Question 179.— Section 8, clause 5, of the Bills of Exchange Act reads: " Where a bill is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order, at his option."

Does this mean that if a cheque is drawn, for instance, " Pay John Smith or order," John Smith can demand payment from the bank on whom drawn without endorsing the cheque or giving the bank a receipt, or what does it mean?

Answer.—If a cheque is worded " Pay to the order of John Smith," a literal interpretation of the drawer's instructions would exclude any right of John Smith personally to receive payment, as it is clearly an order to pay, not him, but his endorsee. The clause mentioned was passed to make the words quoted equivalent to " pay to John Smith or order.''

The question of the right of a bank to demand the payee's endorsement has been frequently discussed, and the view expressed that it has such a right. It may he urged that if a customer instructs the bank to pay a certain person, his instructions must he obeyed, and the bank must preserve such evidence of the payment as it can, that being the general rule with regard to all payments by debtors. But the bank, in our opinion, is entitled to rely on the universal practice of banks on this point as governing its relations with its customer, and to treat its contract with him as one under which it is bound to pay his cheques, provided it has funds, and provided also that the customary requirements as to endorsement are fulfilled.

It is to be remembered further that the customer is entitled, before he ratifies the payments made on his behalf, to have his order cheques endorsed by the payees, or to have satisfactory evidence that they have been so paid.