This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 119.— A draws a cheque payable to B for $1,000; gets it certified by his bank, and sends it by post to B. B finds he does not need it and returns it to A, but omits to endorse it. A changes " order " to " bearer " and initials the alteration; then presents it to the bank for payment. The bank, however, refuses to pay the cheque, and allows it to be protested on the ground that the cheque has been altered since it was marked. Is the bank right?
Answer.—We think the bank is technically right, as the alteration of the cheque without the bank's consent, avoided it, and the bank could strictly decline to cash it. Substantially, however, the drawer would not lose the thousand dollars. It would work out in this way: The drawer of a cheque may at any time before payment countermand the cheque, and as between the bank and the drawer, the bank must upon the countermand decline to pay and still hold the money for the drawer. If, however, the payee gets the cheque marked at the bank, then the drawer cannot countermand ; but should the payee not get immediate payment, and should the bank subsequently fail or refuse to honour the cheque, the drawer would not be liable upon it to the payee. But we think that where the drawer himself gets the cheque certified he can still countermand it before he has parted with it; in other words, before the bank has become liable to anyone but himself upon it. If, therefore, in the case put, the drawer before sending the cheque to B had changed his mind and cancelled the cheque and handed it back to the bank, the bank would have had to reverse the entry and credit his account again with the amount. The payee having returned the cheque to the drawer, and it being lawfully and beneficially in his possession we think he would have the same right to cancel it and countermand its payment.
Had he done so the bank would have been bound to restore the amount to the credit of his account, and he then might have drawn a new cheque and got it cashed. He clearly had no right without the assent of the bank to alter the existing cheque, and ask to have it cashed.