This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 366.— (1) A bank received for collection a bill of exchange drawn on an incorporated company; does the bank incur any liability with regard to the acceptance which it takes, i.e., that it is signed by the proper person or persons on behalf of the company? Would the bank's position be affected by the fact that the company's account was or was not kept with it?
(2) A draft drawn on John Jones is left at his store, and his clerk writes John Jones' name across it without adding any initials. Does the bank holding it for collection incur any responsibility?
(3) If the collecting bank allows a bill to be accepted by one who claims to be an attorney, and it afterwards transpires that his authority has been previously cancelled, what would be the collecting bank's position? Is the party giving such a power of attorney under any obligation to advise the banks generally of its cancellation, he having lodged it only with his own bank?
(4) Is the authority of the proper persons to accept a bill of exchange on behalf of an incorporated company fixed by statute or by by-law of the company ? Should there not be a requirement that the names of officers authorized to bind a company by signing bills of exchange and promissory notes should be recorded in the country registry office?
Answer.—In answer to the Questions 1, 2, and 3, it may be said generally, that the collecting bank is bound to use due diligence in procuring the acceptance of the drawee, and is responsible for the consequences of its negligence in this respect. An acceptance by unauthorized officials, or by one acting outside of the authority conferred on him, counts for nothing.
(4) The proper officers to sign on behalf of an incorporated company are usually fixed by by-law. It is not usual to find statutory provisions on the subject. If there were no by-law the question would depend upon the scope of the authority of the persons signing.
The parties who give a power of attorney are under no obligation to give notice of its cancellation to the banks generally. When a bank is asked to take the signature of an agent or attorney on his principal's behalf, it must either ask for evidence or take the risk of accepting the signature without evidence.