This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Delivery of a check,1 either one drawn by the debtor,2 even if certified,3 or by a third person,4 is prima facie not payment. Even if a check is drawn upon the bank which accepts it in reliance upon the apparent condition of the drawer's account, such acceptance is not an absolute payment if the drawer's account proves to be insufficient because of the refusal of other banks to pay checks which he has deposited with the bank on which he has drawn his own check.5 If a bank which holds a note for collection surrenders it on receipt of a check in reliance upon a statement of the drawee bank that such check was good, such surrender of the note and receipt of such check do not amount to payment if the statement of the drawee bank was made under a mistake as to the check intended and if the check which was given was not paid for want of funds.6 If the seller of goods accepts the buyer's check for such goods, the check does not of itself operate as absolute payment; and if it is not paid, the seller may recover the goods.7 A sold wheat to B and gave B a bill of lading. B delivered to A therefor his check on a bank in which he had not funds to meet such check. B indorsed the bill of lading over to the bank, which took with knowledge of the facts. The check was not paid. It was held that the vendor could retake the goods from the bank.8 Under somewhat similar facts the vendor was allowed to retake the goods even from an innocent holder of the bill of lading.9 If, however, the payee of a check has it certified,10 or fails to present it for payment promptly, whereby the indorser is damaged through the subsequent insolvency of the maker,11 or deposits the check to his own credit, even though he does not check against it,12 he thereby accepts it in payment. The creditor must therefore show either that the check was returned or that it was duly presented but not paid,13 unless he is able to show some valid excuse for his failure to do either. Whether a check is to be regarded as an equitable assignment between the debtor and the payee, or not, the loss of a check, especially if without the fault of the drawee, excuses him from presenting it for payment; and accordingly such check is not regarded as payment, although it is neither presented for payment nor returned,14 at least if the drawee bank remains solvent and no injury will be done to the drawer of the check by requiring him to pay the original indebtedness.15 If, however, the creditor expresses his willingness to accept a check of a certain amount as part payment only, his failure to return a check which is sent to him as payment in full does not make his receipt of the check acceptance if he did not cash it.16 If a draft which is drawn on A is sent to the X bank as agent for the holder of the draft, and A, who has a deposit in the X bank in excess of the amount of such draft, gives his check to the X bank therefor and receives the draft, marked "Paid," and the X bank sends its check for the amount of the draft to its correspondent by which the draft was forwarded for collection, such transaction amounts to a payment of the draft, although the X bank became insolvent and was unable to pay its own check.17 Payment was held to exist where A gave B a check on a bank, Y, in which A had funds; and B deposited it in his bank, X, which gave him credit therefor and sent it to Y, which gave X credit therefor.18 If A, an attorney for a creditor, receives funds from the debtor and the debtor agrees that the attorney shall send his check to the creditor for such debt, this constitutes payment.19 If a note is indorsed to a bank for collection, a check on the indorsing bank drawn by one who has an account therein is payment.20 If the debtor gives his check to an agent of the creditor who is authorized to receive it, and such agent indorses such check in excess of his authority and receives the money thereon from the drawee bank, the transaction amounts to a payment as between the debtor and the creditor.21 Although the act of a bank in giving credit on its books does not of itself amount to payment, the further act of the bank in paying a substantial amount of such credit to the creditor amounts to payment.22 If checks are deposited in a bank which is insolvent and are. forwarded by such bank to another bank with which it has dealings, and they are credited to the account of the insolvent bank, such transaction does not prevent the depositor of such checks from stopping payment thereon and recovering the checks from the receiver of the insolvent bank, at least if the bank to which they were forwarded acquiesces.23
Illinois. Leake v. Brown, 43 111. 372.
Iowa. Park v. Best, 170 Ia. 7, 157 W. 233.
Michigan. Duquette v. Richar, 102 Mich. 483, 60 N. W. 974.
Wisconsin. Gallagher. v. Ruffing, 118 Wis. 284, 95 N. W. 117.
11 Gallagher v. Ruffing, 118 Wis. 284, 95 N.W. 117.
12 Chase v. Brundagc, 58 O. S. 517, 51 N. E. 31.
1 1nterstate National Bank v. Ringo, 72 Kan. 116. 113 Am. St. Rep. 176, 3 L. R. A. (N.S.) 1179, 83 Pac. 110; First National Bank v. McConnell, 103 Minn. 340, 14 L R. A. (N.S.) 616, 114 N. W. 1129; United States National Bank v. Shupak, 54 Mont. 542, 172 Pac. 324; Mutual Ben. L. Ins. Co. v. Chattanooga Bar. Bank, 47 Okla. 748, L. R. A. 1916A, 669. 150 Pac. 190.
2 United States. In re Perpall, 256 Fed. 758
Alabama. Steiner v. Jeffries, 118 Ala. 673, 24 So. 37; Morris v. Bank, 122 Ala. 680, 25 So. 499.
Arizona. Empire-Arizona Copper Co. V. Shaw, - Ariz. - 181 Pac. 464.
California. Steinhart v. Bank, 94 CaL 362, 28 Am. St. Rep. 132, 29 Pac 717.
Georgia. Kirby Planing Mill Co. v. Titus, 14 Ga. App. 1, 80 S. E. 18.
Illinois. Angus v. Chicago Trust & Savings Bank, 170 111. 298, 48 N. E. 946 [affirming, 68 111. App. 425].
Indiana. Burrows v. State, 137 Ind. 474, 45 Am. St. Rep. 210, 37 N. E. 271.
Iowa. People's Savings Bank v. Gif-ford. 108 la. 277 79 N. W. 63.
Kansas. Interstate National Bank v. Ringo, 72 Kan. 116, 115 Am. St. Rep. 17b, 5 L. R. A. (N.S.) 1179, 83 Pac. 119.