The Gazette 1991

NOVEMBER 1991

GAZETTE

In both Britain and Ireland the law is largely to be found in the 1882 Act as modified by the Cheques Act, 1957 (in Britain) and the Cheques Act, 1959 (in Ireland). Further changes have been effected in Ireland by the Central Bank Act, 1989, section 132 of which inserts a new section 45A into the 1882 Act to permit the "truncation" of cheques. This is a process which replaces physical presentation with an electronic message and enables banks to make greater use of electronic means of data transfer. The 1989 Act makes a number of other amendments which should be noted, namely the substitution of a new paragraph (1) in section 14 of the 1882 Act and the insertion of a new section after section 3 of the Cheques Act, 1959. Furthermore the Building Societies Act, 1989 amends the definition of " bank" in section 2 of the 1882 Act to include a building society. Professor Guest identifies a number of other changes wh i ch are necessary to bring the 1882 Act up to date. He doubts, for instance, whether the Act permits the use of instruments denominated in units of account such as the ECU. In the United Kingdom the government has announced (Cm. 1026) that it will amend the 1882 Act so that the expression "a sum certain in money" in section 3 (1) is defined to include a monetary unit of account established by an inter- governmental institution or by agreement between two or more States. The UK government also proposes to amend the 1882 Act to recognise a guarantee given by way of an "aval". As Guest points out (p. 459), an aval is a common practice in most EC Member States and is essentially "a guarantee of payment of a bill". Quite simply a third person guarantees the payment of a bill by signing it. The liability of the giver of an aval is not, however, the exact equivalent of that of a guarantor in English or Irish law since, as Guest explains, his undertaking is valid even when the liability which he has guaran- teed is inoperative for any reason other than defect in form.

On a more practical level another area where amending legislation would appear to be required is cheque crossing. The expression " not negotiable" written on a cheque is not generally understood. It does not mean that the cheque cannot be transferred, it means only that if it is transferred the holder does not get better rights of ownership than the person from whom he received it. There is undoubtedly a need for a clear method of making cheques non- transferable and perhaps this should be done by giving legal status to the words "Account Payee only". As Guest points out (p. 642) such words are not "words prohibiting transfer, or indicating that the cheque should not be transferable". Nevertheless, in practice, they may render the cheque transferable only with difficulty or not at all "for a banker may refuse to collect a third party cheque so crossed in the absence of explanation as to why it is being collected for his customer who is not the payee". Irish cases on negotiable instru- ments are not particularly common, the most important recent case probably being Creative Press Ltd. -v- Harmon [1973] I.R. 313. Section 83 (1) of the 1882 Act provides that a promissory not is an un- conditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or " a t a fixed or determinable future time" a sum certain in money to a specified person. Each of the defendants signed a document which stated that they, jointly and severally, promised to pay the plaintiff "on or before the 1st day of November, 1970" the sum of £2000. The point at issue was whether an instrument payable "on or before" a specified date was invalid as a promissory note since it was not payable at a fixed future time. Pringle J. refused to apply the English Court of Appeal decision in Williamson -v- Rider [1963] 1 Q.B. 89, preferring to follow instead the decision of the Supreme Court of Canada in John Burrows Ltd. -v- Subsurface Surveys Ltd. (1968) 68 349

Chalmers & Guest on Bills of Exchange. Edited by A.G. Guest [Sweet & Maxwell] £110 The last edition (the 13th) of Chalmers was published in 1964. A reflection of the extent of the changes that have taken place in the law and practice of banking since then is that the work has ex- panded from 420 to 836 pages. Although the pattern of previous editions is followed, in that the text is presented in the form of a section-by-section commentary on the Bills of Exchange Act, 1882 and the Cheques Act, 1957, Professor Guest has rewritten the text com- pletely, "leaving very little of the old Chalmers". The helpful practice, rare nowadays, of providing illustra- tions is also continued but based this time on decided cases. Bills of exchange were first brought into use by the Florentines in the 12th century as an instrument by which a trade debt, due in one place, was transferred in another, thus avoiding the necessity of transmitting cash from place to place. As they developed in England, however, bills of exchange became flexible paper currency. Chalmers summed up the diff- erence well when he said that in France and the other civil law systems a bill of exchange represented a trade transaction whereas in England it was merely an instrument of credit.