The document discusses various aspects of bills of exchange, cheques, and the liabilities of banks. It defines key terms like indorsement, holder, holder in due course, and drawer. It explains the crossing of cheques and the duties and protections afforded to the paying banker and collecting banker. The paying banker is protected if payment is made in due course, for forged indorsements if in good faith, and for irregular indorsements. The collecting banker is protected if acting in good faith and without negligence for a customer. However, negligence can occur if checks are deposited into improper accounts.

1. Indorsement
a) transfers the property in the bill to the
transferee
b) makes the transferor who is also the indorser
liable
1)must be written on the bill itself and signed by
indorser.
2)Indorsement on the entire bill.
3)If payable to several payees,all payees must
indorse unless has authority to indorse on behalf.
4)Payee’s/indorsee’s name is wrongly spelt, indorse
according to spelling.
5)Where there are 2/more indorsement, each is
presumed made in the order it appears.

2. Holder
Person who is in possession of the bill (payee,
indorsee or bearer)
Holder in Due Course
(1)Holder who takes a bill (2)which is complete and
regular on the face of it (3)before it becomes overdue
(4)without notice t has previously been dishonoured
(5)in good faith, (6)has given value for it and (7)without
notice of any defect in the title.
Holder for Value
Value was given some time previously. His title depends
on what his transferor has. Can enforce the bill against
all parties who have signed the bill prior to the giving
of such value.

3. DRAWER
DRAWEEDRAWEE
DRAWER
PAYEE
CROSSING
Payable to Order

4. Indorsement at the back of the Cheque

5. CHEQUES (Combination of S3 & S73 of Bills of Exchange Act
1949)
1) An unconditional Order in writing.
2) It is signed by the drawer.
3) It is drawn on a banker.
4) Orders the banker to pay a sum certain in money on demand.
5) Drawn in favour of a specified person/to his order/in favour of a
bearer (payee).
Undated Cheques valid though banker may not honour it. Holder
can fill the true date h/e within reasonable time.
Overdue or Stale Cheques; which have been in circulation for an
unreasonable length of time. Normally 6 months.
Ante-Dated if bears earlier than date of actual issue (back-dated)
Post-Dated bears date in future, later than the date of issue. Though it
is really not a cheque since not payable on demand h/e still valid &
the holder can be a holder in due course & capable of being
negotiated.
CROSSINGS OF CHEQUES

6. - It is an instructions to the paying banker.
- “Account Payee” or “A/C Payee” instruction to a collecting banker.
TYPES OF CROSSINGS
General Crossing; 2 parallel transverse lines drawn across the face
of the cheque. Between the lines may insert “and Company”, “Not
Negotiable”, “Account Payee”.
- Paying banker can only pay collecting banker.
Special Crossing; banker name inserted between the parallel lines.
Effect of “Not Negotiable” Crossing
Loses negotiability but remains transferable. Depends on transferor title.
Wilson & Meeson v Pickering
“Account Payee Only” Crossing
Only a/c of the payee is to be credited.
Woodland Development Sdn Bhd v Chartered Bank
ALTERATIONS ON A CHEQUE
Drawer discharged from liability.
Apparent Alteration; by scrutinizing with reasonable care, would know
that it has been alter

7. - Parties liable will be discharge h/e person who made the alteration &
all subsequent parties bound.
Non-apparent Alteration; not visible on reasonable scrutiny.
- Principle similar to apparent alteration h/e holder in due course has
the right to enforce it according the original tenor.
Customer’s Duty of Care Against Fraudulent Alterations
Customer’s negligence, alteration not apparent, the banker is protected.
London Joint Stock Bank v Macmillan & Arthur
PROTECTION OF THE PAYING BANKER
Banker knows his customer & his signature but not the payee.
1) Payment in Due Course; (S59) payment made at/after maturity of the
bill to the holder in good faith.
- Protected if pays a bearer cheque. While for an order cheque where
the indorsement is forged/unauthorized the protection under S60.
2) Forged/ Unauthorised Indorsement, not protected if signature drawer
forged. However he did not know signature of others who are not
his customers. T/fore protected if in good faith & ordinary course of
business pays cheque bears forged/ unauthorised indorsement.(S60)

8. 3) No Indorsement/Irregular Indorsement; pays in good faith & in the
ordinary course of business. Covers order cheques.
4) Crossed Cheques; cannot be certain collected for the true owner.
Crossing not apparent, obliterated, added or altered. S80 if pays in
good faith, without negligence & according to the crossing.
Slingsby v District Bank (added ‘per Cumberbirch & Potts)
PROTECTION OF THE COLLECTING BANKER
Maybe be liable;
a) To his customer for breach of contract.
b) To the true owner for wrongful conversion.
H/e protection under S85(1) where in good faith & without negligence
receives payment. Before entitle must prove;
1) Acted for a Customer; as soon opens an account h/e banker negligent
in opening account if don’t obtain references or make inquiries.
2) Acted in good faith (honestly).
3) Acted without negligence; though good faith if negligence still liable.
Must prove acted with reasonable care. Circumstances of negligence;
i) presents cheque in favour of co. for the credit of a private account.

9. ii) Cheque drawn in official capacity h/e credited in own private a/c.
iii) “ in favour of Principal, credited in his own private account.
Midland Bank Ltd v Reckitt & Ors – sol fraudulently drew cheques
on the a/c of his client & bank in into his a/c with the deft bank.
iv) Presented an ‘a/c payee’ cheque and he is not the payee.
The Rubber Industry (Replanting Board) v The Hongkong &
Shanghai Banking Corporation – cheque in favour of Toh Whye
Teck & cross ‘a/c payee only’.A rogue open a/c Chop Toh Whye
Teck with def.
v) Pays in a cheque for an unusually large amount.
Lloyds Bank Ltd v Chartered Bank of India, Australia and China -
Employee of Pltf drew 19 cheques & credited into his a/c.
vi) x enquiry as to identity & circumstances of the customer.
Hampstead Guardians v Barclays Bank Ltd – referee customer
h/self.
Collecting Banker and Contributory Negligence
Sued for conversion – defence of contributory negligence. Damages
Lumsden & Co. v London Trustee Saving supra – fail to demand

10. ii) Cheque drawn in official capacity h/e credited in own private a/c.
iii) “ in favour of Principal, credited in his own private account.
Midland Bank Ltd v Reckitt & Ors – sol fraudulently drew cheques
on the a/c of his client & bank in into his a/c with the deft bank.
iv) Presented an ‘a/c payee’ cheque and he is not the payee.
The Rubber Industry (Replanting Board) v The Hongkong &
Shanghai Banking Corporation – cheque in favour of Toh Whye
Teck & cross ‘a/c payee only’.A rogue open a/c Chop Toh Whye
Teck with def.
v) Pays in a cheque for an unusually large amount.
Lloyds Bank Ltd v Chartered Bank of India, Australia and China -
Employee of Pltf drew 19 cheques & credited into his a/c.
vi) x enquiry as to identity & circumstances of the customer.
Hampstead Guardians v Barclays Bank Ltd – referee customer
h/self.
Collecting Banker and Contributory Negligence
Sued for conversion – defence of contributory negligence. Damages
Lumsden & Co. v London Trustee Saving supra – fail to demand