A CHEQUE has come to be one of the most common of all writings. Almost
everybody receives more or less of them. There are some principles
that ought to be understood by every holder or receiver of a cheque
which, we fear, are not as well known as they should be.
_First of all, a person ought to present his cheque for payment soon
after receiving it._ Some people are quite negligent in this matter
and carry cheques around in their pocket-books for several days before
presenting them for payment. It may not be convenient to take them to
a bank, and so they are carried around; perhaps their owners forget
they have them. They ought not to do so, for the reason that the maker
of a cheque really says to the holder: "This is an order that I give
to you on my bank for the money mentioned. If you go at once you can
get payment, but I do not promise to keep it there always for
you--only for a short time." Now if a person is willing to accept a
cheque at all, he ought to present it within the time the holder
intended, and if he does not and the bank fails, the loss falls on the
holder and not on the maker.
_What time does the law fix for presenting cheques for payment?_ The
rule everywhere is that the holder must present a cheque received by
him, if drawn on a bank in the place where he lives, on the day of
receiving it or on the next day. If the cheque is drawn on a bank at
a distance, out of town, then he should send it to that bank, either
directly or by leaving it with another bank for that purpose, on the
same day as he received it or the next day. In other words, _he must
take steps to collect the cheque either on the day of receiving it or
the following one_.
A friend of mine gave a cheque to a merchant in payment of a small
bill. Both lived in the same town, where the bank on which the cheque
was drawn was also located. About a week afterward the bank failed and
the merchant wrote to him, stating the unwelcome fact and that the
cheque had not been collected and desired him to send another. I asked
my friend if he complied with the request, and he said: "Certainly." I
told him that he ought not to have done so, for he was under no
obligation either in law or morals to do such a thing. Had he known
the above rule he would not have sent the second cheque, for it was
pure negligence on the part of the merchant in not presenting it--in
fact, on the same day it was received.
A person may, of course, hold a cheque for a much longer period than
the time above mentioned and present it and receive payment, but the
point that we are trying to make clear is that _the risk of holding
it_ during this period _is the holder's and not the risk of the maker
of the cheque_. I suppose the merchant in the above case had, perhaps,
lost the cheque. Every now and then one is mislaid and, consequently,
is not presented for payment when it should be, but the maker ought
not to suffer for the negligence of the receiver of his cheque. The
rule of law that we have given is founded on justice, and if the
receiver is negligent in not presenting it as he should, the holder
ought not to suffer.
_It is the duty of a bank to pay a cheque just as it is drawn, and if
it makes any mistakes it must suffer._ The reason for this rule is
that the maker does not expect to see his cheque again after it leaves
his hand, and when he puts his money in a bank for safe-keeping the
bank virtually says to him that it will pay only on his order just as
he has written. It will guard his interests carefully and pay no
forged cheques or cheques that have been altered in dates or amounts,
to his injury. Now, it is quite a common thing for cheques to be
forged, and still more common for them to be raised. A scoundrel gets
a cheque that is genuine, ordering a bank to pay $18, and changes it
to $1800. He presents it for payment and it is paid. By and by the
depositor finds out that he has not as much money in the bank as he
supposed he had there. What has happened? Some one has altered one of
his cheques and drawn out too much. He goes to the bank and makes
inquiry, learns that this is so, and then demands that it shall make
the amount good to him. Usually a bank is obliged to pay.
There is one limit to this rule. _A man making a cheque must be
careful to write it in such a way that changes or alterations cannot
easily be made._ If he is careless, leaving ample space so that
changes can be made in the amount, then he will be considered
negligent, and a bank would not be obliged to make good his loss. If,
on the other hand, he is careful in drawing his cheques then a bank's
duty to protect him is plain, and it is liable in the event of
neglecting to do so.
A few years ago a man drew a cheque for $250, dated it three days
ahead, and left it with his clerk, directing him to draw the money on
the day written in the cheque and pay the men who worked for him, and
went away. The clerk thought that he would like to keep that money
himself and take a little journey also, so he changed the date to one
day earlier, went into the bank on that day and drew the money, and
started for the Klondike or some other place. The maker of the cheque
soon found out what had happened and demanded of the bank to make the
amount good. The bank said to him: "Suppose the clerk had waited one
day longer and then drawn the money, you would have been the loser
just the same." The man admitted all this, but replied, nevertheless,
that he had not changed the date; that the bank ought to have seen the
alteration before paying, and as it did not it was negligent in that
regard, and the bank was obliged to lose.
When a person takes a cheque he naturally supposes that the bank on
which it is drawn owes the money to him because he can truly demand
it. _Suppose a bank refuses to pay, can the holder then sue the bank
for money?_ In six States--Illinois, South Carolina, Missouri,
Kentucky, Colorado, and Texas--the holder of such a cheque can sue the
bank and get his money. The courts in those States say that a cheque
is an assignment or transfer of the amount of money stated to the
holder of the cheque from the time that the cheque was given him. The
law in all of the other States is otherwise, and a bank for a good
reason can decline to pay a cheque, and, in any event, the holder
cannot sue the bank for the amount. If it will not pay he must look to
the maker and not the bank for payment. Of course, _a cheque must
always be drawn against a deposit, and it is a fraud on the part of a
person to draw a cheque on a bank when he has no money there_.
Sometimes mistakes are made by banks in their bookkeeping, and they
think they have not the money to pay when in truth they have. In such
cases they sometimes decline to pay, but even if they had the money
the law says that there is no contract between the holder of a cheque
and the bank on which it is drawn, and therefore the holder cannot
sue it should it refuse to pay. This rule, however, is rather losing
ground and the other is coming into more general favour--that a cheque
does operate to transfer the money of the maker to the holder and,
consequently, that he has a right to sue the bank for the money.
Cheques are made payable either to bearer or order. If a cheque is
made payable to bearer it can be transferred from one person to
another simply by handing it to him--by delivery; but if a cheque is
made payable to order, then the person who receives it, if wishing to
transfer it to some one else, must write his name on the back. If he
writes his name on the back it is called a blank indorsement, and this
form is often used in transferring cheques. If, however, a person
intends to send a cheque through the mail he should never write it
payable to bearer, but always payable to the order of a particular
person, so as to require his name to be written thereon in order to
make a good transfer. This is a much safer way of sending cheques than
simply by making them payable to bearer.