Question 149. - 1. Bank A receives a cheque deposited to the credit of Smith & Jones, drawn on the bank B. The cheque is payable to Smith & Jones, and is endorsed "John Smith," one of the partners. In the usual way the cheque is presented to bank B, but returned through the clearing house - " Not endorsed."Bank A guarantees endorsement, but bank B refuses to accept the guarantee.

(a) Is "not endorsed" a proper answer on this cheque?

(b) Can bank B ignore A's guarantee?

(c) Does not the guarantee protect bank B from loss because of defective endorsement?

2. Can a bank return a cheque "present again," when there is not sufficient funds, or when the answer should be N.S.F.C.

Answer. - (a) Yes, though "not endorsed by payee" would probably be better.

(b) Yes, the paying bank is not bound to accept a guarantee.

(c) Probably it would, but as the payee bank is not bound to accept the general guarantee, it is within its rights in returning the item for proper endorsement.

2. Yes. A bank is not bound to give any reason for refusing a cheque, neither does the answer given impose any obligation on the holder to present again, and he would be justified in regarding the cheque as dishononred, and at once taking any action open to him upon dishonour.