9. A banker buys Money and Securities from his customers, and gives them in exchange for it his own Credit. This Credit or Debt is expressed either in the form of an entry in his books called a Deposit, or the banker may give him a written document in various forms, such as a Bank Note, Deposit Receipt, a Draft on his correspondents, Circular Notes, and Letters of Credit.

By the Common Law of England any person may issue his Promissory Note in any form payable to bearer on demand; payable to order; or at sight, or after demand: or at any certain event: and for any amount.

In the middle of the last century a considerable number of bankers issued their Notes for small sums such as five or ten shillings, and for £1. But by a Statute in 1775 all persons were forbidden to issue Notes payable to bearer on demand for less than £l; and by a Statute in 1777 a similar prohibition was enacted against all Notes under £5.

By the 7 & 8 Vict. (1844) c. 32. ss. 10, 11, 12, no person may become a party to an Obligation payable to bearer on demand in any part of the United Kingdom: except those bankers who were lawfully issuing their own Notes on the 6th May 1844.

A Bank Note is denned by Statute 17 & 18 Vict. (1854) c. 83, s. 11 to be "Any bill, draft, or note (other than notes of the Bank of England) which shall be issued by any banker, or the agent of any banker, for the payment of money to the bearer on demand, and any bill, draft, or note so issued, which shall entitle, or be intended to entitle the bearer or holder thereof, without indorsement, or without any further, or other indorsement than may be thereon at the time of issuing it, to the payment of any sum of money on demand, whether the same shall be so expressed or not, in whatever form and by whomsoever such bill, draft, or note shall be drawn or made."

The following establishments only may issue obligations payable to bearer on demand in England -

1. The Bank of England.

2. Private banking firms which were lawfully issuing their own notes on the 6th of May 1844, and which have not become bankrupt, or discontinued such issue since that date.

3. Joint Stock Banks formed under the 7 Geo. IV. (1826) c. 46 issuing their own notes at a distance not less than 65 miles from London. .

Tender of payment in country bank notes is good if not objected to on that account. Even if a banker tender his own notes which are afterwards dishonoured.

If country bank notes be taken in payment of goods at the time of the sale, and as part of the contract, so that no debt is created, and without indorsement, the vendor takes them at his own risk, and has no remedy against the transferor if the banker fails, before he has obtained payment of them.

But if the transferor knew at the time he offered the notes in payment that the banker had failed, he is liable.

But if the notes be taken, not at the time of the exchange, but in payment of a pre-existing debt, however short a period has elapsed between the creation of the debt and the tender of the notes, if the transferee present the notes within due time, and find that the banker has failed, and give due notice of dishonour to the transferor, he may demand payment of his original debt.

If a customer pays into his account with his banker the notes of another banker, for which his banker gives him either credit in account or a deposit receipt: and if the banker on duly presenting the notes for payment finds that the banker who issued them has failed: and if he gives due notice of dishonour to his customer, he may cancel the credit.

But if instead of demanding payment of the notes he takes a credit in account with the banker who issued the notes, that is equivalent to payment, and he is liable to his customer, if the other banker fails.

If one person changes a bank note as a favour for another, and if on duly presenting the note for payment he finds that the banker has failed, and if he gives due notice of dishonour, he may demand back his money.