An opposite view to the foregoing, not given here as an exception to an established rule, but as showing that the grounds of the doctrine as stated are disputed, is that it is the universal understanding between banks and depositors, arising from the custom of trade, that the check of the latter is to be paid upon presentment; the drawer makes his deposit and gives the check with this understanding, and the bank receives the money with the like understanding, and so the holder receives the check; these together create an implied privity and complete the contract between them.11 In some states, suit is allowed the holder of an uncertified check, on the existence of implied privity. It is claimed the banker, when he receives the deposit, agrees with the depositor to pay it out.152 The claim is further fortified by the assertion that the delivery of a check constitutes an assignment of the amount. 153 27. A Check Not an Assignment. - A check is not an assignment of the funds in bank. According to English law, the drawee of a bill or check, as such, incurs no liability to the holder and there is no privity of contract between them;15 but privity may be created by agreement external to the bill, and the relation of the parties is then regulated by the terms of the agreement.' And, in England, when a bill is accepted payable at a banker's, there is no privity between the drawer or holder and the acceptor's banker.' 155 156 ILLUSTRATION. —- Where A, having one hundred pounds at his bankers, draws a check on them for that sum in favor of C, and the check is dishonored, C has no remedy against the bankers." 157 In England, the Bills of Exchange Act, 1882, provides that a bill, of itself, does not operate as an assignment of funds in the hands of the drawee available for the payment thereof, and unless the drawee accept as required by the act, he is not liable on the instrument. 158 The statute law of 1512 Dan. Neg. Inst., Sec. 1,638. 15225 III. 21 (1860); 26 Iowa 315 (1868); 12 Bush (Ky.) 139 (1876); 2 Dan. Neg. Inst., Sec. 1,638. 153 Chal. Dig. Eng. B. of E. Act (5th Ed)., p. 180. 154 L. R. 19 Eq. (Eng.) 74 (1874). 159 Canada is the same; but in Scotland, it is otherwise; bills and checks in Scotland operate as assignments, of the sums for which they are drawn, in favor of the holders from the time when they are presented to the drawees." 160 In the United States, as declared by the negotiable instruments laws in states where they exist, and by the weight of judicial authority, "a check, of itself, does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts and certifies the check.' 159 Can. B. of E. Act, Sec. 53. 99161 161 N. Y. N. I. L., Sec. 325; Pa. N. I. L.. Sec. 189; 165 U. S.6 34 (1896); 49 Barb. (N. Y.) 221 (1867). THE LAW OF COMMERCIAL PAPER (PART 5) DISHONOR AND PROTEST DISHONOR 1. The dishonor of an instrument is the refusal or neglect to pay it at maturity. A bill of exchange is dishonored for non-acceptance or for non-payment; a promissory note and a check are dishonored for non-payment. 2. Dishonor As Declared By Statutes. - In England,' Canada,' and the United States, as declared by statute, a bill of exchange is dishonored by non-acceptance (a) when it is duly presented for acceptance, and acceptance is refused or cannot be obtained; or, (b) where presentment for acceptance is excused and the bill is not accepted. Presentment is excused, and a bill may be treated as dishonored by nonacceptance, (a) where the drawee is dead or bankrupt, or is a fictitious person, or a person not having capacity to contract by bill; (b) where, after the exercise of reasonable diligence, presentment cannot be made; (c) where, although presentment has been irregular, acceptance has been refused on some other ground, as where, although presentment is made at an inproper place, the drawee states that his refusal to accept is for some other reason.* A bill, note, or check is dishonored by non-payment (a) when it is duly presented for payment, and payment is For notice of copyright, see page immediately following the title page refused or cannot be obtained; or, (b) when presentment is excused and the instrument is overdue and unpaid. Presentment for payment is excused (a) where, after the exercise of reasonable diligence, presentment cannot be made; (b) where the drawee is a fictitious person; (c) by waiver of presentment, express or implied." NOTICE OF DISHONOR 3. The notification by the holder of an instrument to a drawer or indorser that it has been dishonored-in case of a bill, by non-acceptance, and in the case of a bill, note, or check, by non-payment-is called notice of dishonor. Such notification must be given in all cases, except when excused or dispensed with. The object of notice is to apprise the party to whom it is addressed of the dishonor, and to inform him that the holder, or party giving notice, looks to him for payment. The party receiving the notice may then take such steps as may seem necessary to obtain indemnity from parties liable to him. Actual notification, not mere knowledge, is necessary; a man who can be clearly shown to have known beforehand that the bill would be dishonored is, nevertheless, entitled to notice." 4. 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. By the English and Canadian acts, the return of a dishonored bill to the drawer or indorser is, in point of form, deemed a sufficient notice of dishonor; and by those acts," also by negotiable instruments laws in the United States," a written notice need not be signed, and an insufficient written notice 5 Eng. B. of E. Act. Sec. 47 (1); Can. B. of E. Act, Sec. 47 (1); N. Y. N. I. L., Sec. 143; Pa. N. I. L., Sec. 83. 6 Eng. B. of E. Act, Sec. 46 (2); N. Y. N. I. L., Sec. 142; Can. B. of E. Act, Sec. 46 (2); Pa. N. I. L., Sec. 82. 7 Chal. Dig. Eng. B. of E. Act (5th Ed.), p. 154. 8 Eng. B. of E. Act, Sec. 49 (5); Can. B. of E. Act, Sec. 49 (e); N. Y. N. I. L., Sec. 167; Pa. N. I. L., Sec. 96. 9 Eng. B. of E. Act Sec. 49 (6); Can. B. of E. Act, Sec. 49 (f). 10 Eng. B. of E. Act, Sec. 49 (7); Can. B. of E. Act, Sec. 49 (g). 11 N. Y. N. I. L., Sec. 166; Pa. N. I. L.. Sec. 95. |