Question 294.— Do the following endorsements require the guarantee of the depositing bank under the rules?

A.  John Smith,

p. Tom Jones.

B.  The Winnipeg Marble Company. William Brown.

In the second case there is no incorporated company; Brown carries on his private business under the name quoted.

(2) If endorsements such as these are passed without the guarantee, what is the position of the paying bank?

Answer.— (1) Both of the above endorsements must be regarded as irregular within the terms of the rules. (See last part of Rule 2, and Rule 3.) They do not in either case indicate the authority of the person signing.

(2) If the endorsements such as those mentioned in the question are accepted by the paying banks without a guarantee, they are protected under the amendment to the Bills of Exchange Act of 1897, should they prove to be forged or unauthorized. Their rights against the depositing bank are somewhat differently conditioned from the rights they would have under a guarantee given in accordance with the rules; the chief difference is that the right under the Act is conditional on proper notice being given as required by its terms.

In discussing these Rules in his article printed in the Journal for January, 1898, Mr. Lash explained the reason for treating such endorsements as irregular. We understand that there was a great deal of discussion before the principle was adopted by the committee. It was urged that no rule should be made which would bar out legal endorsements which these admittedly were, but the conclusion of the committee as a whole was in favour of this rule, as tending to greater care and regularity. Some of the reasons urged are quoted by Mr. Lash in the article referred to. (See p. 194.)