has a similar effect as the accepting a bill, provided the banker writes on it the word "accepted," or his initials.

ment should

be made.

Where the cheque is payable to bearer, the banker may pay To whom paythe amount of the cheque to the lawful holder, whether by indorsement or otherwise, and in order to facilitate the payment of cheques it is enacted, “ that any draft or order drawn upon a banker for the sum of money payable to order on demand, which shall, when presented for payment, purport to be indorsed by the person to whom the same shall be drawn payable, shall be a sufficient authority to such banker to pay the amount of such draft or order to the bearer thereof; and it shall not be incumbent on such banker to prove that such indorsement, or any subsequent indorsement, was made by or under the sanction or authority of the person to whom the said draft or order was or is made payable, either by the drawer or any indorser thereof" (a). If, however, the customer had no funds in the hands of his bankers at the time of presentment, the bankers should ascertain the genuineness of the signature both of the drawer and indorser before paying the cheque. If the customer pay into his bank a cheque, the mere fact of the banker receiving it without observation, and keeping it till the following day, does not imply a promise to pay it, and he is held to have received it as agent of the bearer (b).

paying altered

cheques.

In the payment of cheques it is expected of the banker to Negligence in use due prudence and caution. If he be guilty of gross negligence in paying a forged cheque, or a cheque with the sum altered, he would do it at his peril, and he could not charge the customer with it (c). If, however, the customer was himself guilty of gross neglect, the banker would be exonerated (d). Cheques are within the meaning of the words "bills of exchange," and therefore the Bills of Exchange Act applies also to them (e). The cheque, when paid, should be restored by the banker to his customer who has drawn it, the cheque being considered the property of the drawer when paid (ƒ). It is the duty of the banker to cancel the cheque on payment thereof (g).

(a) 16 & 17 Vict. c. 59, s. 19.

(b) Boyd v. Emmerson, 2 A. & E. 184; Kilsby v. Williams, 5 B. & A. 816; De Bernales v. Fuller, 14 East, 590.

(c) Hall v. Fuller, 5 B. & C. 750. (d) Young v. Grote, 4 Bing. 253.

(e) Eyre v. Waller, 29 L. J. Exch. 246; 18 & 19 Vict. c. 67.

(f) Warwick v. Rogers, 5 M. & G. 348; Partridge v. Coates, Ry. & M.

156.

(g) 55 Geo. 3, c. 184, s. 19; Morley r. Culverwell, 7 M. & W. 174.

CHAPTER XIII.

INTRODUC

TORY.

ON BANKING.

ALTHOUGH the commerce of banking is of very ancient origin, having been introduced into this country by the Lombards, whatever legislation exists on the subject, it sprung almost entirely from the monopoly granted to the Governor and Company of the Bank of England (a). At first the monopoly of this company was absolute, a statute having been passed enacting that no other bank, or any corporation, society, fellowship, or institution in the nature of a bank, should be established by Act of parliament within the kingdom (b). A few years after, another Act was passed forbidding any other body politic or partnerships of more than six persons in England to borrow, owe, or take up any money on their bills or notes payable on demand, or at any less time than six months from the borrowing thereof (c), and in 1742 it was provided that no other bank should be established by Parliament (d). This close monopoly continued as late as 1826. In that year, however, it was limited to London and within a district of sixty-five miles round it, the Bank of England being then allowed to establish branches in any part of England (e). In 1833, banking companies in the country were allowed to draw bills on London payable on demand. And banking companies, exceeding six persons, were allowed to be formed in London and within a district of sixty-five miles thereof; but they were precluded from issuing notes payable on demand, and Bank of England notes were made a legal tender any where but at the Bank of

(a) 5 & 6 Will. & M. c. 20.

(b) 8 & 9 Will. & M. c. 20.

(c) 7 Anne, c. 7, s. 61.

(d) 15 Geo. 2, c. 13, s. 5.

(e) 7 Geo. 4, c. 46.

England or its branches. Thus the law continued till 1844, when the existing law regarding the issue was established (a).

SECTION I.

NATURE OF BANKING.

A banker is one who deals in and with money. The name of Definition. banker is made by statute to apply to all corporations, societies, partnerships, and persons, and every individual person carrying on the business of banking, whether by the issue of bank notes or otherwise, except the Governor and Company of the Bank of England (b).

banking.

The business of banking consists in receiving deposits of Business of money upon which interest may or may n be allowed, in making advances of money principally in the way of discounting bills, and in effecting the transmission of money from one place to another.

Public and

private banks.

Banks are divided into public and private. A public or a joint-stock bank is one composed of a large number of partners or shareholders and administered by a certain number of them as directors elected from their own body. A private bank is one having few partners, who attend personally to its management (c). To carry on the business of a banker, with power to License. issue unstamped promissory notes or bills of exchange, a licence is required, with a stamp duty of £30, a separate licence being required in respect of every town or place where any such unstamped promissory notes or bills of exchange are to be issued or drawn ; but where any banker issues such notes or bills at more than four different towns or places, then, after taking out three distinct licences for three of such towns or places, he is entitled to have all the rest of such towns and places included in a fourth licence (d). Bankers authorised to issue Composition duty for or draw unstamped promissory notes and bills in England, unstamped and unstamped notes in Ireland, must, in lieu of the duties on such notes and bills, pay 38. 6d. duty for every £100, and

notes.

(a) 7 & 8 Vict. c. 32.

(b) Ibid. s. 11.

(c) Gilbart on Banking, p. 2.

(d) 9 Geo. 4, c. 22, s. 2.

also for the fractional part of £100, of the average amount or value of such notes and bills in circulation during every halfyear (a).

The relation

SECTION II.

RELATION OF BANKERS TO CUSTOMERS.

The relation between a banker and customer who pays money

of banker and into the bank is the ordinary relation of debtor and creditor (b).

customer is

a relation

of debtor and creditor.

Right of

customer to the balance

in his credit.

Banker may constitute

The money which a customer deposits with his banker, and which is usually spoken of as the customer's money at his banker's, is money lent to the banker, with which the banker may do what he pleases, the only obligation which he contracts being to return an equivalent, by paying a similar sum to that deposited with him, when he is asked for it. Such relation does not partake of a fiduciary character, nor bear analogy to the relation between principal and factor or agent, who is quasi trustee for the principal in respect of the particular matter for which he is appointed agent. And consequently the Statute of Limitation runs against this debt as against any other simple contract debt (c).

As the banker is not a trustee for the sum deposited with him, but only debtor to his customer for the same, where money is ordered to be paid to a third person, no right is thereby transferred to the payee against the banker, and in case of non-payment the customer is the proper party to sue (d).

The customer, on the other hand, has a perfect command over the balance in his credit, and may command payment of the same at sight, or order it, or any portion of it, to be carried to the account of any other person by cheque or otherwise (e). A himself agent banker, however, may by special agreement constitute himself agent or trustee of his customer, as where the banker undertakes to negotiate or sell exchequer bills or to receive interest for it on his behalf, or to receive money to invest in stock, or orders to appropriate the customer's balance or any part of it

or trustee.

(a) 9 Geo. 4, c. 23, England; and 9 Geo. 4, cc. 23 & 80; and 5 & 6 Vict. c. 82, Ireland.

(b) 7 & 8 Vict. c. 32, s. 11.

(c) Foley v. Hill, 2 H. L. Cas. 36; Pott v. Clegg, 16 M. & W. 321. (d) Malcolm v. Scott, 5 Exch. 610. (e) Watts v. Christie, 11 Beav. 551.

to a specific purpose. In all these cases the banker becomes the trustee of his creditor (a).

customers'

cheques.

The obligation on the part of the banker is to pay the cus- Obligation of tomer's cheques. And he would be liable to damages should he banker to pay refuse to pay a cheque presented to him, within banking hours, bearing the genuine signature of a customer who has sufficient funds in the bank at the time to cover the amount so drawn (b), provided such funds were received at the bank in a reasonable time before presentment (c). Nor could the banker refuse to honour the customer's draft if there had been a course of dealing among them, and sufficient value had been put into his hands as would justify the drawer in the belief that the draft would be honoured. Where there is such a course of dealing it will amount to an evidence of agreement between the parties, and could not be put an end to without distinct notice (d).

of customer.

But where the customer has committed an act of bankruptcy Bankruptcy the banker's duty is to refuse to honour his cheque, and to hold his balance at the bank to the credit of the bankrupt's assignee (e).

know the

It is the duty of the banker to be acquainted with the Banker should customer's signature, and he might be responsible for the conse- customer's -quences of any irregularity or loss caused by his negligence in signature. this respect.

SECTION III.

LIABILITY OF BANKERS FOR DEPOSITED SECURITIES.

Where securities are deposited with a banker for a specific purpose, or undue bills are entrusted with him in order that he may receive the proceeds when due, they continue the property of the customer; and if the banker should become bankrupt, such bills or securities would not pass to his assignees, the banker in such case acting as factor or agent for his customer (f). Nor would it make any difference if the banker

(a) Foley v. Hill, 2 H. L. Cas. 36. (b) Rolin. Steward, 14 C. B. 595. (c) Whitaker v. Bank of England, 6 C. & P. 700; Marzetti v. Williams, 1 B. & Ad. 415.

(d) Cumming v. Shand, 29 L. J.

Exch. 129.

(e) Vernon v. Hankey, 2 T. R. 119. (f) Belcher v. Campbell, 8 Q. B. 11; Ex parte Dumas, 1 Atk. 233; Zinck v. Waller, 2 W. Bl. 1156; Jombard v. Woollet, 2 My. & C. 402.

Deposit of

securities for specific pur

poses.