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University of Ghana

Commercial Law: Semester Two (2009/2010)

Detailed Outline BANKING LAW


a. Definition of "Bank", "Banker" and the "Business of Banking":
Statutory

i) ii) iii)

The Banking Act, 2004 (Act 673), Section 90 The Bills of Exchange Act, 1961 (Act 55), Section 97 Bank of Ghana Act, 2002 (Act 612), Section 69(a) and (b)

Common Law
1. 2. 3. 4. Woods v. Martin's Bank [195911 QB 55 Bank of Chettinad Ltd v. Commissioners of Income Tax, Colombo [19481 AC 378 at 383 United Dominions Trust Ltd v. Kirkwood [1966] 2 QB 43 1; [1966] 1 All ER 968, CA. Re Roes' Legal Charge [198212 Lloyd's Rep. 370

b. The Regulation and Control of Banking i) Supervisory role of the Bank of Ghana- Banking Act; Bank of Ghana Act, S. 54 ii) Licensing requirements for the establishment of banking business-Banking Act iii) Statutory obligations of banks- Banking Act c. The Banker-Customer Relationship i)Who is a customer? Ladbroke & Co. v. Todd (1914) 3 0 TLR 43 3 Woods v. Martin's Bank (1959) 1 QB 55; (1958) 3 All ER 166 Taxation Commissioners v. English Scottish and Australian Bank Ltd (1920) AC 683 Great Western Rly v. London & County Banking Co., (190 1) AC 414 Rowlandson v. National Westminster Bank Ltd (1978) 1 WLR 798 Stoney Stanton Supplies (Coventry) Ltd v. Midland Bank Ltd (1966) 2 Lloyd's 373 ii)Basis of the Relationship Joachimson v. Swiss Bank Corporation (1921) 3 WLR 110 Page 1 of 35

iii)

Rowlandson v. National Westminster Bank Ltd (1978) 1 WLR 798 Turner v. Royal Bank of Scotland Plc (1999) 2 All ER 664 Incidents of the Relationship

General incidents
1. 2. Dicta of Lord Atkin in Joachimson v. Swiss Bank Corp., (supra) at p. 127 Space Investment Ltd v. Canadian Imperial Bank of Commerce Trust Ltd (1986) WLR 1072

The Customer as creditor of the Bank


1. 2. 3. 4. Foley v. Hill (1848) 2 HL Cas 28 Burnett v. Westminster Bank Lid (1966) 1 QB 7421 (1965) 3 All ER 81 Curtice v. London City and Midland bank (1908) 1 KB 293 Barclays Bank Lid v. Quincecare Ltd (1992) 4 All ER 363

The Bank's duty of care


1. 2. 3. 4. 5. 6. Bills of Exchange Act, Sections 74 and 78 Joachimson v. Swiss Bank Corp (supra) Barclays Bank v. Quincecare Lid (supra) Lipkin Gorman v. Karpnale (1992) 4 All ER 4091 (1989) 1 WLR 1340 National Westminster Bank v. Morgan (1985) AC 6861 (1985) 1 All ER 821 Lloyds Bank Lid v. Bundy (19 75) QB 3261 (19 74) 3 All ER 75 7, CA

The Customer's Duty of Care


1. 2. 3. Greenwood v. Martin's Bank Lid (1933) London Joint Stock Bank Ltd v. Mactnillan and Arthur (1918) A C 777 Tai Hing Cotton Mill Ltd v. Du Chong Bank Ltd (1986) AC 801 (1985) 2 All 947, PC

The Bank's duty of confidentiality


1. The Banking Act 2. Tournier v. National Provincial and Union Bank o England (1924) 1 KB 461[duty of confidentiality extends to all transactions beyond the customer's account] 3. Christofi v. Barclays Bank Plc (1999) 2 All ER 417 4. Parry-Jones v. Law Society (1969) 1 Ch 1/ (1968) 1 All ER 177, CA [duty of confidentiality generally capable of being overridden by public interest requirements] 5. Barclays Bank plc v. Taylor (1989) 3 All ER 563

Liabilities of the paying and collecting banks


1. 2. Bills of Exchange Act, Sections 79 and 81 Brown v. Westminster Bank Ltd (1964) 2 Lloyds Rep 187 Page 2 of 35

3. 4. 5. 6.

Greenwood v. Martin's Bank Lid (supra) Lloyds Bank v. E. B. Savory & Co (1933) AC 201 Marfani &Co v. Midland Bank Ltd (1968) 1 WLR 956 Marques of Bute v. Barclays Bank Lid (1954) 1 QB 20213 All ER 365

Liability Arising from other payment OrdersTravellers' cheques 1. Braithwaite v. Thomas Cook Travellers' Chques Ltd (1989) ]All ER 2351 QB 553

2. El Awadi v. Bank of Credit and Commerce International SA (1990) 1 QB 6061 (1989) 1 All ER 242 Automated Teller Machines (ATM)-p.29 of Ghana Law Since Independence d) Termination of the Banker-Customer Relationship 1. Bill of Exchange Act, Section 74 2. Joachimson v. Swiss Bank Corp (supra) 3. Prosperity Ltdv. Lloyds Bank (1923) 39 TLR 272 4. National Bank of Greece SA v. Pinios Shipping Co (1990) 1 AC 637/ 1 All ER 78, HL

THE LAW OF NEGOTIABLE INSTRUMENTS


Nature of the bill of exchange Contract 1. Esso Petroleum Ltdv. Milton (1997) 2 AER 593 Payment of direct debit - BoE contract independent of underling transaction

Statutory definition and essentials of a bill of exchance


Unconditionality 2. Fielding & Platt Ltd. v. Najjar (1969) WLR 357 especially dicta of Denning MR. 3. Nova (Jersey) Knit Ltd v. Kammgarn Spinerei GmbtH(1977) 2 AER 463 at 470 Signature 1. Elliott v. Bax-lronside (1925) 2KB 301 2. Goodman v. J Eban Ltd (1954) 1QB 5501 1 AER 763 CA Facsimile with a rubber stamp was capable of being a signature. Can a bill of signed digitally? Can there be an electronic bill of exchange?

signature applied exchange be

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Time of Payment a. Korea Exchange Bank v. Debenhams (Central Buying) Ltd (1979) 1 Lloyd's Rep. 548 b. Hong Kong & Shanghai Banking Corporation Ltd v. GD Trade Co (1998) CLC 238 (check also All ER) c. Novaknit Hellas SA v. Kumar Bros. International Ltd (1998) CLC 971 d. Williamson v. Rider (1963) 1 QB 89, (1962) 2 AER 268, CA. (PN payable 'on or before' a specified date held invalid) e. Claydon v. Bradley (1987) 1 AER 522 / 1 WLBR 521 CA (PN payable 'by' a specified date held invalid) Payment to order/specified person etc o Orbit Mining & Trading Co Ltd v. Westminster Bank Ltd (1963) 1 QB 794Instrument payable "to cash" or "to wages" is not a bill of exchange

Concept of negotiability
1. Yorkshire Bank plc v. Lloyds Bankplc (1999) 2 All ER 153 2. Hibernian Bank Ltd v. Gyson and Ranson (1939) 1 KB 483

Holder and Holder in due course


For value

a. Oliver v. Davis (1949) 2 KB 727 b. Diamond v. Graham (1968) 2 AER 909 c. Clifford Chance v. Silver (1992) 2 Bank LR 11 d. Barclays Bank Ltd v. Astley Trust Ltd (1970) 2 QB 257
In due course

e. Jade International Steel v. Robert Nicholas Steel Ltd (1978) 3 AER 104 (CA) f. Arab Bank v. Ross (1952) 1 AER 709, CA/2QB 211

Rights and Liabilities of the Parties to a bill of exchange


1. 2. Bondina Ltd v. Rolling Shower Blinds Ltd (1986) 1 AER 564 Roffie Lubell v. Keith (1979) 1 AER 860

Acceptance and Non-acceptance of a bill of exchange


Yeoman Credit Ltd v. Gregory (1963) 1 AER 245 p.644 Page 4 of 35

Forgery and Alteration


a. Kreditbank Cassel v. Schenkers Ltd (1 927)l KB 826; what does Act 29 say? b. Greenwood v. Martin's Bank Ltd (193 3) AC5 1, HL: wife forged husband's signature on cheques drawn from his bank. He kept quiet though he knew. of the forgery. Held estopped from denying that signatures were genuine. Silence was deliberate and was held to amount to a representation that signature was genuine. c. Bank ofEngland v. Vagliano Bros (189 1) AC 107, HL d. Clutton v. Attenborough (1897) AC 90, HL. Contrast with e. Vinden v. Hughes (1905) 1 KB 795 f. Slingsby v. District Bank (193 2) 1 KB 544 g. Lumsden v. London Trustee Savings Bank (197 1) 1 Lloyd's Rep. 114 h. Foster v. Driscoll (1929) 1 KB 470, CA i. Rong Kong & Shanghai Banking Corporation v. Lo Lee Shi (1928) AC 18 1, PC

Cheques as bills of exchange


Definition of Cheque: A bill of exchange drawn on a banker payable on demand- S. , Bill of Exchange Act. Bank of Baroda Ltd v. Punjab National Bank (1944) AC 176 Roberts &Co., v. Marsh (1915) 1KB 42 Keyes v. Royal Bank of Canada (1947) 3 DLR 161

Discharge
Cocks v. Masterman (1829) a B&C 902 London& Rivers Plate Bank offlamilton (1903) AC 49 Barclays Bank v. W.J Simms son & Cooke Ltd (1980) QB 677

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NEGOTIABLE INSTRUMENTS AND THE LAW OF BANKING A. CASES AND REFERENCE MATERIALS a. Textbooks 1. Byles on Bills of Exchange 2. R.M. Goode, Commercial Law 3. Ian Brown, Commercial Law 4. R. Bradgate, Commercial Law 5. Ross Cranston, Principles of Banking Law (2nd Ed.) 6. L.S. Sealy & RJA Hooley, Commercial Law (Text, Cases and Materials) (3rd Ed.) pp.486-812 7. Bills of Exchange, Cheques & Promissory Notes (in Practical Draftsman by da Rocha & Lodoh, 1998) b. Statutes 1. Bills of Exchange Act, 1961 (Act 55) (see also the Bills and Cheques Bill which is before Parliament) 2. Banking Act, 2004 (Act 673) 3. Banking (Amendment) Act, 2007 (Act 738) 4. Bank of Ghana Act, 2002 (Act 612) 5. Payment Systems Act, 2003 (Act 662) 6. Foreign Exchange Act, 2006 (Act 723) 7. Exchange Control Act, 1961 (Act 71) c. Other Materials 1. Ghana Inter-bank Settlement (GIS) System's Terms and Conditions, http://www.bog.gov.gh 2. Rules Governing the Operations of Clearinghouse, available at Bank of Ghana website 3. Bank of Ghana Regulatory Notices, available at Bank of Ghana website 4. Bank of Ghana Annual Reports, available at Bank of Ghana website 5. Ghana Association of Bankers (GAB) Banking Code, 2003 6. Uniform Commercial Code, available at, www.law.cornell.edu/ucc/3/overview.html 7. Bank of Ghana, "Bank of Ghana and Banks set up Ghana Interbank Payment and Settlement System," Press Release, May 11, 2007, available at Bank of Ghana website. 8. Bank of Ghana, "Building a Financial Sector for an Emerging Market Economy - Implications for the Capitalization of Bank and Non-bank Financial Institutions," Consultation Paper, October 2007, available from Bank of Ghana website. Page 6 of 35

d. Cases 1. Alfa Enterprises Ltd. v. Pan African Trading Co. and Another [1979] GLR 571 (Unlike a bill of exchange or a promissory note, a bill of lading cannot like a negotiable instrument pass to a bona fide transferee for valuable consideration without regard to the title of the transferor. The transferor [of a bill of lading unlike a negotiable instrument] cannot transfer to another any better title to the goods than the one he has. If the transferor had no title then his endorsement on the bill of lading cannot convey any title.) 2. Sabblah v. Tawiah [1966] GLR 145 3. Directors of Orthodox Secondary School of Peki v. Tawlmabels [1974] 1 GLR 419 (Exhibit A was not a promissory note within the meaning of the Bills of Exchange Act, 1961 (Act 55), because neither the commencement date for the monthly instalments nor the quantum of the monthly instalments payable had been fixed.). 4. Tiah v. Johnson and Others [1964] GLR 661 5. Harlley v. Ejura Farms (Ghana) Ltd [1977] 2 GLR 179 6. Lloyds Bank, Ltd. v. Chartered Bank of India, Australia and China [1929] 1 K.B. 40, C.A. 7. Carlisle and Cumberland Banking Co. v. Bragg [1911] 1 K.B. 489, C.A. 8. Great Western Railway Co v London & County Bank [1901] AC 414 9. Ladbroke v Todd (1914) 111 L.T. 43 10. Joachimson v. Swiss Bank [1921] 3 K.B. 110 11. Ligget (Liverpool) Ltd v. Barclays Bank [1928] 1 KB 48 12. London Joint Stock Bank Ltd v. Macmillan & Arthur [1918] AC 777 13. Williamson v. Rider [1962] 2 All E.R. 268, C.A. 14. Akbar Khan v. Attar, Singh [1936] 2 All E.R. 545, P.C. B. SCOPE OF COURSE: BANKING AND NEGOTIABLE INSTRUMENTS 1. 2. DEFINITION OF CONCEPTS NEGOTIABLE INSTRUMENTS THE NATURE OF NEGOTIABILITY REQUIREMENTS OF NEGOTIABILITY BEARER BILL AND ORDER BILL 3. TYPES OF ENDORSEMENT SPECIAL BLANK RESTRICTIVE 4. HOLDER Page 7 of 35

HOLDER FOR VALUE HOLDER IN DUE COURSE 5. PROMISES TO PAY MONEY PROMISSORY NOTE CERTIFICATES OF DEPOSIT 6. ORDERS TO PAY MONEY BILLS OF EXCHANGE CHEQUES BANKERS DRAFT MONEY ORDERS TRAVELLERS CHEQUES 7. 8. DETERMINATION OF A CHEQUE RELATIONS OF BANKER AND CUSTOMER DUTIES OF THE BANK/BANKER DUTIES OF THE CUSTOMER 9. 10. 11. REVOCATION OF BANKERS AUTHOTITY LIABILITIES IN RESPECT OF NEGOTIABLE INSTRUMENTS ELECTRONIC WIRE TRANSFERS AND MONEY LAUNDERING

DEFINITION OF CONCEPTS

COMMON LAW DEFINITION OF BANKING


The leading authority on the definition of 'bank' at common law is the decision of the English Court of Appeal in United Dominions Trust Ltd v Kirkwood where the following were identified as the defining characteristics of a bank: 1. Collection and payment of cheques (for definition of cheque see Section.... of Bills of Exchange Act): 2. Receipt of deposits, that is, loans for an indefinite period upon running account, repayable as to the whole or any part thereof upon demand by the customer either without notice or upon an agreed period of notice.

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The court in United Dominion Trust also considered the reputation of the firm amongst ordinary intelligent commercial men as a relevant factor. In Re Roes' Legal Charge, no significant evidence was given of the plaintiff lender's reputation, but evidence showed that it took current accounts, paid cheques drawn on it by customers and collected cheques for customers. The defendant argued that the plaintiffs banking business was negligible and that it was not a true bank. The Court of Appeal took a different view of the matter and held that the plaintiff was a bank. According to the court, the fact that the plaintiffs banking business was on a much smaller scale than other institutions was irrelevant. The important thing was that the plaintiff carried on the activities of a bank. The two cases demonstrate that at common law the essence of banking is the receipt of deposits and the collection and payment of cheques on behalf of customers. Both cases were concerned with the application of the English Money Lenders Act, 1900 which made a loan unenforceable if made by an unlicensed moneylender, unless the lender was a bank. In both cases a loan had been made by an unlicensed lender and the borrower sought to resist repayment on that basis. To be able to recover the loan, the lender had to establish that it was a bank. BANK The Banking Act, 2004 (Act 673), Section 90 defines a bank as a body corporate which is issued with a license in accordance with this Act to carry on banking business o It must be a body corporate. o Bank of Ghana must have issued it with a license to operate as a bank. o It must carry on banking business. A bank must thus meet the following three (3) pronged criteria to qualify as a Bank under the law: 1. Incorporation at the Registrar-Generals Department 2. Licensed by Bank of Ghana: Types of licences (Sec. 5A) A licence issued under the Banking Act, 2004 as amended shall be issued subject to the terms and conditions that the Bank of Ghana may impose and shall be in one of the following categories: (a) General Banking Licence; Page 9 of 35

(b) (c)

Class I Banking Licence; or Class II Banking Licence.

Limitation of Class II Banking Licence (Sec. 5B) Subject to the Banking Act, 2004 as amended or any other enactment, the holder of a Class II Banking Licence shall not (a) take deposits or placements from any person resident in Ghana other than another bank holding a General Banking Licence with respect to its Class II banking business, or another bank holding a Class II Banking Licence; (b) invest in an asset that represents a claim on any person resident in Ghana except a (i) (ii) a Class II banking transaction with another bank holding a General Banking Licence or a Class II Banking Licence; or the purchase of bonds or other securities issued by the Government of Ghana or any other securities that may be approved by the Bank of Ghana; or (c) carry on business in Ghana other than the business for which its Class II Banking Licence has been issued. Pre-requisites for a licence (Sec. 5C) A licence shall not be granted by the Bank, unless it is satisfied with the (a) (b) (c) (d) (e) technical knowledge, experience, financial conditions and history of the applicant; the adequacy of the capital structure of the applicant; the character of the business and its management; the adequacy of the applicants accounting control systems and records; in the case of an applicant incorporated outside Ghana, that the applicant is a branch or related company of a foreign bank of established international reputation; and (f) the ability and willingness of the applicant to comply with the other conditions that the Bank may impose. Provisional approval (Sec. 6) (1) The Bank of Ghana may issue a provisional approval for a specified licence to the applicant on the terms and conditions that it considers appropriate, if it is satisfied that (a) the applicant will carry on banking business with integrity, prudence and Page 10 of 35 the required professional competence; claim resulting from

(b) (c)

the applicant has and will maintain paid up capital as set out in the First where the bank is an external bank, it shall have and maintain in Ghana the

Schedule and hold a licence of the specified type as required; and required capital in the form of funds transferred from abroad together with other funds that may be determined by the Bank. (2) The Bank of Ghana may by notice published in the Gazette, alter the capital requirements as well as any other pre-licensing requirements. 3. Carry on Banking Business (Sec. 90): BANKING BUSINESS This is defined in section 90 of Act 673 as: Accepting deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, orders or by any other means; Financing, whether in whole or in part or by way of short, medium or long term loans or advances, of trade, industry commerce or agriculture and Any other business activities that the Bank of Ghana may prescribe or recognise as being part of banking business. The key elements in the definition of banking business are : o Accepting deposits...withdrawable by cheque, draft, orders (negotiable instruments) or by any other means [e.g., debit cards, credit cards at ATMs, Point of Sale terminals]. o Financing. o Any other business prescribed or recognized by the Bank of Ghana. (See Sec. 11) Permissible activities of banks (Section 11 of the Banking Act, 2004 as amended) (1) A bank shall not carry on a business, other than any of the following: (a) (b) (c) (d) (e) acceptance of deposits and any other repayable funds from the public; lending; financial leasing; investment in financial securities; money transmission services; Page 11 of 35

(f) (g) (h) (i) (ii) (iii) (i) (j) (k) (l) (m) (n) (o) (p)

issuing and administering means of payment including credit cards, travellers cheques and bankers drafts; guarantees and commitments; trading for own account or for account of customers in money market instruments, foreign exchange, or transferable securities; participation in securities issues and provision of services related to those issues; advice to undertakings on capital structure, acquisition and merger of undertaking; portfolio management and advice; the keeping and administration of securities; credit reference services; safe custody of valuables; electronic banking; and any other services as the Bank of Ghana may determine.

(2) The Bank of Ghana may, by notification in writing, restrict the permissible activities of banks in general or a class of banks or an individual bank or remove the restriction so imposed as it considers appropriate. 12. Restrictions on commercial, agricultural or industrial activities and immovable property (1) Subject to subsections (2), (3) and (4), a bank shall not directly engage in a commercial, an agricultural or an industrial undertaking unless it establishes for that purpose a subsidiary company of the bank registered in the Republic. (2) The equity capital invested in a subsidiary company by the bank shall not exceed fifteen percent of the net worth of the bank and where the bank has more than one subsidiary company the equity capital invested in those subsidiary companies by the bank shall not exceed in the aggregate twenty-five percent of the net worth of the bank. (3) The aggregate amount of a loan, an advance, a credit or any other facility and equity capital which a bank may grant and invest under subsection (2) shall not at any one time exceed (a) (b) twenty-five percent of the net worth of the bank, in the case where the bank owns one thirty-five percent of the net worth of the bank, in the case where the bank owns more than subsidiary company, or one subsidiary company. (4) A bank shall not build, purchase or take a lease of immovable property except Page 12 of 35

(a) (b)

for the provision of premises or housing the business or staff of the bank; or for the provision of amenities for its staff.

(5) Despite anything in this section, a bank may accept immovable property as security for a debt or any other liability and may acquire an interest which a bank may lawfully acquire in the satisfaction of a debt due to it. (6) An interest acquired under subsection (5) shall be disposed of by the bank within one year after the acquisition or within a longer period that may be determined by the Bank of Ghana on an application made by the bank. (7) This section does not prevent a bank from letting or subletting a part of immovable property which is ordinarily used for housing its business where the property is in excess of the immediate requirements of the bank. (8) The Bank of Ghana may, subject to the terms and conditions that it considers fit, exempt a bank holding a Class II Banking Licence or a General Banking Licence, with respect to its Class II banking business or investment banking business in currencies other than the currency of Ghana, from compliance with this section in so far as the activities referred to in these subsections are carried on outside Ghana and do not involve the acquisition of an interest in movable or immovable property in Ghana. General banking business means Class I and Class II banking business; and General Banking Licence thus means a licence authorising the holder to transact Class I and Class II banking business in and from within Ghana; Class I banking business means banking business other than Class II banking business; and Class I Banking Licence means a licence authorising the holder to transact Class I banking business; Class II banking business means banking business or investment banking business conducted in currencies other than the Ghanaian currency except to the extent permitted by the Bank of Ghana for trading on the foreign exchange market of Ghana and investment in money market instruments; and Class II Banking Licence means a licence authorising the holder to transact Class II banking business; Class II banking transactions means transactions effected by a bank holding a Class II Banking Licence pursuant to its licence or transactions of a similar nature effected by a Page 13 of 35

bank holding a General Banking Licence pursuant to that licence;

NEGOTIABLE INSTRUMENTS Negotiable instruments are substitutes for money They are treated as documents of title to money. Like money (and unlike ordinary contracts), consideration, good faith, etc., are all presumed Examples of negotiable instruments include: Cheques Promissory notes Certificates of deposits Bankers drafts (or cashiers cheques), Money orders Bills of exchange, etc These documents are negotiable instruments because they are easily transferable and make commercial transactions easier. They are assignable (even as debt instruments) by simple delivery or endorsement & delivery, free from the equities. (With no requirement to give anyone any notice! Thus differs from an ordinary contract.) THE NATURE OF NEGOTIABLE INSTRUMENTS o Valuable consideration is presumed -- no need to state the value on the instrument. o It may be transferred from one person to another either by simple delivery only or by endorsement and delivery (without any need to give anyone notice); o The transferee is able to sue upon it in his own name all parties to the instrument; o A transferee who takes a negotiable instrument in good faith and for value obtains a completely good title notwithstanding any defect in the title of the transferor. o They have great assignability and negotiability convenience by being assignable (even as debt instruments) by simple delivery or endorsement and delivery, free from the equities. (With no requirement to give anyone any notice!) BUT NOTE: When a bill contains words prohibiting transfer or indicating an intention that it should not be transferable, it is valid between the parties but it is not negotiable. Section 6(1) of the Bills of Exchange Act (Act 55) Page 14 of 35

CLASSES OF NEGOTIABLE INSTRUMENTS: 1. PROMISES TO PAY Those that are promises to pay money e.g. promissory notes and certificates of deposit ORDERS TO PAY Those that are orders to pay money E.g. cheques, drafts, bills of exchange, etc.

2.

LET US NOW CONSIDER A FEW KEY TERMS RELATING TO NEGOTIABLE INSTRUMENTS BEFORE WE LOOK AT THESE TWO (2) CLASSES CLOSELY. DEFINITION OF KEY TERMS: [Section 97 of Act 55] DRAWER The drawer is the party who draws a negotiable instrument. DRAWEE The drawee is the party on whom the instrument is drawn. ACCEPTOR When a drawee of a negotiable instrument signifies his assent to the order of the drawer, he becomes the acceptor of the instrument. ACCEPTANCE Acceptance consists of the signification of the assent of the drawee completed by delivery or notification of the assent to the holder of the negotiable instrument. PAYEE The payee is the party to whom the negotiable instrument is payable. MAKER The maker is the party who makes an instrument in the form of a promissory note. DELIVERY Delivery is the transfer of possession of an instrument from one person to another whether actual or constructive. [See Section 97 of Act 55] ISSUE The first delivery of an instrument, complete in form, to a person who takes it as a holder is known as the issue of the instrument. NEGOTIATION An instrument is negotiated when it is transferred for value to a person who then becomes entitled to hold it and can sue on it in his own name. Page 15 of 35

A bill payable to bearer is negotiated by delivery. Sec. 29(2) A bill payable to order is negotiated by the holders endorsement completed by delivery. Sec. 29(3) ENDORSEMENT Endorsement takes place when the name and/or the signature of the transferor is written on the instrument and it is completed by delivery to the transferee. ENDORSER Endorser is the transferor whose name and/or the signature is written on the instrument. ENDORSEE Endorsee is the person to whom an instrument is transferred by endorsement. BEARER A bearer is the person in possession of an instrument payable to bearer or on which the last endorsement is an endorsement in blank. HOLDER The holder is the payee or endorsee of an instrument who is in possession of it, or the bearer thereof A. 1. PROMISES TO PAY MONEY CERTIFICATES OF DEPOSIT This is a promise to pay issued by a banker. By a certificate of deposit, a bank acknowledges that it has received a deposit from the depositor, and promises to repay the depositor upon demand. 2. PROMISSORY NOTE 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. Section 83(1) of Act 55 B. 1. ORDERS TO PAY MONEY CHEQUES (INCLUDING MONEY ORDERS) A cheque is a bill of exchange drawn on a banker payable on demand. Section 72 of the Bills of Exchange Act (Act 55) 2. BILLS OF EXCHANGE Page 16 of 35

A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed 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. (Section 1(1) of the Bills of Exchange Act, 1961 (Act 55)) Thus if payment is conditioned on any contingency, the instrument will be an invalid bill. 3. BANKERS DRAFT IS A BANKERS DRAFT A CHEQUE? Any draft payable on demand drawn by a banker upon himself, whether payable at the head office or some other office of his bank is considered a cheque; And the provisions of Sections 75 to 81 of Act 55 relating to cheques apply to such drafts and have effect in relation to such drafts, as they have effect in relation to cheques. 4. OTHER CHEQUE SUBSTITUTES

CAN OTHER DOCUMENTS SUBSTITUTE A CHEQUE? Any document issued by a customer of a banker which, though not a cheque, is intended to enable a person to obtain payment from that banker of the sum mentioned in the document; is considered a cheque; And the provisions of Sections 75 to 81 of Act 55 relating to cheques shall apply to such documents and have effect in relation to them, as they have effect in relation to cheques. LET US LOOK AT THE VARIOUS NEGOTIABLE INSTRUMENTS CLOSELY BILLS OF EXCHANGE Section 1(1) of the Bills of Exchange Act, 1961 (Act 55): A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed 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. An unconditional order. Page 17 of 35

a. Ordering the payment of money out of a particular fund is conditional. S. 1(3) b. An unqualified order to pay, coupled with an indication of a particular fund out of which the drawee is to reimburse himself is not conditional Section 1(3) c. An unqualified order to pay, coupled with an indication of a particular account to be debited with the amount is not conditional. Section 1(3) Guaranty Trust Co. of New York v. Hannay & Co. [1918] 2 K.B. 623, 635 d. An unqualified order to pay, coupled with a statement of the transaction which gives rise to the bill is not conditional. Section 1(3) NOTE: i. A bill may be accepted conditionally and such conditional or qualified acceptance is valid. Section 17(1)&(2) ii. A drawer of a bill and any endorser may qualify in any way he pleases, his liability to the holder. Section 14(a) e. Payment must not depend on a contingency. E.g., Pay A (or We promise to pay A) the sum of $20,000,000 if an event occurs: (We promise to pay , on the death of George Hindshaw, provided he leaves either of us sufficient money to pay the said sum, or if we shall be otherwise able to pay it.) After someone marries. After someone gives birth After complying with certain terms On the sale of goods, produce or property On the honouring of drafts (or cheques) given to us by B which said drafts fall due on (a future date) (say, April 10, 2007). 30 days after the arrival of the ship Paragon at Tema [All these examples are contingencies as they may or may not occur. Thus if payment is conditioned on any such contingency, the instrument will be an invalid bill -- void.] f. An instrument expressed to be payable on a contingency is not a bill, and the happening of the contingency event does not cure the defect. Section 9(2). Carlos v. Fancourt (1794) 5 T.R. 482, @485 per Lord Kenyon: It would perplex the commercial transactions of mankind, if paper securities of this kind were issued out into the world, encumbered with conditions and contingencies, and if the

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persons to whom they were offered in negotiation were obliged to inquire when these uncertain events would probably be reduced to certainty. 2. In writing a. It may be written in any language and in any form of words. b. It may be printed or written c. It may be in pencil and/or in ink. d. Often written on paper. May be written on any convenient substitute for paper. 3. Addressed by one person to another. a. Addressed by the drawer to the drawee. b. The drawer and the drawee of a bill can be the same person. Section 3. c. A holder of any such bill (having the same person as both drawee and drawer) may treat it, at his option, as either a bill of exchange or a promissory note. -- Section 3(2) d. In any case, the drawee must be named or otherwise indicated in a bill with reasonable certainty. Section 4 4. Signed by the person giving it. a. The person signing the bill is called the drawer. b. This is an essential feature of a bill of exchange. c. In its absence, an acceptance is inoperative. d. Even if an unsigned instrument is accepted by the drawee, it cannot be treated as a promissory note of the acceptor. e. Signature essential to liability of the drawer. Section 21. f. It can be a mark and such signing by mark should be habitual of the person so signing. g. If signed by a mark, there is no need to prove that the person so signing cannot write. h. If a bill is signed, it is a complete and regular bill, even if it is unaccepted by the drawee. i. Signing an inchoate (incomplete) instrument gives the person in possession of it a prima facie authority to fill up the omission in any way he thinks fit! Section 18(1). Such filling up should be within reasonable time (a question of fact) and strictly in accordance with the authority given. Section 18(2). BUT NOTE THE PROVISO! if any such instrument after completion is negotiated to a holder in due course, it shall be valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up within reasonable time and strictly in accordance with the authority given! Section 18(2) HOWEVER THIS PROVISO APPEARS VERY RESTRICTIVE! Page 19 of 35

It should have been negotiated to the holder. The holder must be a holder in due course. See, pp. 33-34; & 198-202 of BYLES ON BILLS OF EXCHANGE 5. 6. Requiring the person to whom it is addressed. a. The person to whom the bill is addressed is the drawee. To pay. a. When drawee undertakes to pay he is called the acceptor. b. An acceptance to pay must not express that the drawee will perform his promise by any other means than the payment of money. Section 15(2)(b) c. The drawee is not liable to pay money to the payee or holder of the bill until he accepts the bill. Section 51. d. A verbal undertaken to pay is invalid. Section 15(2)(a) e. Drawees mere signature on the bill, without additional words, is sufficient. Section 15(2) (a) f. A drawee who does not accept a bill is not liable on the instrument Section 51 g. WHY? h. Because, a bill of itself does not operate as an assignment of funds in the hands of the drawee available for the payment thereof. Section 51. Brown, Shipley & Co. v. Kough (1885) 29 Ch.D. 848 (Facts: Bill drawn by B&Co. on K in London was purchased by A in America. B&Co. informed K by letter of advise on the same day of the bill they had drawn on K in favour of A. K subsequently refused to accept the bill. Held: Refusal valid. The direction on the face of the bill did not operate as an equitable assignment.) i. The payee must be named or otherwise indicated with reasonable certainty. Section 5. 7. To pay on demand or a. Section 8 of Act 55 (If a bill of exchange is made payable at a never so distant day, if it be a day that must come, it is no objection to the bill.) 8. At a fixed or determinable future time. a. Section 9 of Act 55. b. Uncertain A promissory note payable with interest 12 months after notice. c. On or before a given date (invalid) [Williamson v. Rider [1963] 1 Q.B. 89 d. Twelve months after date (valid) Page 20 of 35

e. After sight (if simply so stated, it is invalid!) NOTE the distinction with at sight f. After sight is acceptance (so use a period after sight!). BUT At sight is demand. g. If its a note, then after sight refers to exhibiting the note to the maker. So it can be valid for notes. 9. A sum certain in money. a. A bill or note must be payable in money in specie or legal currency b. It must not order any act to be done in addition to the payment of money! -- Section 1(2) c. The sum must be certain d. It must be susceptible to contingent or indefinite additions or deductions. e. According to Section 7(1) a sum is certain even if it is required to be paid: i. With interest ii. By stated instalments iii. By stated instalments but with provision on full becoming due on default. iv. According to an indicated rate of exchange v. According to a rate of exchange to be ascertained as directed by the bill. f. Sums in words trump sums in figures in cases of discrepancies. Section 7(2) g. If figures higher than words evidence to explain difference is inadmissible. h. Inaccurate but intelligible statement of sum payable is valid. [Pound instead of Pounds] [Twenty-five, seventeen shillings and three is 25 17s. 3d.] 10. To or to the order of a specified person, or a. Such bills are referred to as order bills. b. The person so named in such bills is the payee 11. To bearer. a. Such bills are referred to as bearer bills. If an instrument does not comply with these conditions is not a bill of exchange. So though no precise form of words is essential to the validity of a bill of exchange, any bill must comply substantially with the above requirements. However, if an instrument is defective as a bill or note, it may still be evidence of an agreement. NOTE: SECTION 1(4)(a)-(c) 1. A bill is not invalid merely because it is not dated 2. A bill is not invalid because no value is given. Page 21 of 35

3. A bill is not invalid because it does not specify place where drawn or payable. LEGAL EFFECT OF DRAWING OR INDORSING A BILL 1. If a drawer draws a bill payable to a third party, it is a contract by the drawer to pay the payee, his order, or the bearer, as the case may be, conditionally on the acceptors (or drawees) failing to do so. 2. The legal effect of accepting a bill, is an absolute contract, on the part of the acceptor to pay the payee, his order, or the bearer as the instrument may require. 3. The legal effect of making a note, is an absolute contract, on the part of the maker to pay the payee, his order, or the bearer as the instrument may require. 4. The legal effect of indorsing a bill is a conditional contract, on the part of the indorser, to pay the immediate or any succeeding indorsee, or bearer, in case of the acceptors default. 5. The legal effect of indorsing a promissory note is a conditional contract, on the part of the indorser, to pay the immediate or any succeeding indorsee, or bearer, in case of the makers default. NEGOTIATING A BILL A bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder of the bill s. 29(1). A bill payable to bearer is negotiated by delivery s. 29(2) A bill payable to order is negotiated by the endorsement of the holder completed by delivery s.29 (3). A person who acquires a negotiable instrument for value and in good faith is entitled to ignore all previous claims to the document. The most important type of negotiable instrument is the Bill of Exchange: a Cheque is a kind of bill of exchange. The extensive body of case law and customary rules concerning bills of exchange is codified in the Bills of Exchange Act 1960, (Act 55). NOTE: A BILL MAY NOT BE A NEGOTIABLE INSTRUMENT! Section 6(1) of Act 55 provides that when a bill contains words prohibiting transfer or indicating an intention that it should not be transferable, it is valid between the parties thereto but it is not negotiable. Why is this so?

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Also, since the essence of a bill of exchange is negotiability, if a bill prohibits transfer -- and transfer is indispensable in negotiability -- See s.29 (1) -- should it still be a bill of exchange? Yes! See Section 1 of Act 55 (which does not mention negotiability in its definition of a bill) and Section 6(1) (which permits such limiting of negotiability)!

REQUIREMENTS OF NEGOTIABILITY In order that the holder of a negotiable instrument may have all the rights which such a document can give, the following conditions must be satisfied: o Value must have been given - this is the principle of consideration found in the law of contract and which evidences that the agreement of the parties is a bargain. S. 25(1) (a). However, in the case of negotiable instruments past consideration is good consideration, for example, a cheque is valid even if issued in settlement of an existing debt. S. 25(1) (b). If the present holder of the instrument has not himself given value but some previous holder had done so, the holder is a holder for value and he is given some measure of protection. S. 25(2). Every party whose signature appears on the bill is prima facie deemed to have given value s. 28(1). o Secondly, the holder of the instrument must have acted in good faith i.e. honestly, without knowledge of any defect in title of a previous holder. S. 90 of Act 55 says that a thing is deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not. o Thirdly, the instrument must be complete and regular that is, the instrument must appear to be in order on the face of it: It must not be overdue or show signs of unauthorized alterations. o The fourth requirement is that instrument must be deliverable (i.e., capable of transfer by being physically handed over).

BEARER BILL AND ORDER BILL Sec. 6(2) provides that a bill may be payable either to order or to bearer. BEARER BILLS

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o If the document is payable to any person who holds it, that is to the bearer, it can be negotiated, i.e., transferred with good title, merely by delivery. Sec 6 (3) provides that a bill is payable to bearer which is expressed to be so payable or if the only or last endorsement is an endorsement in blank then the bill is a bearer bill. That is if the bill does not contain or mention any name. Also where there are number of endorsements and the last endorsement is an endorsement in blank. ORDER BILLS o If it is payable to a named person or to his order that is, an order bill, then that person must sign on the reverse side or indorse it in order to make the instrument capable of being negotiated by delivery to the next holder. Sec 6(4) of Act 55 provides that a bill is payable to order which is expressed to be so payable or expressed to be payable to a particular person. In addition it must not contain words prohibiting transfer or indicating an intention that is should not be transferable. An order bill is negotiable and thus freely transferable. ENDORSEMENT Endorsement takes place when the name and/or the signature of the transferor is written on the instrument and it is completed by delivery to the transferee. Instruments payable to order can only be negotiated by endorsement of the holder and completed by delivery. NOTE: Where a bill purports to be endorsed conditionally, the condition may be disregarded by the payer, and the payment to the endorsee is valid whether or not the condition is fulfilled. See Section 31 of Act 55. CONDITIONS FOR ENDORSEMENT For endorsement to be effective it must satisfy certain conditions. These conditions as laid down in Section 30 of Act 55 include the following:(a) It must be written on the bill itself and signed by the endorser. The simple signature of the endorser on the bill without additional words is sufficient. NOTE: An endorsement on an allonge or on a copy of a bill issued or negotiated in a country where copies are recognised, is deemed to be written on the bill itself. (b) It must be an endorsement of the entire bill. A partial endorsement does not operate as a negotiation of a bill. Thus an endorsement which purports to transfer to the endorsee a part only of the amount payable, or which purports to transfer the bill to two or more endorsees severally is not an effective or valid negotiation. Page 24 of 35

(c) (d)

Where a bill is payable to two or more payees or endorsees who are not partners, all must endorse, unless the one endorsing has authority to endorse for the others. Where, in a bill payable to order, the payee or endorsee is wrongly designated or his name is mis-spelt, he may endorse the bill as therein described, adding, if he thinks fit, his proper signature.

(e) (f)

Where there are two or more endorsements on a bill, each endorsement is deemed to have been made in the order in which it appears on the bill, until the contrary is proved. An endorsement may be made in blank or special or contain terms making it restrictive.

TYPES OF ENDORSEMENT An endorsement may be made in blank or special or contain terms making it restrictive. BLANK ENDORSEMENT An endorsement in blank specifies no endorsee. Section 32(1) A bill endorsed in blank becomes payable to bearer. See Sections 6(3)&32(1) However, a bill endorsed in blank may be converted, by any holder, into a special endorsement by writing above the endorsers signature a direction to pay the bill to or to the order of himself or some other person. SPECIAL ENDORSEMENT A special endorsement specifies the person to whom, or to whose order, the bill is to be payable. As noted earlier, a bill endorsed in blank may be converted, by any holder, into a special endorsement by writing above the endorsers signature a direction to pay the bill to or to the order of himself or some other person. RESTRICTIVE ENDORSEMENT According to Section 33(1) of Act 55, an endorsement is restrictive if it:(i) (ii) Prohibits the further negotiation of the bill; or Expresses that it is a mere authority to deal with the bill as thereby directed, and not a transfer of the ownership thereof. Examples: o Pay Samuel Manteaw only o Pay Samuel Manteaw for the account of Daniel Boateng Page 25 of 35

o Pay Samuel Manteaw or order for collection. According to Section 33(2) of Act 55, a restrictive endorsement gives the endorsee the right to: (i) Receive payment of the bill (ii) Sue any party thereto that his endorser could have sued. However, a restrictive endorsement does not give the endorsee any power to transfer his rights, unless the restrictive endorsement expressly authorizes the endorsee to do so. (See Section 33(2) of Act 55). In cases where a restrictive endorsement authorizes further transfer, all subsequent endorsees take the bill with the same rights and subject to the same liabilities of the first endorsee under the restrictive endorsement. Section 33(3) of Act 55. HOLDER, HOLDER FOR VALUE, HOLDER IN DUE COURSE HOLDER Act 55 defines very carefully what is meant by a 'holder of a bill'. S. 97 says that holder means the payee or endorsee of a bill or note who is in possession of it, or the bearer thereof. A person in possession of an unendorsed order bill is not a holder, though he gave value for the bill, and cannot sue in his own name. Good v. Walker (1892) 61 L.J.Q.B. 736. However, by Section 29(4), such a person in possession of an unendorsed order bill, has the right to have the bill endorsed to him (Section 29(4); Cook v. Hoosain Mia (1912) 33 N.L.R. 12), and will become holder as from the date of endorsement, if subsequently made. Day v. Longhurst (1893) 62 L.J.Ch. 334. A drawer of a bill to his own order (even if unendorsed), is the holder thereof (upon its acceptance). Walters v. Neary (1904) 21 T.L.R. 146 HOLDER FOR VALUE S. 97 says a holder means a payee or endorsee or a bearer of a bill. S. 97 says value means valuable consideration. S. 25 says valuable consideration may be constituted by any consideration sufficient to support a simple contract including past consideration Section. 25(1)(a)&(b). A holder for value would seem on the basis of these sections to be a person who holds or is in possession of a bill for which consideration has been given by the holder or someone else. Section 25(2) shows that the holder for value does not himself need to give consideration. Page 26 of 35

Also, every party whose signature appears on the bill is prima facie deemed to have given value. Section 28(1). Also, a person may have knowledge of a defect in the bill and still be a holder for value but such a person cannot be a holder in due course.

HOLDER IN DUE COURSE Section 27(1) of Act 55 defines a holder in due course as follows: (a) (b) A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions, namely that: he became the holder of it before it was overdue, & without notice that it had been previously he took the bill in good faith and for value, & that at the time the bill was negotiated to him he had A holder in due course holds the bill free from any defects in title of prior parties. Section 27(2) lists some examples of acts that my cause a defect in title: When the person negotiating the bill obtained it or acceptance thereof by o Fraud o Duress o Force and fear o Other Unlawful means o Or for an illegal consideration o Or when he negotiates it in breach of faith o Or such circumstance that amounts to fraud Its conclusively presumed that every party to the bill prior to him made a valid delivery of it. Section 19(2)(b)( in the hands of a HDC, a valid delivery of the bill by all parties prior to him so as to make them liable to him is conclusively presumed.) The person to whom a current and apparently regular negotiable instrument has been negotiated, who takes it in good faith and for value, obtains a good title to it even though his transferor had a defective title or no title to it. Section 36(b)&(c). (1) HOLDER dishonoured, if such was the fact; or no notice of any defect in the title of the person who negotiated it.

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Though the payee can be a holder for value, arguably, the payee cannot be a holder in due course! Because bill is issued to him; NOT NEGOTIATED TO HIM! For one to be a holder in due course, the bill must have been negotiated to him! Section 27(1)(b). R.E. Jones Ltd. v.Waring & Gillow [1926] A.C. 670 Lewis v. Clay (1897) 14 T.L.R. 149

BUT see the case of Herman v. Wheeler [1902] 1. K.B. 361; Lloyds Bank Ltd. v. Cooke [1907] 1 K.B. 794 (CA)

(2) BILL The instrument must be a bill. It must have been ISSUED. An instrument is not a bill if it has not been issued! See Sections 97 and 19(1). Ingham v. Primrose (1859) 7 C.B. (NS) 82 The instrument is not a bill if the purported signature of the drawer is a forgery. Section 22 The instrument is not a bill if the drawer has no capacity to contract. Section 20 (1). Although such an instrument might not be enforceable against the drawer or endorser of incapacity, it may however entitle the holder to enforce it against any other party thereto. Section 20 (2). The instrument is not a bill if the drawer of the bill or maker of the note signs it in the reasonable belief that he is witnessing someone elses signature to another document. NOTE: The drawer is in such cases entitled to a plea of non est factum. Lewis v. Clay (1897) 14 T.L.R. 149. (3) COMPLETE AND REGULAR The instrument must be complete and regular that is, the instrument must appear to be in order on the face of it: both front and back. The expression therefore includes the endorsements. Arab Bank, Ltd v. Ross [1952] 1 All E.R. 709, 715 per Lord Denning. Facts: The Pt bank sued as holders in due course of two promissory notes made by the Dt in favour of Fathi and Faysal Nabulsy Company, which were endorsed Fathi and Faysal Nabulsy. Held: The endorsement was sufficient to pass a title but the bank were not holders in due course as the endorsement was irregular.

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(4) OVERDUE

So if there is anything on the instrument, or any omission, which should put a transferee on inquiry, it will be difficult to claim HDC status. Even an alteration of the date is material and prevents a cheque from being regular on the face of it.

Section 34 deals with overdue bills. Section 86 deals with overdue notes. Sections 34(3) and 86 deal with bills and notes that are payable on demand. [Section 8 defines bills payable on demand]. Section 12 deals with the computation of time for payment of bills that are not payable on demand BUT payable at a future time. (Under section 12 such bills or notes are not overdue till after the expiration of the three (3) days of grace). [Section 9 defines bills payable at a future time NOT on demand].

Section 34(3) says that a bill payable on demand is overdue if it appears on the face of it to have been in circulation for an unreasonable length of time. Reasonable length of time is a question of fact. Section 86(2) gives guidelines on how to determine a reasonable length of time.

(5) DISHONOUR Section 34(5) deals with dishonoured bills. A holder in due course must not have any notice of any such dishonour of the bill in question. According to Section 34(5), where a bill which is not overdue has been dishonoured, any person who takes it with notice of the dishonour takes it subject to any defect of title attaching thereto at the time of dishonour BUT such a defect will not affect a holder in due course who takes the bill without notice of the dishonour. See section 27. (6) GOOD FAITH The holder of the instrument must have acted in good faith i.e. honestly, without knowledge of any defect in title of a previous holder. Section 90 of Act 55 says that a thing is deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not. Mere negligence, however gross, not amounting to wilful or fraudulent blindness and abstinence from inquiry, will not of itself amount to lack of good faith, but it may be evidence of notice. (7) NOTICE Page 29 of 35

Notice may be particular (express) or general. Particular notice is where the holder had notice of the particular facts avoiding the bill. o Midland Bank v. Reckitt [1933] A.C. 1, 19 General notice is where the holder had notice that there was some illegality or some fraud vitiating the bill, though he may not have been apprised of its precise nature. A wilful or fraudulent absence of inquiry into the circumstances, when they are known to be such as to invite inquiry, will (if the abstinence from inquiry arose out of a belief or suspicion that an inquiry would disclose a vice in the bill) amount to a general or implied notice. Jones v. Gordon

There must however be something to put the holder on inquiry! o Guildford Trust v. Goss Facts: Money lenders took post-dated cheques in repayment of loans. They were drawn by one partner, indorsed by another, and dealt with by a third partner. Held: The facts did not put the transferees on inquiry.

There is no question of constructive notice! Notice in section 27 refers to actual notice. The equitable doctrine of constructive notice by which a man, who refrains through gross negligence from making enquiries, is held to have had notice, is inapplicable to negotiable instruments. Joint Stock Bank v. Simmons (per Lord Herschell)

Note section 27(3)!! It implies that even if one had notice, so long as he is not complicit in the fraud or illegality, and obtained the title through a holder in due course, he has a valid title.

HDC MUST BE A HOLDER FOR VALUE A holder in due course must necessarily be a holder for value. Value must have been given. S. 25(1) (a). Past consideration is good consideration. S. 25(1) (b). Also, if the present holder of the instrument has not himself given value but some previous holder had done so, the holder is a holder for value and he is given some measure of protection. S. 25(2). But this is not the case when we are dealing with HDC. Every party whose signature appears on the bill is prima facie deemed to have given value s. 28(1). But this presumption will be inapplicable to HDC.

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PROMISSORY NOTE A promissory note is one kind of a Bill of Exchange. Section 83(1) of Act 55 defines a promissory note as 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. an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, a sum certain in money on demand, or at a fixed or determinable future time, to, or to the order of, a specified person or to bearer

For cases discussing the characteristics of a promissory note, see: o Sabblah v. Tawiah [1966] GLR 145 o Directors of Orthodox Secondary School of Peki v. Tawlma-Abels [1974] 1 GLR 419

Section 84 provides that a promissory note is inchoate and incomplete until it is delivered to the payee or bearer.

CERTIFICATES OF DEPOSIT This is a promise to pay issued by a banker. By a certificate of deposit, a bank acknowledges that it has received a deposit from the depositor, and promises to repay the depositor upon demand. Today, certificates of deposit are processed electronically.

CHEQUES (INCLUDING MONEY ORDERS) Section 72 of Act 55 provides that a cheque is a bill of exchange drawn on a banker payable on demand. Section 1(1) of Act 55 provides that A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed 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. A cheque must have the following characteristics: Page 31 of 35

o IT MUST BE AN ORDER o THE ORDER MUST BE UNCONDITIONAL o IT MUST BE IN WRITING o ADDRESSED BY ONE PERSON TO A BANKER o SIGNED BY THE PERSON GIVING IT o DRAWN ON A BANKER o PAYABLE ON DEMAND o REQUIRE THE BANKER TO PAY o ON DEMAND o A SUM CERTAIN IN MONEY o TO THE ORDER OF A SPECIFIED PERSON OR o TO BEARER IS A BANKERS DRAFT A CHEQUE? Section 82(b) Any draft payable on demand drawn by a banker upon himself, whether payable at the head office or some other office of his bank; is considered a cheque; and the provisions of Sections 75 to 81 of Act 55 relating to cheques shall apply to such drafts and have effect in relation to such drafts, as they have effect in relation to cheques. CAN OTHER DOCUMENTS SUBSTITUTE A CHEQUE? Section 82(a) Any document issued by a customer of a banker which, though not a cheque, is intended to enable a person to obtain payment from that banker of the sum mentioned in the document; is considered a cheque; and the provisions of Sections 75 to 81 of Act 55 relating to cheques shall apply to such documents and have effect in relation to them, as they have effect in relation to cheques. CROSSED CHEQUES A cheque may be open or crossed. A crossed cheque is one which has two parallel traverse lines drawn across its face with or without words written on it in addition to the crossing. Page 32 of 35

When a cheque is crossed it can only be paid to a banker.

TYPES OF CROSSING General crossing Where the cheque contains the two parallel lines simply it is a general crossing. 75(1)(b) Where the cheque contains the two parallel lines with the words not negotiable it is a Where the cheque contains the two parallel lines plus the words and company or any Where the cheque contains the two parallel lines plus the words and company or any general crossing. Section 75(1) (b) abbreviation of same between the two parallel lines it is a general crossing. 75(1) (a) abbreviation of same between the two parallel lines with the words not negotiable it is a general crossing. 75(1)(a) Special crossing A special crossing is one which bears across its face an addition of the name of a banker, 75(2) 78(1). According to Section 78(1), a specially crossed cheque is specific to the banker named and no other unless it is crossed to an agent for collection and that agent happens to be a banker. DETERMINATION OF A CHEQUE A bankers authority to pay a cheque is determined by: o Countermand; that is stopping the cheque. o Notice of the death of the customer; o What of mental incapacity? o What of bankruptcy? o Where by contract banker is not required to overdraw the account? BANKING: RELATIONS OF BANKER AND CUSTOMER Page 33 of 35 A special crossing is one which bears across its face an addition of the name of a banker, In such cases the cheque is crossed specially and to that specific banker. Sections 75(2) & with the words not negotiable 75(2).

We have discussed the definition of a bank (See definition of core terms above).

CUSTOMER OF A BANK A customer is any one who has an account with a bank by contract of course. In Great Western Railway Co v London & County Bank, a man was for some years cashing his crossed cheques with a bank. The Court of Appeal held that he was a customer according to the old rule, which looked for a course of conduct over time between a person and a bank. The House of Lords held that a series of transactions cannot constitute a person into a customer; a customer is a person who has an account with a bank. The relationship is a contract. In Ladbroke v Todd, a person is a customer even if he has not yet issued his first cheque, or if his account is overdrawn. It is contractual relationship. It is also a relationship of debtor and creditor. It is also a fiduciary relationship.

DUTIES OF THE BANK/BANKER Duty of banker to obey the mandate of the customer In Ligget (Liverpool) Ltd v. Barclays Bank, a bank was held not to be entitled to debit the customers account when it paid a cheque signed by one director contrary to the mandate to pay only when two directors sign. Duty of banker to pay or honour cheques The banker is under a duty to pay or honour cheques drawn on him by his customer if certain conditions are met: o If there is a balance or overdraft on the customers account; o If the cheque appears to be regular on the face of it; o If the cheque comes in to the bankers hands in the ordinary course of business. A banker who wrongfully dishonours a cheque is liable primarily to the customer in damages; quantum of damages depends on position of customer, whether or not he is a businessman, the extent to which his business is affected etc. Bankers duty to observe secrecy/confidentiality The banker must observe the confidentiality of the customers banking information, except were: o Disclosure is required by law; e.g. by the Serious Fraud Office Act. o There is a public duty to disclose e.g. trading with the enemy. Page 34 of 35

o It is in the interest of the bank to disclose; e.g. say the bank is suing to recover an overdraft and needs to disclose the details of the overdraft. o It is by the permission of the customer- e.g. bank statements furnished to a foreign embassy for visa purposes. Bankers duty to collect cheques for customer It is the duty of the bank to act as a collecting bank for its customer.

DUTIES OF THE CUSTOMER She is to take care when drawing a cheque so that it is not easily altered. In London Joint Stock Bank Ltd v. Macmillan & Arthur, the plaintiff carelessly prepared a cheque for 2 pounds and no words were written on the cheque. Somebody altered it for 120 pounds. It was held that the plaintiff must pay for his carelessness. REVOCATION OF BANKERS AUTHOTITY Countermanding. Death of customer. Insanity of customer. Bankruptcy of customer.

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