1. Negotiable Instruments
Commercial Law

2. Bills of Exchange Bills of Exchange Act 1949
On cheques and liability of parties
A cheque is a signed written instruction given by the customer (drawer) to the bank (drawee) to pay money from the account of the drawer to the person or company named in the cheque (payee). The payee (endorser) may negotiate the cheque to a third party (endorsee)

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7. Cheques
Undated cheques – bankers need not honour undated cheques – S.20
The holder/payee of the cheque can fill u[ the correct date within a reasonable time and the cheques can be honoured
Post dated cheques – one which bears a date in the future. It is a valid cheque S.13(2)

8. Crossed Cheques 2 types of crossing – general or special
General: the paying bank can only pay the amount to a collecting bank. The banker cannot pay cash
Special: the paying bank must pay the amount only to the collecting banker named in the crossing

9. Crossed Cheques
Where a cheque is uncrossed – the payee can cross it generally or specifically
It is common for the words ‘account payee’ or ‘A/C payee’ to be put in the crossing – this works as a notice to the banker that only the account of the payee can be credited
S.81A – the addition of the words account payee makes the cheque not transferable but only valid as between the parties to the cheque

10. Cheque Fraud CF occurs in 3 ways
A signature may be forged onto a blank cheque
An already completed cheque may be altered before being presented for payment
Total fabrication of the cheque
Victims – banks, businesses and consumer that accepts the CF
See: Catch me if you can

12. Liability of Banks
Where a drawee bank pays a cheque with a forged signature, the injured party would have a claim against the drawee bank.
The signature inoperative under S.24
Bank liable because banks keep signature samples thus give rise to the duty to verify.

13. Drawer’s liability A forged signature is wholly inoperative
The bank may thus not pay out a cheque with forged signature
The drawer is not liable on such a cheque to the payee – S.38

14. Cheque Alteration
Part of the implied contract between banker and customer that customer must exercise due care in drawing cheques
London Joint Stock bank v Macmillan (1918) – a sum was stated in figures but not in words, 2 pounds was changed to 120 pounds
Held – the bank could debit the firms account with 120 pounds, the partners had been negligent by leaving blank spaces for the amounts in words to be altered.

15. Cheque Alteration Barbour Ltd v Ho Hong Bank (1926)
The manger drew a cheque for $2520. The figure was altered to $ The bank paid out the altered sum.
Held – the respondent had to bear the loss because the manager was negligent in drawing the cheque