This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 111.— Can a bank refuse payment of a cheque which it has marked " good for two days only " if presented after expiration of the two days?
Answer.—We think that after the two days have expired the cheque must be regarded as if it had not been marked by the bank, and if there are then no funds its refusal would seem to be in order.
Cheque Certified " Good for Two Days only."
Editing Committee Journal of the Canadian Bankers' Association, Toronto:
Dear Sirs.—The reply given in the Journal for July, 1899, to question No. 1ll, is so entirely at variance with that which has, I believe, hitherto been the accepted view of the matter, that I may perhaps be pardoned for drawing your attention to it. Writing from memory, I think I am correct in stating that this question arose some years ago in a very important way, when the tenders for the construction of the Canadian Pacific Railway were under consideration by the Government at Ottawa. The Minister of Railways, Sir Charles Tupper, I think, refused to accept the deposit made by one of the tenderers on the ground that the cheque had been marked good by the Bank of Montreal, Ottawa, with a time limit attached. As soon as the question arose it was at once referred, we were told at the time, to the authorities of that bank at head office, and the reply was made that the cheque would be considered good until paid, in spite of any limit attached to the acceptance.
This answer was in accord with the view held by bankers generally when the dispute arose, and I remember it was the cause of a good deal of angry discussion in the press at the time.
If the cheque is charged to a customer's account at the same time that it is marked good with this qualification, how is the acceptance to be cancelled? Is the time limit really of any effect legally, because I have been instructed that it has none?
I submit these remarks with the utmost deference and only for the purpose of making the matter still more clear.
E. D. Arnaund. Annapolis, N.S., 21st Aug., '99.
We think that the answer we have given is correct. The fact that the bank in the case cited had declared that the cheque would be considered good until paid does not affect the question. It merely meant that they were willing to go beyond the contract entered into on the cheque, and in that particular instance it was done because the drawer of the cheque particularly wished it to be held good, and the limitation in the acceptance was an error on the part of the officer who marked the cheque.
On the general question we think that when a cheque is marked with a time limit the bank might regard itself as free from liability thereon, and reverse the debit to the customer's account after the expiry of the time, although in practice it is quite unlikely that either the customer or the bank would wish to do this. If, however, the customer were to say to the bank under such circumstances: "You are no "longer liable on the cheque which you marked a week ago "and charged to my account. I wish you to reverse this " entry and to pay other cheques which I have drawn," we think it very doubtful indeed whether the bank would not be liable for damages if it should refuse to honour cheques to the extent of the balance which the customer's account would show after reversing the entry for the marked cheque.
The "moral" of the whole matter seems to be that banks should not accept cheques except in the absolute form. —Ed. Com.