§ 173 Paris and was paid.

Not negotiable cross.

Customer without

title.

It was forwarded to London and credited to the Paris branch. It was held that English law governed, and that the bank was liable to plaintiff: Lacave v. Credit Lyonnais, [1897] 1 Q. B. 148.

174. 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. 53 V., c. 33, s. 80. Imp. Act, s. 81.

Making a cheque "not negotiable" does not make it not transferable, but merely puts it on the same footing as an overdue bill, so that any holder takes it subject to the equities attaching to it, and no person can become a holder in due course. If such a cheque should be lost or stolen the person receiving the money from the collecting bank would be liable in any event.

Where a cheque crossed "not negotiable" was drawn in favour of a firm, and one partner, S., in fraud of plaintiff, his co-partner, indorsed it to defendant, who got it cashed for S., defendant was held liable to the co-partner, who under the partnership articles was entitled to the cheque: Fisher v. Roberts, 6 T. L. R. 354 (1890). See National Bank v. Silke, [1891] 1 Q. B. 435.

The words "not negotiable" written on a cheque by themselves would have no effect under the statute. It is only when they are taken in connection with an addition which, by section 168, constitutes a crossing, that they are effectual in restricting the negotiability of the cheque: Paget on Banking (2nd ed.), p. 73.

The words "not negotiable" need not be within the lines which constitute the crossing, but should bear a reasonable relation or proximity to them, so that the connection can be reasonably inferred.

175. Where a bank in good faith and without negligence, receives for a customer payment of a

cheque crossed generally or specially to itself, and 175 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 Bank received such payment. 53 V., c. 33, s. 81. Act, s. 82.

paying.

Imp. Bonafides.

Section 173 relieves the bank on which the crossed cheque is drawn; this section, the bank which collects it. If it be indorsed "per proc." and the banker makes no inquiry as to the authority to so indorse, this may be negligence: Bissel v. Fox, 53 L. T. N. S. 193; 1 T. L. R. 452 (1885). See Matthiessen v. London & County Bank, 5 C. P. D. 7 (1879); Bennett v. London & County Bank, 2 T. L. R. 765 (1886). For an illustration of negligence disentitling a bank to the benefit of this section, see Hannan's Lake View Central v. Armstrong, 16 T. L. R. 236 (1900).

Where a customer's account is overdrawn, a banker collecting a crossed cheque, and placing the proceeds to his credit, is within the section: Clarke v. London & County Banking Co., [1897] 1 Q. B. 552.

liable.

A railway company drew an order in the form of a cheque Bank on a bank for £69, with this clause added: "Provided the receipt form at foot hereof is duly signed, stamped and dated." The order was crossed generally, and was stolen and plaintiff's name forged to the receipt and indorsement. Defendants received it in good faith from a customer and collected it. Held, that it was not a cheque, being conditional, and the bank was not protected: Bavins v. South Western Bank, [1900] 1 Q. B. 270.

customer.

The word "customer" implies something of use and Meaning of habit. Where the only transaction between an individual and a bank is the collection of a crossed cheque, such individual is not a customer of the bank, and if he has no title the bank is not protected: Matthews v. Brown, 63 L. J. Q. B. 494 (1894); (reported as Matthews v. Williams, 10 R. 210); Lacave v. Crédit Lyonnais, [1897] 1 Q. B. 148.

To make a person a "customer" of the bank within the meaning of this section, there must be some sort of account,

Meaning of

customer.

§ 175 either a current or a deposit account, or some similar relation. A person fraudulently obtained from the drawer a cheque crossed generally and marked "not negotiable" and took it to a bank which, at his request, paid part of the amount of the cheque into the account of one of its customers and harded the balance to him. After the bank had received payment of the cheque from the bank on which it was drawn, the fraud was discovered, and the drawer sued the collecting bank. The latter received the payment in good faith and without negligence, and had for years been cashing cheques for the same person in like manner, but he had no account with them. Held, that he was not a customer, and the collecting bank was not protected, but was liable for the proceeds of the cheque: Great Western Ry. Co. v. London & County Banking Co., [1901] A. C. 414.

Amendment of Act.

Bank pro

tected.

Two banks credited a customer with the amounts of cheques as soon as they were handed in to his account and allowed him to draw against the amounts so credited before the cheques were cashed. It was held that the protection of this section did not apply to such a case, as the banks received the amounts for themselves and not for the customer: Capital & Counties Bank v. Gordon and London City & Midland Bank v. Gordon, [1903] A. C. 240. To overcome the effect of these decisions the Imperial Act was amended by chapter 17 of 6 Edw. VII., providing that a banker receives payment of a crossed cheque within the meaning of section 82, notwithstanding that he credits his customer's account with the amount of the cheque before receiving payment thereof. The Canadian Act has not been amended, doubtless because crossed cheques are not in use here as in England.

A clerk of the plaintiffs by fraud induced them to sign cheques crossed generally in favour of certain persons. He then forged the indorsement of the payees, and deposited the cheques in the defendant bank where he had an account. The latter credited him the amount in its books, crossed the cheques specially, and had them cashed. It then entered the amount in his pass-book, and allowed him to draw against it. Held, that the bank was protected under section 82: Akrokerri Mines v. Economic Bank, [1904] 2 K. B. 465.

In another case arising before the passing of the amend- § 175 ing Act 6 Edw. VII. c. 17, it was held by Channell, J., that a banker does not lose the protection of section 82 merely because, before a crossed cheque paid in by a customer is cleared, he makes a credit entry in the bank's books or in the pass-book not communicated to the customer. It may be negligence on the part of the banker to receive payment for a customer of a crossed cheque marked "account of payee," where the banker has information which may lead him to think that the account into which he is paying the amount of the cheque is not the payee's account: Bevan v. The National Bank, 23 T. L. R. 65 (1906).

§ 176

PART IV.

PROMISSORY NOTES.

Only twelve sections of the Act, 176 to 187 inclusive, are devoted specially to promissory notes. As will be seen from section 186, however, most of the provisions of the Act in Part II. relating to bills of exchange, except those connected with their acceptance, apply also to promissory notes. The provisions relating to the acceptor of a bill are applicable, as a rule, to the maker of a note; and those relating to the drawer of an accepted bill payable to his own order, to the first endorser of a note.

Definition. 176. A promissory note is an unconditional promise in 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. 53 V., c. 33, s. 82 (1). Imp. Act, s. 83 (1).

This definition of a promissory note is an adaptation of that of a bill of exchange given in section 17, with the necessary modifications.

The definition in the Civil Code, Quebec, is given in Art. 2344 as follows:-"A promissory note is a written promise for the payment of money at all events and without any condition." The French Code de Commerce does not define a note, but, after specifying what articles apply to notes as well as to bills, says, Art. 188: "A promissory note is dated. It specifies the sum to be paid, the name of the person to the order of whom it is made, the time at which payment must be made, the value furnished in money, goods, account, or otherwise."