This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 527.— In your reply to a former question you say that the acceptance by banks of cheques for part of their amount would as a practice be open to objection. Would you kindly state the principal objections?
(2) You also imply that to give the holder a right to demand payment of part of the cheque when there were insufficient funds for the whole " would involve serious consequences." In Girouard's " Bills of Exchange Act, 1890," p. 260, the case of Gore Bank v. Royal Canadian Bank, 13 Ch. 425, is quoted: " If a bank refuses to pay a cheque, having sufficient funds of the drawer for the purpose, the holder can compel payment in equity." If this rule holds good it might be in the interest of all to extend it to a case of " insufficient funds."
Answer.— (1) The chief objection is the trouble and risk of error involved, for which the trifling profit derived from the class of accounts where such things might happen would never pay.
(2) The remark cited is contrary to the well-recognized rule, that until a cheque has been accepted the holder is not in privity with the bank, and no one can proceed against it in connection with the cheque except the drawer. It had nothing to do with the merits of the case, but was a mere passing remark.
As to the consequences of a change in the law, the following among other considerations may be mentioned:
If the holder had a right to demand payment it would involve a duty on the part of the bank to pay on his demand if it held funds, and a consequent responsibility to him for any error in refusing payment. At present, whether the bank pays a cheque or refuses it, if it refuses one cheque and immediately afterwards pays another, if it overlooks a credit, or charges the customer with a wrong debit, the matter is one which affects only the bank and the customer, and a reasonable and friendly settlement of any mistake is in practically every case assured. It needs little imagination to forecast the difficulties that would arise if the bank had to reckon with a holder who was (or thought he was) unjustly treated. To give such a right to holders of cheques for which there are insufficient funds is open to other practical objections, such as the labour and risk of error it would involve, and the endless disputes which might be expected to result.