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The relation between a banker and his customer is that of a debtor and
a creditor. Money deposited will always belong to the customer and the
bank will be bound to return its equivalent to the customer or to any
person to his order. But in certain cases a banker refuses to honor his
customer’s cheque. When the payment of the cheque is refused by the
bank, it is said to be dishonored.
iii. When the customer closes the account before the cheque is
presented for encashment.
xi. If the amount written in figures is different from the amount written
in words.
xii. If the cheque is presented for payment at a branch other than the
one where the customer has the account.
COUNTERMANDS OF PAYMENT:
A banker is obliged to honor the cheque of his customer, if there is a
sufficient balance in the account to meet it, and the cheque is in order.
The drawer may, however, instruct the banker to stop payment of a
cheque, and the banker will be liable if he neglects to attend to the
instructions.
The Bills of Exchange Act, 1882, Section 75, states that the duty and
authority of a banker to pay a cheque drawn on him by his customer
are determined by countermand of payment.
A countermand of payment can be given only by the drawer, but notice
from a holder that a cheque has been lost by him would put a banker
on his guard, pending instructs tins from the drawer.
An order to stop payment of a cheque should be in writing and be
signed by the customer, and if the order is subsequently cancelled, the
fresh instructions should also be in writing. The drawer cannot stop
payment of a cheque which a banker has, at the drawer's request,
already certified, or marked, for payment.
MEANING OF NOTICE
By notice of dishonor is meant bringing either verbally or by writing, to
the knowledge of the drawer or indorser of an instrument, the fact that
a specified negotiable instrument, upon proper proceedings taken, has
not been accepted or hasn’t been paid, and that the party notified is
expected to paid it.
BURDEN OF PROOF
• It is upon the plaintiff who seeks to enforce the defendant’s
liability upon a negotiable instrument as indorser to establish said
liability by proving that notice was given to the defendant within the
time and in the manner required by the law that the instrument
in question had been dishonored
• Where these facts are not proven, the plaintiff doesn’t
sufficiently establish the defendant’s liability.
• Where there is no proof in record tending to show that the
plaintiff gave any notice whatsoever to the defendant that the
instrument in question had been dishonored, said plaintiff hasn’t
established its cause of action.
NOTICE OF AGENT
• Notice may be given by the agent and it is not necessary that the agent be
authorized by the principal
• He may give the notice in his name or in the name of his principal
• A collecting bank may give notice, and where it has done so, no notice from the
owner is necessary
• And where the cashier of the drawee bank which had refused to pay a check gave the
check to a notary to protest, which was done, it was held that the possession of the check
by the cashier was evidence of his agency of the holder to present it for protest
Sec. 92. Effect of notice on behalf of holder. - Where notice is given by or on behalf
of the holder, it inures to the benefit of all subsequent holders and all prior
parties who have a right of recourse against the party to whom it is given.
MEANING OF BENEFIT
• Benefit refers to the right to charge the person secondarily liable
who received notice
• The party to whom this benefit inures can charge the party
receiving notice of dishonor, even if himself didn’t give the notice.
Sec. 94. When agent may give notice. - Where the instrument has
been dishonored in the hands of an agent, he may either
himself give notice to the parties liable thereon, or he may give
notice to his principal. If he gives notice to his principal, he must
do so within the same time as if he were the holder, and the
principal, upon the receipt of such notice, has himself the same
time for giving notice as if the agent had been an independent holder.
WHEN AGENT’S NOTICE MUST BE GIVEN
• When an instrument is dishonored in the hands of an agent, he
can do either of the following
o Directly give notice to the persons secondarily liable thereon
o Give notice to his principal
• If the agent decides to give notice to the principal, he must give
notice within the time ed by law as if he were a holder
• The principal has also the same time to give notice to the
persons secondarily liable
Sec. 96. Form of notice. - The notice may be in writing or merely oral
and may be given in any terms which sufficiently identify the
instrument, and indicate that it has been dishonored by non-
acceptance or non-payment. It may in all cases be given by
delivering it personally or through the mails.
NOTICE BY PHONE
• This could be done however it must be shown that the
party to be notified was really communicated with, that is, fully
identified as to the party at the receiving end of the line.
Sec. 98. Notice where party is dead. - When any party is dead and his
death is known to the party giving notice, the notice must be given to
a personal representative, if there be one, and if with reasonable
diligence, he can be found. If there be no personal
representative, notice may be sent to the last residence or last
place of business of the deceased.
Sec. 100. Notice to persons jointly liable. - Notice to joint persons who
are not partners must be given to each of them unless one of them has
authority to receive such notice for the others.
APPLICATION OF SECTION
1. Where the party secondarily liable has been declared a bankrupt
or an insolvent
2. Where he has made an assignment of his properties for the
benefits of creditors.
• In such cases, notice be given to the party himself or his
trustee or assignee.
Sec. 102. Time within which notice must be given. - Notice may be
given as soon as the instrument is dishonored and, unless delay is
excused as hereinafter provided, must be given within the time fixed
by this Act.
Sec. 103. Where parties reside in same place. - Where the person
giving and the person to receive notice reside in the same
place, notice must be given within the following times:
Sec. 105. When sender deemed to have given due notice. - Where
notice of dishonor is duly addressed and deposited in the post
office, the sender is deemed to have given due notice,
notwithstanding any miscarriage in the mails.
CONCLUSIVE PRESUMPTION
Sec. 106. Deposit in post office; what constitutes. - Notice is deemed
to have been deposited in the post-office when deposited in any
branch post office or in any letter box under the control of the post-
office department.
Sec. 108. Where notice must be sent. - Where a party has added an
address to his signature, notice of dishonor must be sent to that
address; but if he has not given such address, then the notice must be
sent as follows:
But where the notice is actually received by the party within the
time specified in this Act, it will be sufficient, though not sent in
accordance with the requirement of this section.
IMPLIED WAIVER
• Waiver may be implied from acts, declarations, or silence
Sec. 110. Whom affected by waiver. - Where the waiver is embodied in the
instrument itself, it is binding upon all parties; but, where it is written above
the signature of an indorser, it binds him only.
Sec. 112. When notice is dispensed with. - Notice of dishonor is dispensed with
when, after the exercise of reasonable diligence, it cannot be given to or does not
reach the parties sought to be charged.
(a) Where the drawer and drawee are the same person;
(d) Where the drawer has no right to expect or require that the
drawee or acceptor will honor the instrument;
Sec. 118. When protest need not be made; when must be made. -
Where any negotiable instrument has been dishonored, it may be
protested for non-acceptance or non-payment, as the case may be;
but protest is not required except in the case of foreign bills of
exchange.