This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 121.— 1. A post-dated cheque drawn by a firm on an American bank in favour of one of the two partners in the firm, was cashed by a Canadian bank for the payee, who endorsed it, and it was lost in the mail. The Canadian bank applied to the other partner, who was winding up the partnership business, for a duplicate, and also notified the endorser of the loss, receiving the latter's assurance that a duplicate would be issued. This has not been done, although two months have elapsed. Has the bank any recourse against the endorser as such, or against him as one of the drawers? The other partner is now insolvent.
(2) Would proof that there were no funds for the cheque affect the endorser's liability?
Answer.— (1) The payee, as endorser, is probably discharged from liability by want of notice of dishonour, although his promise to procure a duplicate might be held to excuse the notice. It is not excused by the loss of the cheque.
He is, we think, liable as one of the drawers. The delay in presentment would not discharge the drawers unless they suffered actual damage through the delay.
The Canadian bank should present a copy of the cheque for payment and give the drawers notice of dishonour; they can then proceed in the ordinary way.
(2) It would not follow that the cheque would be refused because there were no funds at credit. If it could be affirmatively established that the endorser knew there were no funds, and no arrangement for an overdraft, notice to him of dishonour would probably be unnecessary.