This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 186.— John Smith having been appointed secretary and treasurer by the patrons of a cheese factory, engages to manage the business, make the cheese and sell the same, for a remuneration of so much per pound. He makes a sale of cheese, receives an unmarked cheque for the same payable to himself personally, endorses the cheque (in his own name alone), and negotiates it with a bank. The cheque is returned dishonoured. Can the holder recover from the patrons, Smith being their paid agent and the cheese really their property?
Answer.—The questions involved here are chiefly questions of fact. If the relations between John Smith and the bank were such that the latter could successfully set up that they were dealing with him as agent for the patrons, they could no doubt look to the latter to make good the agent's liability.
If, however, he was only authorized as agent to sell for them for cash, and not on credit, it could scarcely be said that the unmarked cheque was taken under their authority, and it would probably prove that John Smith took the cheque at his own risk, and that he alone is responsible to the bank, as endorser, for its non-payment.
On the state of facts indicated by the question, we should say that the bank would have great difficulty in establishing any claim on the patrons, but a definite opinion could not be expressed without hearing both sides of the case fully.