This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 282.— Now that stamped endorsements are becoming so much used by large business firms and others, would it not be as well to have some definite understandings regarding them? The question might arise as to whether they are legally valid discharges. There does not seem to be any provision made for them in the Bills of Exchange Act, and there is evidently some doubt regarding them, as they are frequently guaranteed by bankers when sending documents endorsed in this fashion, forward for collection. They seem to have come into use as a means of doing away with the old and more laborious way of writing the endorsements. Some banks are in the habit of taking letters from their customers admitting liability for such endorsements; but how about the drawer (in the case of a cheque) ? Is he to be satisfied by a stamped endorsement ? Cannot he demand a written discharge ? Of course cheques endorsed in this way always come to the payee bank through the medium of another bank, and are usually endorsed " for deposit only," but 1 have noticed cases, more especially in cheques coming from American institutions, where they have not had even that clause inserted.
Answer.—Stamped endorsements put on with the authority of the party are quite as binding as written endorsements; and although from the point of view of the difficulty of proving their genuineness, the practice has some objectionable features, it has become altogether too common and too useful to be now withstood. As far as the banks are concerned, what we have said in reply to Question No. 293 above, as to the liability of the bank to which items are paid, applies to this case also, and this affords protection for the bulk of such transactions. The bank with which the item is originally deposited by the party whose endorsement is put on by means of a stamp, would naturally protect itself by a written agreement with its customer, such as our correspondent refers to.
As to the rights of the drawer of the cheque to be satisfied with the endorsement, we do not think that he has any ground for complaint. At any rate in order to prove that the bank had no right to charge the cheque to his account, he would have to prove the invalidity of an endorsement.