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   Chapter 59 THE LAW RELATING TO BANK CHEQUES

Up To Date Business By Various Characters: 7975

Updated: 2017-12-06 00:03


A cheque has come to be one of the most common of all writings. Almost everybody receives more or less of them. There are some principles that ought to be understood by every holder or receiver of a cheque which, we fear, are not as well known as they should be.

First of all, a person ought to present his cheque for payment soon after receiving it. Some people are quite negligent in this matter and carry cheques around in their pocket-books for several days before presenting them for payment. It may not be convenient to take them to a bank, and so they are carried around; perhaps their owners forget they have them. They ought not to do so, for the reason that the maker of a cheque really says to the holder: "This is an order that I give to you on my bank for the money mentioned. If you go at once you can get payment, but I do not promise to keep it there always for you-only for a short time." Now if a person is willing to accept a cheque at all, he ought to present it within the time the holder intended, and if he does not and the bank fails, the loss falls on the holder and not on the maker.

What time does the law fix for presenting cheques for payment? The rule everywhere is that the holder must present a cheque received by him, if drawn on a bank in the place where he lives, on the day of receiving it or on the next day. If the cheque is drawn on a bank at a distance, out of town, then he should send it to that bank, either directly or by leaving it with another bank for that purpose, on the same day as he received it or the next day. In other words, he must take steps to collect the cheque either on the day of receiving it or the following one.

A friend of mine gave a cheque to a merchant in payment of a small bill. Both lived in the same town, where the bank on which the cheque was drawn was also located. About a week afterward the bank failed and the merchant wrote to him, stating the unwelcome fact and that the cheque had not been collected and desired him to send another. I asked my friend if he complied with the request, and he said: "Certainly." I told him that he ought not to have done so, for he was under no obligation either in law or morals to do such a thing. Had he known the above rule he would not have sent the second cheque, for it was pure negligence on the part of the merchant in not presenting it-in fact, on the same day it was received.

A person may, of course, hold a cheque for a much longer period than the time above mentioned and present it and receive payment, but the point that we are trying to make clear is that the risk of holding it during this period is the holder's and not the risk of the maker of the cheque. I suppose the merchant in the above case had, perhaps, lost the cheque. Every now and then one is mislaid and, consequently, is not presented for payment when it should be, but the maker ought not to suffer for the negligence of the receiver of his cheque. The rule of law that we have given is founded on justice, and if the receiver is negligent in not presenting it as he should, the holder ought not to suffer.

It is the duty of a bank to pay a cheque just as it is drawn, and if it makes any mistakes it must suffer. The reason for this rule is that the maker does not expect to see his cheque again after it leaves his hand, and when he puts his money in a bank for safe-keeping the bank virtually says to him that it will pay only on his order just as he has written. It will guard his interests carefully and pay no forged cheques or cheques that have been altered in dates or amounts, to his injury. Now, it is quite a common thing for cheques to be forged, and still more common for them to be raised. A scoundrel gets a cheque that is genuine, ordering a bank to pay $18, and changes it to $1800. He presents it for payment and it is paid. By and by the depositor finds out that he has not as much money in the bank as he supposed he had there. What has happened? Some one

has altered one of his cheques and drawn out too much. He goes to the bank and makes inquiry, learns that this is so, and then demands that it shall make the amount good to him. Usually a bank is obliged to pay.

There is one limit to this rule. A man making a cheque must be careful to write it in such a way that changes or alterations cannot easily be made. If he is careless, leaving ample space so that changes can be made in the amount, then he will be considered negligent, and a bank would not be obliged to make good his loss. If, on the other hand, he is careful in drawing his cheques then a bank's duty to protect him is plain, and it is liable in the event of neglecting to do so.

A few years ago a man drew a cheque for $250, dated it three days ahead, and left it with his clerk, directing him to draw the money on the day written in the cheque and pay the men who worked for him, and went away. The clerk thought that he would like to keep that money himself and take a little journey also, so he changed the date to one day earlier, went into the bank on that day and drew the money, and started for the Klondike or some other place. The maker of the cheque soon found out what had happened and demanded of the bank to make the amount good. The bank said to him: "Suppose the clerk had waited one day longer and then drawn the money, you would have been the loser just the same." The man admitted all this, but replied, nevertheless, that he had not changed the date; that the bank ought to have seen the alteration before paying, and as it did not it was negligent in that regard, and the bank was obliged to lose.

When a person takes a cheque he naturally supposes that the bank on which it is drawn owes the money to him because he can truly demand it. Suppose a bank refuses to pay, can the holder then sue the bank for money? In six States-Illinois, South Carolina, Missouri, Kentucky, Colorado, and Texas-the holder of such a cheque can sue the bank and get his money. The courts in those States say that a cheque is an assignment or transfer of the amount of money stated to the holder of the cheque from the time that the cheque was given him. The law in all of the other States is otherwise, and a bank for a good reason can decline to pay a cheque, and, in any event, the holder cannot sue the bank for the amount. If it will not pay he must look to the maker and not the bank for payment. Of course, a cheque must always be drawn against a deposit, and it is a fraud on the part of a person to draw a cheque on a bank when he has no money there. Sometimes mistakes are made by banks in their bookkeeping, and they think they have not the money to pay when in truth they have. In such cases they sometimes decline to pay, but even if they had the money the law says that there is no contract between the holder of a cheque and the bank on which it is drawn, and therefore the holder cannot sue it should it refuse to pay. This rule, however, is rather losing ground and the other is coming into more general favour-that a cheque does operate to transfer the money of the maker to the holder and, consequently, that he has a right to sue the bank for the money.

Cheques are made payable either to bearer or order. If a cheque is made payable to bearer it can be transferred from one person to another simply by handing it to him-by delivery; but if a cheque is made payable to order, then the person who receives it, if wishing to transfer it to some one else, must write his name on the back. If he writes his name on the back it is called a blank indorsement, and this form is often used in transferring cheques. If, however, a person intends to send a cheque through the mail he should never write it payable to bearer, but always payable to the order of a particular person, so as to require his name to be written thereon in order to make a good transfer. This is a much safer way of sending cheques than simply by making them payable to bearer.

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