidence is admissible to show what the transaction really was (k). For one consideration to be done on the one side stated in a document is at all events primâ facie consideration for all that is to be done on the other, and all the premises are to be referred to all the considerations (). But if it appear on

(c) See French v. French (1841), 2 M. & G. 644.

(d) See Payne v. Wilson (1827), 7 B. & C. 423; Johnson v. Nicholls (1845), 1 C. B. 251, 261, n. (a).

(e) Crofts v. Beale (1851), 11 C. B. 172.

(f) See White v. Woodward (1848), 5 C. B. 810; Boyd v. Moyle (1846), 2 C. B. 644; Johnson v. Nicholls (1845), 1 C. B. 251; and see Westhead v. Sproson (1861), 6 H. & N. 728.

(g) Russell v. Moseley (1822), 3 B. & B. 211.

(h) Chapman v. Sutton (1846), 2 C. B.

634. As to continuing guarantee, see Wood v. Priestner (1867), L. R., 2 Ex. 282, Ex. Ch., and post, p. 457 et seq.

(i) Colbourn v. Dawson (1851), 10 C. B. 765; Steele v. Hoe (1849), 14 Q. B. 431; Edward v. Jevons (1849), 8 C. B. 436; Goldshede v. Swan (1847), 1 Exch. 154; Broom v. Bachelor (1856), 1 H. & N. 255.

(k) Goldshede v. Swan (1847), 1 Exch. 154; and see Butcher v. Stewart (1843), 11 M. & W. 857; Haigh v. Brooks (1839), 10 A. & E. 309.

(1) Harris v. Venables (1872), L. R., 7 Ex. 235.

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