Question 301.— A cheque payable to Mrs. A. A. Smith or order is endorsed " B. B. Smith," and paid under a guarantee.

(1)   What is the exact position of the paying bank under the guarantee?

(2)   Would its position be different if the cheque had been endorsed " B. B. Brown " ?

Answer.— (1) We think the presenting bank guarantees that " B. B. Smith" is the proper signature of Mrs. A. A. Smith, the payee of the cheque, and that if this should turn out not to be the case they would be bound to return the amount of the cheque to the paying bank.

(2) We do not think a cheque drawn in favour of Mrs. A. A. Smith and endorsed " B. B. Brown " should be cashed even under a guarantee. If Mrs. Smith had remarried and her new name was Brown, no doubt the guarantee would have the same effect as in the first instance mentioned, but if it should prove that there is no connection between Mrs. A. A. Smith and B. B. Brown, we do not think the guarantee would affect the question at all. The presenting bank would probably be bound to return the amount of the cheque to the paying bank as money paid to them under a mistake. See reply to Question 292.