evidently a corollary to the plain intention of the Act in authorizing the Sec. 78. crossing of a cheque. The use and object of crossing a cheque, is highly beneficial to the public, and is a protection and safeguard to the owner of the cheque, by securing payment through a banker, in order that it may be easily traced to whose use the money paid on a cheque was received: Bellamy v. Majoribanks, 7 Ex. 403.

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2 A bank disregarding the provisions as to (1) the duplicate or special" crossings; (2) the "general" crossing to a bank; or (3) the "special" crossing to a bank, as well as that authorized by sub-s. 5 of s. 76, is liable to the true owner of the cheque for any loss he may have sustained by reason of the bank's disregard of the law.

3 A bank paying a cheque under the circumstances set out in this clause may find itself on the border line of danger, if not within the lines, and subject to the penalties of negligence. An early case on crossed cheques, intimated that the crossing of a cheque was equivalent to a direction and warning to a banker, as to the mode of payment; and that where a banker paid a crossed cheque other than to a bank, it "would be strong evidence of negligence." If, on an inspection of the cheque, some alteration or incongruity is apparent on the face of it, then the bank is put upon inquiry; and it has been held that "an alteration may be an apparent one, even if it is not an obvious one to all mankind." This proviso corresponds with the proviso to s. 63, as to non-apparent alterations. See the notes and cases to that section.

of bank and

where

crossed.

79. Where the bank, on which a crossed cheque is Protection drawn, 1 in good faith and without negligence pays it, if drawer crossed generally, to a bank, or, if crossed specially, to the cheque is bank to which it is crossed, or to a bank acting as its agent Imp. Act,s.80 for collection, the bank 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. 2

1 The words "bank on which a crossed cheque is drawn," are scarcely accurate, and strictly might be held to include only a crossed cheque issued by the drawer. But the evident intention of the clause is to cover all cases of cheques crossed by the drawer, as well as the cases of original uncrossed cheques which subsequently to their issue, are crossed generally or specially by the holder, or a bank, as authorized by s. 76.

2 This clause may be applicable to the payment of crossed cheques which have been lost by, or stolen from, the holder. The protection to the bank intended by this clause, depends upon whether it has acted in good

Sec. 80. faith, and without negligence, in paying a crossed cheque. The protection to the drawer depends upon whether the cheque has come into the hands of the drawee. If it has, then whatever casualities may have overtaken it, prior to its payment by the bank, the drawer is discharged from responsibility. See as to " good faith," note 1, p. 264.

Holder's title to crossed cheques.

Imp. Act,s.81

Collecting bank not liable to owner.

80. 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 had the person from whom he took it. 1

1 A cheque crossed "not negotiable," is still transferable; but its negotiable quality is limited. It is put on a similar footing with an overdue bill. A holder who has a good title can still transfer it, and the transferee is entitled to receive payment; but where the title of the transferor is defective, a subsequent holder for value is deprived of the protection ordinarily afforded to a holder in due course. Suppose a cheque payable to bearer, and crossed “not negotiable,” is stolen, the thief gets a tradesman to cash it for him, and the tradesman gets the cheque paid on presentment through a banker. The banker who pays, and the banker who receives, the money for the tradesman are protected; but the tradesman would be liable to refund the money to the true owner, and assuming payment to have been stopped, he could not sue the drawer: Chalmers on Bills, 241. This is a new fashioned cheque altogether; and the Act says that if it is marked "not negotiable," the person who takes that cheque is to have no greater right than the person who gives it to him. The customer of the bank gets no better title than his transferor, not only when the cheque is marked "not negotiable," but when it is not so marked, if it is not an open, but a crossed, cheque : Per Lindley, J., in Matthiessen v. London and County Bank, 5 C. P. D. 16.

81. Where a bank, in good faith and without negligence, receives for a customer payment of a cheque crossed generImp. Act,s.82 ally or specially to itself, and the customer has no title, or a defective title thereto, the bank shall not incur any liability to the true owner of the cheque by reason only of having received such payment. 1

1 This clause reproduces one of the clauses in the "Crossed Cheques Act, 1876, "under which Matthiessen v. London and County Bank, 5 C. P. D. 7, was decided, where it was held that when a banker, in good faith, receives from his customer a crossed cheque to which his customer has no title, or only a defective title, whether by reason of forgery of the indorsement, or otherwise, he is exonerated from liability. "When the bank has got the proceeds, and the true owner says to the bank, 'Hand me those proceeds,"

the legislature says: 'No; if you (the bank) have collected only the pro- Sec. 81. ceeds of the cheque for your customer, we will not render you responsible for the proceeds where you have dealt with the cheque in the only way in which, as a matter of business, you could deal with it. If you have done anything more; if you have applied it to your own use, that is another matter. But if you have simply collected it through the clearing house, in the only way in which a banker collects cheques, and that is all you have done, the true owner shall look through you to the customer; and he, and not you, must be responsible to the true owner for the proceeds:" Per Lindley, J., Ibid. The first branch of the section (now s. 80), refers to any person, the second branch (now s. 81), refers to a banker. Therefore the section, having in the first part given a protection to those who put upon their cheque the words "not negotiable," by which a person taking it shall not have, or be capaple of giving, a better title to the cheque than that which the person had from whom he took it, goes on in the second part to give a banker a further protection, whether he is included in the word person or not; and a banker, if he has, in good faith and without negligence, received payment for a customer of a cheque crossed generally, or specially to himself, is not to incur any liability to the true owner of the cheque by reason only of having received such payment: Per Grove, J., Ibid. Where the cheque is indorsed pro proc., the collecting bank will be held to have notice that the agent had but a limited authority; and if it makes no inquiry as to the authority of the agent, such omission may be negligence, within the meaning of this clause, if it is found that the alleged agent had not the authority represented.

PART IV.

PROMISSORY NOTES.

note defined.

Imp. Act,s.83

Ind. Act, s. 4.

82. A promissory note is an unconditional promise in Promissory 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:1

by maker.

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

3. A note is not invalid by reason only that it contains Collateral also a pledge of collateral security with authority to sell or not invalidispose thereof: 3

pledge does date.

Sec. 82.

4. A note which is, or on the face of it purports to be, Inland and both made and payable within Canada, is an inland note: any other note is a foreign note. 4.

foreign.

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1 This is similar in effect to the definition given in s. 3 of a bill of exchange, varied only in respect of the form and character of the contract. The bill being drawn as an "order," to which there are three original parties, the drawer, the payee, and the drawee, who after acceptance becomes the acceptor; while the note is drawn as a promise," and to which there are only two original parties, the maker and the payee. In a bill of exchange, the acceptor is the primary debtor to the payee, and the drawer is but collaterally liable. In a promissory note the maker is the primary debtor to the payee. The acceptor is not the creator of the bill, and his contract is supplementary, and may be conditional; while the maker is the creator of the note, and his contract is final, and must be unconditional. Then, if both classes of securities are negotiable, there are similarities in the relations of the persons who subsequently become parties to them as indorsers. The payee of a note by indorsing it, stands in the same relation to the subsequent parties as the drawer of a bill; and the maker of a note is subject to the same liabilities as the acceptor of a bill. Promissory notes payable to order, may be transferred by indorsement; or when indorsed in blank, or made payable to bearer, they are transferable by mere delivery, and the possession of such an instrument indorsed in blank, or made payable to bearer, is prima facie evidence that the holder is the proper owner and lawful possessor of the same; and nothing short of fraud, nor even gross negligence, if unattended with mala fides, is sufficient to overcome the effect of that evidence, or to invalidate the title of the holder, supported by that evidence: Brown v. Spofford, 95 U. S. 478. There is no precise form of words requisite to constitute a promissory note. But it ought to have the essentials of a contract: Brown v. De Winton, 6 C. B. 356. Any words which will amount in law to a promise to pay, are sufficient: Morris v. Lee, 2 Ld. Raym. 1396. A note of a bank is a promissory note payable to bearer on demand, and passes by delivery. The transferor is not liable on it, by virtue of any contract in it, to which he is a party; but he warrants to his immediate transferee that the bank note is what it purports to be, that he has the right to transfer it, and that at the time of transfer, he is not aware of any fact which renders it valueless. (s. 55.) A bank note differs from an ordinary promissory note, in that it never becomes "overdue; but may be re-issued from time to time, and is not subject to questions of title, or to rights arising out of any equities" between the original or remote holders. Gold coins are very rarely used, and silver coins are used only in small quantities in daily business transactions, so that practically such bank notes form the ordinary commercial currency of Canada. A note though stolen, becomes the property of any person who gives value for it, and takes it bona fide, and without notice of the

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larceny; even though such party had the means of knowledge of which Sec. 82. he neglected to avail himself: Raphael v. Bank of England, 17 C. B. 161. In the early part of this century there was a conflict of decision as to whether an I. O. U. was or was not a promissory note. In Fisher v. Leslie, 1 Esp. 426, Lord Kenyon, C. J., (1795), held it was not a note. In Guy v. Harris, Chit. on Bills 345n, Lord Eldon, C. J., (1800), held it was a note. In Israel v. Israel, 1 Camp. 499, Lord Ellenborough, C. J., (1808), dubitante, decided it in the negative. The later decisions are that it is not a promissory note: Childers v. Boulnois, 1 D. & R. N. P. C. 8; unless it contain an agreement that it is to be paid on a certain day : Brookes v. Elkins, 2 M. & W. 74. "This is an instrument to which only two persons can be parties, namely, the person who produces it, and who answers to the description of 'U.,' and the person who makes it, who is therefore the 'I.' These little notes are only given on the spur of the occasion, and at the moment of some immediate loan :" Per Tindal, C. J., in Curtis v. Richards, 4 Jur. 508. See further the notes to the first part of s. 3, pp. 31, 38.

ILLUSTRATIONS.

Due A. B. or bearer $200.20 for value received, is a promissory note : Russell v. Whipple, 2 Conn. 536.

Good to R. C., or order, for thirty dollars, borowed money, is a note: Franklin v. March, 6 N. H. 363.

I. O. U. £85, to be paid May 5th, is a promissory note: Waithman v. Elsee, 1 Car. & K. 35. See note to Edis v. Bury, 2 C. & P. 560, and Brown v. Gilman, 13 Mass. 158.

I. O. U. £45 13s. which I borrowed of Mrs. M., and to pay her 5 per cent. till paid, is not a note; Melanotte v. Teasdale, 13 M. & W. 216; s. p. Smith v. Smith, 1 F. & F. 539.

Held, in Quebec, that an I. O. U. is negotiable, like other mercantile paper: Beaudry v. Laflamme, 6 L. C. J. 307.

A note, by which is promised to pay "eight hundred and sixty eight, for value received," without designating the kind of money, is a note for 868 dollars: McCoy v. Gilmore, 7 Ohio 268.

The following instrument: "Borrowed of Mr. J. W. £200, to account for on behalf of the Alliance club, at months' notice, if required,"

is not a note: White v. North, 3 Ex. 689.

An instrument promising to pay money, and deliver horses is not a note: Martin v. Chauntry, 2 Stra. 1271.

A note payable at a fixed date contained a proviso that if the defendant should sooner dispose of certain lands, described in a memorandum on the note, then that the note should be payable on demand ;--Held, that the time of payment was certain: Elliott v. Beech, 3 Man. R. 213. "Certainty that the time of payment will arrive, appears to be the proper criterion; not certainty when it will arrive :" Per Killam, J., Ibid.

An instrument in the following terms is a note: "I have received the imperfect books, which together with the cash overpaid on the settlement of your account, amounts to £80 7s., which sum I will pay in two years: Wheatley v. Williams, 1 M. & W. 533.