NEGOTIABLE INSTRUMENTonly

NEGOTIABLE INSTRUMENTS
LECTURE NOTES
University of Ghana Business School
2017-2018 Academic Year
Commercial Law II
Level 200
ROWLAND ATTA-KESSON ESQ.

OUTLINE
• GENERAL INTRODUCTION
– PAYMENT METHODS
– NATURE OF NEGOTIABLE INSTRUMENT
– ORIGIN OF NEGOTIABLE INSTRUMENT
– DEFINITION OF BOE
– FORM OF BOE
• NEGOTIABLE INSTRUMENT UNDER GHANA LAW
– CLASSES OF NEGOTIABLE INSTRUMENT
– DEFINITION OF KEY TERMS
– PROMISE TO PAY
– ORDER TO PAY
– DETAIL DISCUSSION OF NEGOTIABLE INSTRUMENTS UNDER GHANA LAW
– LEGAL EFFECT OF DRAWING A BILL
– NEGOTIATING A BILL
– ORDER BILL, BEARER BILL
– HOLDER, HOLDER FOR VALUE, HOLDER IN DUE COURSE
– PROMISORY NOTES
– CHEQUES

Tuesday, February 27, 2018 2
LLB. BL(Ghana); LLM.(Indiana)
GENERAL INTRODUCTION

LLB. BL(Ghana); LLM. (Indiana)
PAYMENT METHODS
• Payment methods are the instruments,
procedures, and institutions which enable users
to meet payment obligations.
• Traditionally, payment methods have been
classified as credit or debit transfers, depending
on whether the payor’s payment instructions are
given direct to its banks (credit transfer) or pass
via the payee (debit transfer).
• Payment methods are either paper based,
electronic, or a combination of both.

NATURE OF NEGOTIABLE
INSTRUMENT
– Negotiable instruments are substitutes for money
• They are treated as documents of title to money.
• Like money (and unlike ordinary contracts), consideration,
good faith, etc., are all presumed. No need to state the value
on the instrument.
• It may be transferred from one person to another either by
simple delivery only or by endorsement and delivery
(without any need to give anyone notice);
• The transferee is able to sue upon it in his own name all
parties to the instrument;
ROWLAND ATTA-KESSON ESQ. LLB. 5

Tuesday, February 27, 2018
BL(Ghana); LLM. (Indiana)
BUT NOTE:
– When a bill contains words prohibiting transfer or indicating an intention
that it should not be transferable, it is valid between the parties but it is
not negotiable.
– Section 6(1) of the Bills of Exchange Act (Act 55)
• Examples of negotiable instruments include:
– Cheques
– Promissory notes
– Certificates of deposits
– Bankers drafts (or cashiers cheques),
– Money orders
– Bills of exchange, etc
• These documents are negotiable instruments because they are easily
transferable and make commercial transactions easier.
• They are assignable (even as debt instruments) by simple delivery or
endorsement & delivery, free from the equities. (With no requirement to
give anyone any notice! – Thus differs from an ordinary contract.)
BL(Ghana); LLM. (Indiana)
ORIGIN OF NEGOTIABLE INSTRUMENTS.
 The bill of exchange, which is the earliest type of
negotiable instrument, is generally regarded as
having originated in medieval Europe, perhaps as
early as the 12th Century.
 Certainly it was well established by the 17th century.
 The conditions of travel with poor roads, slow modes
of transport, and the prevalence of piracy at sea as
well as the possibility of counterfeiting of local
currencies led European merchants, engaged in the
purchase and sale of commodities, to avoid using
gold, silver or coinage in long-distance mercantile
transactions.
7 ROWLAND ATTA-KESSON ESQ. Tuesday, February 27, 2018
 Italian bankers were also at this time active
in loan transaction, lending substantial sums
to merchants from many countries.
 Repayment of the loans raised the same
difficulties of transportation as purchase and
sale transactions amongst merchants.
 The merchants’ response to these difficulties
was to develop written orders directing
money, which was owed by one merchant or
banker to the directing party, to be paid to a
third party to whom the directing party
himself owed money.
 Payment was often required to be made at a future date.
 The result was the short circuiting of the chain of mercantile
obligations.
 The only cash that needed physically to changes hands was
the balance due after the inter-relating credits and debits
had been taken into account among a group of merchants
and bankers.
 Fairs were held in Europe at set times during the year, at
which this balancing of accounts could take place with
minimal gold, silver or coinage actually changing hands.
 Further rationalization took place by the recognition among
merchants that these written orders for payment were
transferable by simple delivery without the necessity of
acknowledgement by signature.
9 ROWLAND ATTA-KESSON ESQ. LLB. BL(Ghana); Tuesday, February 27, 2018

LLM. (Indiana)
 The prohibition that existed at this time against lending
money at interest gave a further impetus to the
development of these instruments, which were to
become known as bills of exchange.
 Banker or other lenders could buy a bill for an amount
less than its face value, and, when the bill was due to be
met, the lender would (as the new owner) be entitled to
be paid its full face values. the difference, of course,
represented the interest component that otherwise was
prohibited.
 One difficulty remained. If a bill was lost or stolen and passed
to an innocent person who gave value for it, the law was
clear.
 The new “purchaser” did not have title to the bill as the
original owner had never intended title to pass.

LLB. BL(Ghana); .LLM. (Indiana)
 The maxim the “nemo dat quod non habet” (“nobody may
give what he does not have”) meant that a finder or thief
could not pass on a title which he or she never had.
 Merchants apparently found this legal rule unworkable and
there developed a mercantile custom that certain
instruments had a quality that transcended the “nemo dat”
rule.
 That quality was the concept of “negotiability”, whereby the
purchaser of certain instruments acquired a title free of all
interests of which the purchaser had no notice at the time he
or she gave value for the instrument.
 It was the recognition of this quality and the assignability of
bills by the courts in England in the seventeenth century that
was the true beginning of the development of the bill of
exchange as a powerful commercial force.
LLM. (Indiana)
 Negotiable instruments are substitutes for money
 They are treated as documents of title to money.
 Like money (and unlike ordinary contracts), consideration,
good faith, etc., are all presumed
 Examples of negotiable instruments include:
 Cheques
 Promissory notes
 Certificates of deposits
 Bankers drafts (or cashiers cheques),
 Money orders
 Bills of exchange, etc
• These documents are negotiable instruments because they are easily transferable
and make commercial transactions easier.
• They are assignable (even as debt instruments) by simple delivery or endorsement
& delivery, free from the equities. (With no requirement to give anyone any
notice! – Thus differs from an ordinary contract.)

PPM. LLM.(MCL) (Indiana)
1. THE NATURE OF NEGOTIABLE INSTRUMENTS
 Valuable consideration is presumed -- no need to state the value on the
instrument.
 It may be transferred from one person to another either by simple
delivery only or by endorsement and delivery (without any need to give
anyone notice);
 The transferee is able to sue upon it in his own name all parties to the
instrument;
 A transferee who takes a negotiable instrument in good faith and for
value obtains a completely good title notwithstanding any defect in the
title of the transferor.
 They have great assignability and negotiability convenience by being
assignable (even as debt instruments) by simple delivery or
endorsement and delivery, free from the equities. (With no requirement
to give anyone any notice!)
2. BUT NOTE:
 When a bill contains words prohibiting transfer or indicating an
intention that it should not be transferable, it is valid between the
parties but it is not negotiable.
 Section 6(1) of the Bills of Exchange Act (Act 55)

PPM. LLM.(MCL) (Indiana)
DEFINITION OF BOE
• ‘an unconditional order in writing,
addressed by one person to another, signed
by the person giving it, requiring the person
to whom it is addressed to pay on demand
or at a fixed or determinable future time a
sum certain in money to or to the order of a
specified person, or bearer’.

Tuesday, February 27, 2018 LLB. BL(Ghana); PPM. LLM.(MCL) 14
(Indiana)
• The definition sets out the requirements in
a nutshell.
• It may be helpful to start by describing the
parties in a straightforward type of
transaction:
– A bill is an order by one person to another,
requiring that person to pay money to a third
person, or to bearer.

• The order is written and signed by (A) (the
drawer), and is usually addressed to his or
her bank (B) (the drawee). B is instructed to
pay C (the payee) money. B (the bank) may
pay out of A’s account, and when it does so,
it discharges its debt to A to the extent of
the payment made to C.
• These are the bare bones of the
transaction.
• The issues are expanded below.
Acceptance
• The drawee, B (the bank here), will probably be
asked to accept the bill as well as pay it.
• If B accepts the bill by signing it, he or she will
take primary responsibility for its payment.
• Cheques, however, are not usually accepted; the
bank merely acts as drawee and is not therefore
liable to the payee for the money, (although it
may breach its contractual duty to A, its
customer, if it does not pay on his or her
instructions).
Negotiation
• A bill may order the payment to be made at some
future date, and the payee, C, may not wish to wait
until the date of its maturity and may prefer to sell it
to someone else, probably at a discount.
• A bill which has been accepted by a reliable person
or institution, such as a bank, will provide assurance
of payment at maturity, and C will be able to
negotiate its sale (which will almost certainly be at a
discount because ready money is given for a right of
payment in the future) to another person, D.
Order or to Bearer
• If the bill is payable to Order (A will have specified
that payment should be made to C or to order), C
will have to indorse (sign) the bill to D to give a good
tile.
• C then becomes the first indorser of the bill and D
becomes indorsee or holder.
• If he or she has taken in good faith and for value and
the bill itself is in order, D will become holder in due
course (the holder in due course obtains title free of
any equities-the equivalent of bona
fide(genuine/real) purchaser for value).

• D may in turn sign the bill and deliver it to E, and it
may be passed from E to another and so on.
• When the bill matures, the current holder will be
entitled to receive payment, either from B, the
acceptor, or from one of the other parties.
• If the bill is a bearer bill, (that is it is not payable to
any specified person), there is even less difficulty
about negotiation, because the right to payment
passes with the physical possession of the bill; it
vests in the person who is the current holder
without any need for indorsement.
• This means that even a thief will be able to obtain
payment from the acceptor on such a bill.

(Indiana)
THE FORM OF BOE
• From the definition above, other requirements must
be satisfied:
– It must be unconditional
– In writing
– Signed by the drawer
– It may be payable on demand or
– At fixed or determinable future time, and
– Amount must be certain in money
• If the document does not satisfy all of these, it will
not amount to a bill of exchange and the transferee
will not obtain all the rights granted on the
negotiation of a negotiable instrument
(Indiana)
Unconditional order
• This means that there must be no qualification
which would make payment uncertain or give rise
to cumbersome inquiries
• E.g. a bill which specified “pay C when he passes
his exams” would not be valid even if C did pass
his exams:
• One which said “pay C’s estate on C’s death”
however, would be-death is not uncertain,
although the time at which it happens, of course,
is.
(Indiana)
• An instrument which requires as a condition of
payment of a receipt by the payee on the front or
reverse of the document is not a negotiable
instrument.
– Bavins and Sims V London and South Western Bank [1990]
1 Q.B. 270
• The plaintiff received an instrument in the form of a cheque
which read: “Pay to….provided the receipt form at the foot is
duly signed and dated”
• The instrument was stolen from the plaintiff, an indorsement
forged on it and the receipt form signed.
• In an action by the plaintiff against the collecting bank, it was
held that the instrument was not a cheque; it depended upon
the receipt being signed and was not therefore an unconditional
order.

(Indiana)
• Where, however, the condition or requirement embodied in the cheque is
not to be fulfilled by the drawee bank, but is a direction addressed to the
payee, the order is unconditional
– Nathan v. Ogden [1905] 94 L.T. 126
• A cheque drawn in the ordinary form contained a clause requiring a
receipt on the back of the cheque to be signed by the payee.
• The court held that the condition requiring the payee’s signature on
the receipt was addressed to the payee alone, and not to the bank;
consequently in this case, the instrument was a cheque.
– Thairlwall v. Great Northern Railway Company [1910] 2 K.B. 509
• A dividend warrant contained a note that it would not be honoured
after 3 months of the date of issue.
• The court held that the instrument was a cheque and the note did not
make the order conditional, since the words were merely a definition
of what was considered a reasonable time within which the warrants
were to be presented for payment, and it was in any case only a
direction to the payee to present the cheque within that time.
(Indiana)
• A cheque may further provide that the instrument must
be presented for payment within a certain period.
• This does not make the instrument conditional, but once
the given period has expired, the payee cannot insist on
payment of the cheque as against the drawer, although
the debt represented by it still remains owing.
• An order requiring payment from a particular account or
fund would not be valid, because there might be
inadequate funds when payment was required.
• An unconditional order to pay, however, coupled with an
indication of a particular fund-e.g. a bill worded “pay C
GhC x and debit my savings account” will be valid.

(Indiana)
• There must be a clear order to pay;
even if the expression of the order is
courteous, it must be a requirement
and not a request.
–Little v Slackford (1829) 1 M.&M. 171
• An instrument in the form “please to let the
bearer have £7…and you will oblige your
humble servant……,” was held to be a mere
request and not a demand on the bank.
(Indiana)
In Writing
• Writing include typewriting and printing,
although in practice this may be discouraged by
banks because of the ease with typewritten or
printed cheques can be fraudulently altered.
• The writing does not have to be in ink, but a
customer who writes a cheque by hand would
probably facilitate fraud by drawing it in pencil,
and might therefore be negligent; the bank
would probably return it unpaid. The writing
does not have to be on paper, although it must
not be written on metal ROWLAND ATTA-KESSON ESQ.
(Indiana)
Addressed by one person to another
• There must be one person as drawer, and
another, usually a bank, as drawee.
• The drawee must be named with reasonable
certainty, and may be an individual or a company.
• There may be one drawee or joint drawees, but
not drawees in the alternative or in succession.
• If the drawer and drawee are the same person,
the holder may treat the instrument either as a
bill of exchange or a promissory note.
(Indiana)
Signed by the drawer
• A bill or cheque, to be a valid instrument, must
be signed by the person giving it (the drawer) or a
person authorized by him or her.
• The instrument is not complete until the drawer
has signed it, so that a cheque form which is
otherwise complete is not valid cheque until
signed by the drawer or his her agent.
• The ‘mark’ of a person who is illiterate is a
satisfactory signature.
(Indiana)
To pay on demand
• A bill is payable on demand-that is, immediately-
either when it is expressed to be payable, or
when it is payable at sight or on presentation, or
when no time for payment is expressed.
• Payable at sight means that it is payable when it
is seen for acceptance or for payment. (This
differs from payable after sight)

(Indiana)
At a fixed or determinable future
time
• A bill may be said to be payable at a fixed period
after date or sight.
• If it is after sight (eg 90 days after sight) this
means that it becomes mature and therefore
payable only on the day which is 90 days after
acceptance or protest for non-acceptance.
• Similarly, if it is payable at a fixed period after an
event which is bound to happen (even if the date
of is uncertain), it is valid.
(Indiana)
• An event which is not certain to happen, like a
marriage, is a contingency, and a document
specifying a contingency is not a valid bill.
• If acceptance of a bill is the event, for example,
this is a contingency which makes the document
invalid as a bill.
• Williamson v. Rider
– The majority of the English CA came to the conclusion
that an instrument expressed to be payable “on or
before” a particular date is not valid because the
phrase does not state a fixed or determinable time:
the words give the payer an option to repay on any
day of his choosing before the date.

(Indiana)
• If the bill is said to be payable at a fixed period after
date, and the bill is undated, this is not fatal,
because a holder may insert the ‘true date of issue’.
• If the wrong date is inserted, a holder in due course
may still obtain payment, on the date which should
have been inserted, not on the incorrect date.
• Dates on a bill are presumed to be correct unless the
contrary is proved.
• A bill which is ante-dated or post-dated is not
invalid, and a post dated cheque is therefore valid as
a bill, though it is not a true cheque because it is not
payable on demand

(Indiana)
A sum certain in money
• A bill or cheque may be drawn or negotiated for
any sum of money but it must be for a certain
sum, which normally is expressed in both words
and figures.

(Indiana)
To or to the order of a specified
person or bearer
• A bill or cheque must specify the person who is entitled to
be paid-the payee, who may be a particular named
person, or the bearer, the person in possession of the
instrument
• If the bill is an order bill-e.g. if it states “pay A” or “pay A
or order”-the person named may present the instrument
for payment or may negotiate it to another person
• The latter case there must be an intention to transfer the
property, coupled with the delivery of the instrument.
• If the order bill has been made non-transferable, however,
by words such as “pay A only” or “not transferable” it may
not be negotiated.
(Indiana)
Bearer bill
• A bill is payable to bearer when it explicitly says “pay
bearer” or when the last or only indorsement is an
indorsement in blank-that is, when the last indorser has
simply written has simpley written his or her signature on
the back of the bill without specifying any person to whom
the bill is to be transferred.
• A bearer has the effect that any person in possession of
the bill may transfer it without indorsement.
• A bona fide transferee obtaining the bill, even from a thief,
has good title to it, and to the acceptor, if acting in good
faith, obtains a good discharge by payment to him or her.
There are obvious risks in such a bill.
(Indiana)
HOW PARTIES USE THE BILL
• The parties who sign a bill undertake liabilities
which interlock and can be thought of as a chain
of liabilities and rights.
• A transaction with a bill payable at a future date
to a specified payee who specially indorsees it to
another person can be described in stages in this
way:

(Indiana)
• A draws the bill on B, to pay C, and delivers it to C;
the bill is payable “60 days after sight”;
• C wishing to receive payment immediately,
negotiates the bill to D for an immediate (reduced)
payment;
• C writes on the back of the bill “Pay D” and signs it;
• D presents the bill to B for acceptance;
• If B accepts it, B may write: “Accepted, payable at X
branch,” date, and sign it;
• The bill will mature 60 days after the date of
acceptance;
• If B does not accept it, it is dishonoured for non-
acceptance, and D may immediately seek payment
from A or C;
(Indiana)
• D then negotiates the bill to E, who may in turn negotiate
it to F; who may negotiate it further;
• When the bill reaches maturity, the holder, say G, should
present it immediately to the acceptor for payment (if G
does not, the liability of the other parties is discharged);
• If B pays, the bill is discharged and B should cancle A’s
signature on it.
• If B does not pay, the bill is dishonoured by non-payment
and G should serve notice of dishonour as soon as possible
on A, C, D, E, and F and seek payment from the other
parties;
• If any of them pays the bill is discharged, because that
party has a right to sue the other parties on the bill;
• The bill is only discharged when there are no more parties
liable on it.

(Indiana)
• These are the parties in this transaction:
– A is the drawer
– B is the drawee, later the acceptor;
– C is the payee; when C indorses the bill to D, C
becomes the first indorser (D is the first indorser)
– D is the second indorser (E the third, F the fourth);
– Whichever of C,D,E,F and G possesses the bill is the
holder of it at that time.
– D, E and F may be holders in due course, but C, the
payee cannot be because bills are not negotiated to
the payee.

(Indiana)
• The relationships between these parties, the
problems which might arise and the appropriate
defences are examined as below
• Capacity:
– generally, any person with capacity to contract may sign a
bill; liability is co-extensive with the right to contract
– Any person with contractual capacity who signs the bill
will be bound as an indorser to a holder in due course,
even if he or she receives no value for it.
– A person whose signature has been forged does not incur
liability; indeed, the forgery of the drawer’s or indorser’s
signature invalidates the instrument as a bill so that a
holder cannot obtain a good title to it, although he or she
is given certain personal rights (by estoppel) against other
parties.

(Indiana)
NEGOTIABLE INSTRUMENT UNDER
GHANA LAW

(Indiana)
CLASSES OF NEGOTIABLE INSTRUMENTS:
• PROMISES TO PAY
– Those that are promises to pay money
– e.g. promissory notes and certificates of deposit
• ORDERS TO PAY
– Those that are orders to pay money
– E.g. cheques, drafts, bills of exchange, etc.
• LET US NOW CONSIDER A FEW KEY TERMS RELATING

TO NEGOTIABLE INSTRUMENTS BEFORE WE LOOK AT
THESE TWO (2) CLASSES CLOSELY.
(Indiana)
DEFINITION OF KEY TERMS:
[Section 97 of Act 55]
1. DRAWER
– The drawer is the party who draws a negotiable instrument.
2. DRAWEE
– The drawee is the party on whom the instrument is drawn.
3. ACCEPTOR
– When a drawee of a negotiable instrument signifies his
assent to the order of the drawer, he becomes the acceptor
of the instrument.

BL(Ghana); PPM. LLM.(MCL) (Indiana)
4. ACCEPTANCE
– Acceptance consists of the signification of the assent of
the drawee completed by delivery or notification of the
assent to the holder of the negotiable instrument.
5. PAYEE
– The payee is the party to whom the negotiable
instrument is payable.
6. MAKER
– The maker is the party who makes an instrument in the
form of a promissory note.
7. DELIVERY
– Delivery is the transfer of possession of an instrument
from one person to another whether actual or
constructive. [See Section 97 of Act 55]

(Indiana)
• ISSUE
– The first delivery of an instrument, complete in form,
to a person who takes it as a holder is known as the
issue of the instrument.
• NEGOTIATION
– An instrument is negotiated when it is transferred for
value to a person who then becomes entitled to hold
it and can sue on it in his own name.
– A bill payable to bearer is negotiated by delivery. Sec.
29(2)
– A bill payable to order is negotiated by the holder’s
endorsement completed by delivery. Sec. 29(3)
(Indiana)
• ENDORSEMENT
– Endorsement takes place when the name and/or the signature of the transferor
is written on the instrument and it is completed by delivery to the transferee.
• ENDORSER
– Endorser is the transferor whose name and/or the signature is written on the
instrument.
• ENDORSEE
– Endorsee is the person to whom an instrument is transferred by endorsement.
• BEARER
– A bearer is the person in possession of an instrument payable to bearer or on
which the last endorsement is an endorsement in blank.
• HOLDER
– The holder is the payee or endorsee of an instrument who is in possession of it,
or the bearer thereof

(Indiana)
PROMISE TO PAY
• CERTIFICATE OF DEPOSIT
– This is a promise to pay issued by a banker. By a certificate of
deposit, a bank acknowledges that it has received a deposit
from the depositor, and promises to repay the depositor upon
demand.
• PROMISSORY NOTE
– A promissory note is “an unconditional promise in writing
made by one person to another signed by the maker, engaging
to pay, on demand, or at a fixed or determinable future time, a
sum certain in money, to, or to the order of, a specified person
or to bearer.”
• Section 83(1) of Act 55
(Indiana)
ORDERS TO PAY
• CHEQUES (INCLUDING MONEY ORDERS)
– “A cheque is a bill of exchange drawn on a banker payable on
demand”.
– Section 72 of the Bills of Exchange Act (Act 55)
• BILLS OF EXCHANGE
– “A bill of exchange is an unconditional order in writing, addressed by
one person to another, signed by the person giving it, requiring the
person to whom it is addressed to pay on demand or at a fixed or
determinable future time a sum certain in money to or to the order
of a specified person, or to bearer.”
– (Section 1(1) of the Bills of Exchange Act, 1961 (Act 55))
• Thus if payment is conditioned on any contingency, the
instrument will be an invalid bill.
(Indiana)
• BANKER’S DRAFT
– IS A BANKER’S DRAFT A CHEQUE?
• Any draft payable on demand drawn by a banker upon himself,
whether payable at the head office or some other office of his
bank is considered a cheque;
• And the provisions of Sections 75 to 81 of Act 55
relating to cheques apply to such drafts and have
effect in relation to such drafts, as they have effect in
relation to cheques.
• OTHER CHEQUE SUBSTITUTES
– CAN OTHER DOCUMENTS SUBSTITUTE A CHEQUE?
• Any document issued by a customer of a banker which, though not a
cheque, is intended to enable a person to obtain payment from that banker
of the sum mentioned in the document; is considered a cheque;
• And the provisions of Sections 75 to 81 of Act 55 relating to
cheques shall apply to such documents and have effect in
relation to them, as they have effect in relation to cheques.

(Indiana)
DETAIL DISCUSSION OF THE VARIOUS
NEGOTIABLE INSTRUMENTS
• BILLS OF EXCHANGE
– Section 1(1) of the Bills of Exchange Act, 1961 (Act
55):
• “A bill of exchange is an unconditional order in
writing, addressed by one person to another,
signed by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a
fixed or determinable future time a sum certain in
money to or to the order of a specified person, or
to bearer.”

(Indiana)
• An unconditional order.
– Ordering the payment of money out of a particular fund is
conditional. – S. 1(3)
– An unqualified order to pay, coupled with an indication of a
particular fund out of which the drawee is to reimburse
himself is not conditional – Section 1(3)
– An unqualified order to pay, coupled with an indication of a
particular account to be debited with the amount is not
conditional. – Section 1(3)
– Guaranty Trust Co. of New York v. Hannay & Co. [1918] 2 K.B. 623,
635
– An unqualified order to pay, coupled with a statement
of the transaction which gives rise to the bill is not
conditional. – Section 1(3)
(Indiana)
•
NOTE
A bill may be accepted conditionally and such conditional or
qualified acceptance is valid. – Section 17(1)&(2)
• A drawer of a bill and any endorser may qualify in any way he
pleases, his liability to the holder. – Section 14(a)
– Payment must not depend on a contingency. E.g., Pay A (or We promise to pay
A) the sum of $20,000,000 if an event occurs:
• (We promise to pay …, on the death of George , provided he leaves
either of us sufficient money to pay the said sum, or if we shall be
otherwise able to pay it.)
– After someone marries.
– After someone gives birth
– After complying with certain terms
– On the sale of goods, produce or property
– On the honouring of drafts (or cheques) given to us by B which said drafts fall due on
(a future date) (say, April 10, 2007).
– 30 days after the arrival of the ship Paragon at Tema
• [All these examples are contingencies as they may or may not occur.
Thus if payment is conditioned on any such contingency, the
instrument will be an invalid bill -- void.]
(Indiana)
• An instrument expressed to be payable on a contingency is
not a bill, and the happening of the contingency event does
not cure the defect. – Section 9(2).
• Carlos v. Fancourt (1794) 5 T.R. 482, @485 per Lord Kenyon:
– “It would perplex the commercial transactions of mankind, if paper
securities of this kind were issued out into the world, encumbered
with conditions and contingencies, and if the persons to whom they
were offered in negotiation were obliged to inquire when these
uncertain events would probably be reduced to certainty.

(Indiana)
• Addressed by one person to another.
– Addressed by the drawer to the drawee.
– The drawer and the drawee of a bill can be the same
person. – Section 3.
– A holder of any such bill (having the same person as
both drawee and drawer) may treat it, at his option,
as either a bill of exchange or a promissory note. --
Section 3(2)
– In any case, the drawee must be named or otherwise
indicated in a bill with reasonable certainty. – Section
4

(Indiana)
• Signed by the person giving it.
– The person signing the bill is called the drawer.
– This is an essential feature of a bill of exchange.
– In its absence, an acceptance is inoperative.
– Even if an unsigned instrument is accepted by the drawee, it cannot be
treated as a promissory note of the acceptor.
– Signature essential to liability of the drawer. – Section 21.
– It can be a mark and such signing by mark should be habitual of the
person so signing.
– If signed by a mark, there is no need to prove that the person so signing
cannot write.
– If a bill is signed, it is a complete and regular bill, even if it is unaccepted
by the drawee.
– Signing an inchoate (incomplete) instrument gives the person in
possession of it a prima facie authority to fill up the omission in any way
he thinks fit! – Section 18(1). Such filling up should be within reasonable
time (a question of fact) and strictly in accordance with the authority
given. – Section 18(2).

(Indiana)
• BUT NOTE THE PROVISO! “… if any such instrument after
completion is negotiated to a holder in due course, it
shall be valid and effectual for all purposes in his hands,
and he may enforce it as if it had been filled up within
reasonable time and strictly in accordance with the
authority given! – Section 18(2)
• HOWEVER THIS PROVISO APPEARS VERY RESTRICTIVE!
– It should have been negotiated to the holder.
– The holder must be a holder in due course.

(Indiana)
• Requiring the person to whom it is addressed.
– The person to whom the bill is addressed is the drawee.
• To pay.
– When drawee undertakes to pay he is called the acceptor.
– An acceptance to pay must not express that the drawee will perform
his promise by any other means than the payment of money. –
Section 15(2)(b)
– The drawee is not liable to pay money to the payee or holder of the
bill until he accepts the bill. – Section 51.
– A verbal undertaken to pay is invalid. – Section 15(2)(a)
– Drawee’s mere signature on the bill, without additional words, is
sufficient. – Section 15(2)(a)
– A drawee who does not accept a bill is not liable on the instrument –
Section 51

(Indiana)
• WHY?
– Because, a bill of itself does not operate as an assignment
of funds in the hands of the drawee available for the
payment thereof. – Section 51.
– Brown, Shipley & Co. v. Kough (1885) 29 Ch.D. 848
• (Facts: Bill drawn by B&Co. on K in London was purchased by A in
America. B&Co. informed K by letter of advise on the same day
of the bill they had drawn on K in favour of A. K subsequently
refused to accept the bill. Held: Refusal valid. The direction on
the face of the bill did not operate as an equitable assignment.)
• The payee must be named or otherwise indicated
with reasonable certainty. – Section 5.
• To pay on demand or
– Section 8 of Act 55 (“If a bill of exchange is made payable at a never
so distant day, if it be a day that must come, it is no objection to the
bill.”)

(Indiana)
• At a fixed or determinable future time.
– Section 9 of Act 55.
– Uncertain –A promissory note payable with interest 12 months
after notice.
– On or before a given date (invalid) [Williamson v. Rider [1963]
1 Q.B. 89
– Twelve months after date (valid)
– After sight (if simply so stated, it is invalid!) NOTE the
distinction with at sight
– After sight is acceptance (so use a period after sight!). BUT At
sight is demand.
– If it’s a note, then after sight refers to exhibiting the note to the
maker. So it can be valid for notes.

(Indiana)
• A sum certain in money.
– A bill or note must be payable in money in specie or legal currency
– It must not order any act to be done in addition to the payment of money! --
Section 1(2)
– The sum must be certain
– It must be susceptible to contingent or indefinite additions or deductions.
– According to Section 7(1) a sum is certain even if it is required to be paid:
• With interest
• By stated instalments
• By stated instalments but with provision on full becoming due on default.
• According to an indicated rate of exchange
• According to a rate of exchange to be ascertained as directed by the bill.
– Sums in words trump sums in figures in cases of discrepancies. – Section 7(2)
– If figures higher than words evidence to explain difference is inadmissible.
– Inaccurate but intelligible statement of sum payable is valid.
• [Pound instead of Pounds]
• [Twenty-five, seventeen shillings and three is £25 17s. 3d.]
(Indiana)
• To or to the order of a specified person, or
– Such bills are referred to as order bills.
– The person so named in such bills is the payee
• To bearer.
– Such bills are referred to as bearer bills.
– If an instrument does not comply with these conditions is not a bill of
exchange.
– So though no precise form of words is essential to the validity of a bill of
exchange, any bill must comply substantially with the above requirements.
– However, if an instrument is defective as a bill or note, it may still be
evidence of an agreement.
• NOTE: SECTION 1(4)(a)-(c)
– A bill is not invalid merely because it is not dated
– A bill is not invalid because no value is given.
– A bill is not invalid because it does not specify place where drawn or
payable.
(Indiana)
LEGAL EFFECT OF DRAWING OR
INDORSING A BILL
• If a drawer draws a bill payable to a third party, it is a contract by the
drawer to pay the payee, his order, or the bearer, as the case may be,
conditionally on the acceptor’s (or drawee’s) failing to do so.
• The legal effect of accepting a bill, is an absolute contract, on the part of
the acceptor to pay the payee, his order, or the bearer as the instrument
may require.
• The legal effect of making a note, is an absolute contract, on the part of
the maker to pay the payee, his order, or the bearer as the instrument
may require.
• The legal effect of indorsing a bill is a conditional contract, on the part
of the indorser, to pay the immediate or any succeeding indorsee, or
bearer, in case of the acceptor’s default.
• The legal effect of indorsing a promissory note is a conditional contract,
on the part of the indorser, to pay the immediate or any succeeding
indorsee, or bearer, in case of the maker’s default.
(Indiana)
NEGOTIATING A BILL
• A bill is negotiated when it is transferred from one person to
another in such a manner as to constitute the transferee the
holder of the bill s. 29(1).
• A bill payable to bearer is negotiated by delivery s. 29(2)
• A bill payable to order is negotiated by the endorsement of the
holder completed by delivery s.29 (3).
• A person who acquires a negotiable instrument for value and in
good faith is entitled to ignore all previous claims to the
document.
• The most important type of negotiable instrument is the Bill of
Exchange: a Cheque is a kind of bill of exchange.
• The extensive body of case law and customary rules concerning
bills of exchange is codified in the Bills of Exchange Act 1960,
(Act 55).
(Indiana)
• NOTE: A BILL MAY NOT BE A NEGOTIABLE
INSTRUMENT!
• Section 6(1) of Act 55 provides that when a bill
contains words prohibiting transfer or indicating an
intention that it should not be transferable, it is valid
between the parties thereto but it is not negotiable.
• Why is this so?
• Also, since the essence of a bill of exchange is
negotiability, if a bill prohibits transfer -- and transfer
is indispensable in negotiability -- See s.29 (1) --
should it still be a bill of exchange?
– Yes! See Section 1 of Act 55 (which does not mention
negotiability in its definition of a bill) and Section 6(1)
(which permits such limiting of negotiability)!

(Indiana)
REQUIREMENTS OF NEGOTIABILITY
• In order that the holder of a negotiable instrument may have all the rights which
such a document can give, the following conditions must be satisfied:
– Value must have been given - this is the principle of consideration found in the law of
contract and which evidences that the agreement of the parties is a bargain. S. 25(1) (a).
• However, in the case of negotiable instruments past consideration is good
consideration, for example, a cheque is valid even if issued in settlement of an
existing debt. S. 25(1) (b).
• If the present holder of the instrument has not himself given value but some previous
holder had done so, the holder is a holder for value and he is given some measure of
protection. S. 25(2).
• Every party whose signature appears on the bill is prima facie deemed to have given
value s. 28(1).
– Secondly, the holder of the instrument must have acted in good faith i.e. honestly,
without knowledge of any defect in title of a previous holder. S. 90 of Act 55 says that a
thing is deemed to be done in good faith where it is in fact done honestly, whether it is
done negligently or not.
– Thirdly, the instrument must be complete and regular – that is, the instrument must
appear to be in order on the face of it:
• It must not be overdue or show signs of unauthorized alterations.
– The fourth requirement is that instrument must be deliverable (i.e., capable of transfer
by being physically handed over).
(Indiana)
•
BEARER BILL AND ORDER BILL
Sec. 6(2) provides that a bill may be payable either to order or to bearer.
• BEARER BILLS
– If the document is payable to any person who holds it, that is to the bearer, it can be
negotiated, i.e., transferred with good title, merely by delivery.
• Sec 6 (3) provides that a bill is payable to bearer which is expressed to be
so payable or if the only or last endorsement is an endorsement in blank
then the bill is a bearer bill. That is if the bill does not contain or mention
any name. Also where there are number of endorsements and the last
endorsement is an endorsement in blank.
• ORDER BILLS
– If it is payable to a named person or to his order that is, an order bill, then that
person must sign on the reverse side or indorse it in order to make the instrument
capable of being negotiated by delivery to the next holder.
• Sec 6(4) of Act 55 provides that a bill is payable to order which is
expressed to be so payable or expressed to be payable to a particular
person. In addition it must not contain words prohibiting transfer or
indicating an intention that is should not be transferable. An order bill is
negotiable and thus freely transferable.
(Indiana)
ENDORSEMENT
• Endorsement takes place when the name and/or the
signature of the transferor is written on the
instrument and it is completed by delivery to the
transferee. Instruments payable to order can only be
negotiated by endorsement of the holder and
completed by delivery.
• NOTE: Where a bill purports to be endorsed
conditionally, the condition may be disregarded by
the payer, and the payment to the endorsee is valid
whether or not the condition is fulfilled. See Section
31 of Act 55.
(Indiana)
CONDITIONS FOR ENDORSEMENT
• For endorsement to be effective it must satisfy certain
conditions. These conditions as laid down in Section 30 of Act
55 include the following:-
– It must be written on the bill itself and signed by the endorser. The
simple signature of the endorser on the bill without additional words
is sufficient. NOTE: An endorsement on an allonge or on a ‘copy’ of a
bill issued or negotiated in a country where ‘copies’ are recognised, is
deemed to be written on the bill itself.
– It must be an endorsement of the entire bill. A partial endorsement
does not operate as a negotiation of a bill. Thus an endorsement
which purports to transfer to the endorsee a part only of the amount
payable, or which purports to transfer the bill to two or more
endorsees severally is not an effective or valid negotiation.

(Indiana)
– Where a bill is payable to two or more payees or
endorsees who are not partners, all must endorse, unless
the one endorsing has authority to endorse for the others.
– Where, in a bill payable to order, the payee or endorsee is
wrongly designated or his name is mis-spelt, he may
endorse the bill as therein described, adding, if he thinks
fit, his proper signature.
– Where there are two or more endorsements on a bill,
each endorsement is deemed to have been made in the
order in which it appears on the bill, until the contrary is
proved.
– An endorsement may be made in blank or special or
contain terms making it restrictive.
(Indiana)
TYPES OF ENDORSEMENT
• An endorsement may be made in blank or special or
contain terms making it restrictive.
• BLANK ENDORSEMENT
• An endorsement in blank specifies no endorsee.
Section 32(1)
• A bill endorsed in blank becomes payable to bearer.
See Sections 6(3)&32(1)
• However, a bill endorsed in blank may be converted,
by any holder, into a special endorsement by writing
above the endorser’s signature a direction to pay the
bill to or to the order of himself or some other
person.
(Indiana)
• SPECIAL ENDORSEMENT
• A special endorsement specifies the person to
whom, or to whose order, the bill is to be
payable.
• As noted earlier, a bill endorsed in blank may be
converted, by any holder, into a special
endorsement by writing above the endorser’s
signature a direction to pay the bill to or to the
order of himself or some other person.

(Indiana)
• RESTRICTIVE ENDORSEMENT
• According to Section 33(1) of Act 55, an endorsement is restrictive if it:-
• Prohibits the further negotiation of the bill; or
• Expresses that it is a mere authority to deal with the bill as thereby directed, and
not a transfer of the ownership thereof.
• Examples:
– Pay Diana Mintah only
– Pay Joana Kwofie for the account of David Solomon
– Pay Martha Kwarteng or order for collection.
• According to Section 33(2) of Act 55, a restrictive endorsement gives the
endorsee the right to:
– (i) Receive payment of the bill
– (ii) Sue any party thereto that his endorser could have sued.
• However, a restrictive endorsement does not give the endorsee any power to
transfer his rights, unless the restrictive endorsement expressly authorizes the
endorsee to do so. (See Section 33(2) of Act 55). In cases where a restrictive
endorsement authorizes further transfer, all subsequent endorsees take the bill
with the same rights and subject to the same liabilities of the first endorsee
under the restrictive endorsement. Section 33(3) of Act 55.

(Indiana)
HOLDER, HOLDER FOR VALUE, HOLDER IN
• HOLDER
DUE COURSE
• Act 55 defines very carefully what is meant by a 'holder of a bill'.
• S. 97 says that holder “means the payee or endorsee of a bill or
note who is in possession of it, or the bearer thereof”.
• A person in possession of an unendorsed order bill is not a
holder, though he gave value for the bill, and cannot sue in his
own name. Good v. Walker (1892) 61 L.J.Q.B. 736.
• However, by Section 29(4), such a person in possession of an
unendorsed order bill, has the right to have the bill endorsed to
him (Section 29(4); Cook v. Hoosain Mia (1912) 33 N.L.R. 12), and
will become holder as from the date of endorsement, if
subsequently made. Day v. Longhurst (1893) 62 L.J.Ch. 334.
• A drawer of a bill to his own order (even if unendorsed), is the
holder thereof (upon its acceptance). Walters v. Neary (1904) 21
T.L.R. 146
(Indiana)
• HOLDER FOR VALUE
• S. 97 says a holder means a payee or endorsee or a bearer of a
bill.
• S. 97 says value means valuable consideration.
• S. 25 says valuable consideration may be constituted by any
consideration sufficient to support a simple contract including
past consideration Section. 25(1)(a)&(b).
• A holder for value would seem on the basis of these sections to
be a person who holds or is in possession of a bill for which
consideration has been given by the holder or someone else.
• Section 25(2) shows that the holder for value does not himself
need to give consideration.
• Also, every party whose signature appears on the bill is prima
facie deemed to have given value. Section 28(1).
• Also, a person may have knowledge of a defect in the bill and
still be a holder for value but such a person cannot be a holder
in due course.
(Indiana)
• HOLDER IN DUE COURSE
• Section 27(1) of Act 55 defines a holder in due course as
follows:-
• A holder in due course is a holder who has taken a bill,
complete and regular on the face of it, under the
following conditions, namely that:
– (a)he became the holder of it before it was overdue, & without
notice that it had been previously dishonoured, if such was the
fact; or
– (b)he took the bill in good faith and for value, & that at the
time the bill was negotiated to him he had no notice of any
defect in the title of the person who negotiated it.

(Indiana)
• A holder in due course holds the bill free from any defects in title of prior
parties.
• Section 27(2) lists some examples of acts that my cause a defect in title:
• When the person negotiating the bill obtained it or acceptance thereof by
– Fraud
– Duress
– Force and fear
– Other Unlawful means
– Or for an illegal consideration
– Or when he negotiates it in breach of faith
– Or such circumstance that amounts to fraud
• Its conclusively presumed that every party to the bill prior to him made a
valid delivery of it. Section 19(2)(b)( … in the hands of a HDC, a valid
delivery of the bill by all parties prior to him so as to make them liable to
him is conclusively presumed.)
• The person to whom a current and apparently regular negotiable
instrument has been negotiated, who takes it in good faith and for value,
obtains a good title to it even though his transferor had a defective title
or no title to it. Section 36(b)&(c).

(Indiana)
• (1) HOLDER
• Though the payee can be a holder for value, arguably,
the payee cannot be a holder in due course! Because bill
is issued to him; NOT NEGOTIATED TO HIM! For one to
be a holder in due course, the bill must have been
negotiated to him! – Section 27(1)(b).
• R.E. Jones Ltd. v.Waring & Gillow [1926] A.C. 670
• Lewis v. Clay (1897) 14 T.L.R. 149
• BUT see the case of Herman v. Wheeler [1902] 1. K.B.
361; Lloyds Bank Ltd. v. Cooke [1907] 1 K.B. 794 (CA)

(Indiana)
• (2) BILL
• The instrument must be a bill.
• It must have been ISSUED. An instrument is not a bill if it has not
been issued! See Sections 97 and 19(1). Ingham v. Primrose
(1859) 7 C.B. (NS) 82
• The instrument is not a bill if the purported signature of the
drawer is a forgery. Section 22
• The instrument is not a bill if the drawer has no capacity to
contract. Section 20 (1). Although such an instrument might not
be enforceable against the drawer or endorser of incapacity, it
may however entitle the holder to enforce it against any other
party thereto. Section 20 (2).
• The instrument is not a bill if the drawer of the bill or maker of
the note signs it in the reasonable belief that he is witnessing
someone else’s signature to another document. NOTE: The
drawer is in such cases entitled to a plea of non est factum. Lewis
v. Clay (1897) 14 T.L.R. 149.
(Indiana)
• (3) COMPLETE AND REGULAR
– The instrument must be complete and regular – that is, the
instrument must appear to be in order on the face of it: both front
and back. The expression therefore includes the endorsements. Arab
Bank, Ltd v. Ross [1952] 1 All E.R. 709, 715 per Lord Denning.
• Facts: The Pt bank sued as holders in due course of two
promissory notes made by the Dt in favour of “Fathi and Faysal
Nabulsy Company,” which were endorsed “Fathi and Faysal
Nabulsy”.
• Held: The endorsement was sufficient to pass a title but the bank
were not holders in due course as the endorsement was
irregular.
– So if there is anything on the instrument, or any omission, which should
put a transferee on inquiry, it will be difficult to claim HDC status.
– Even an alteration of the date is material and prevents a cheque from
being regular on the face of it.

(Indiana)
• (4) OVERDUE
• Section 34 deals with overdue bills.
• Section 86 deals with overdue notes.
• Sections 34(3) and 86 deal with bills and notes that are payable
on demand. [Section 8 defines bills payable on demand].
• Section 12 deals with the computation of time for payment of
bills that are not payable on demand BUT payable at a future
time. (Under section 12 such bills or notes are not overdue till
after the expiration of the three (3) days of grace). [Section 9
defines bills payable at a future time NOT on demand].
• Section 34(3) says that a bill payable on demand is overdue if it
appears on the face of it to have been in circulation for an
unreasonable length of time.
• Reasonable length of time is a question of fact.
• Section 86(2) gives guidelines on how to determine a
reasonable length of time.

(Indiana)
• (5) DISHONOUR
• Section 34(5) deals with dishonoured bills. A holder in
due course must not have any notice of any such
dishonour of the bill in question. According to Section
34(5), where a bill which is not overdue has been
dishonoured, any person who takes it with notice of the
dishonour takes it subject to any defect of title attaching
thereto at the time of dishonour BUT such a defect will
not affect a holder in due course who takes the bill
without notice of the dishonour. See section 27.

(Indiana)
• (6) GOOD FAITH
• The holder of the instrument must have acted in good
faith i.e. honestly, without knowledge of any defect in
title of a previous holder. Section 90 of Act 55 says that a
thing is deemed to be done in good faith where it is in
fact done honestly, whether it is done negligently or not.
• Mere negligence, however gross, not amounting to
wilful or fraudulent blindness and abstinence from
inquiry, will not of itself amount to lack of good faith,
but it may be evidence of notice.

(Indiana)
• (7) NOTICE
• Notice may be particular (express) or general.
• Particular notice is where the holder had notice of the
particular facts avoiding the bill.
– Midland Bank v. Reckitt [1933] A.C. 1, 19
• General notice is where the holder had notice that there
was some illegality or some fraud vitiating the bill, though
he may not have been apprised of its precise nature.
• A wilful or fraudulent absence of inquiry into the
circumstances, when they are known to be such as to
invite inquiry, will (if the abstinence from inquiry arose out
of a belief or suspicion that an inquiry would disclose a
vice in the bill) amount to a general or implied notice.
Jones v. Gordon
(Indiana)
• There must however be something to put the holder on inquiry!
– Guildford Trust v. Goss
• Facts: Money lenders took post-dated cheques in repayment of loans.
They were drawn by one partner, indorsed by another, and dealt with
by a third partner.
• Held: The facts did not put the transferees on inquiry.
• There is no question of constructive notice! Notice in section 27
refers to actual notice. The equitable doctrine of constructive
notice by which a man, who refrains through gross negligence
from making enquiries, is held to have had notice, is inapplicable
to negotiable instruments. Joint Stock Bank v. Simmons (per Lord
Herschell)
• Note section 27(3)!! – It implies that even if one had notice, so
long as he is not complicit in the fraud or illegality, and obtained
the title through a holder in due course,… he has a valid title.

• HDC MUST BE A HOLDER FOR VALUE
– A holder in due course must necessarily be a holder for
value. Value must have been given. S. 25(1) (a). Past
consideration is good consideration. S. 25(1) (b). Also, if
the present holder of the instrument has not himself
given value but some previous holder had done so, the
holder is a holder for value and he is given some measure
of protection. S. 25(2). But this is not the case when we
are dealing with HDC.
• Every party whose signature appears on the bill is prima facie
deemed to have given value s. 28(1). But this presumption will
be inapplicable to HDC.

LLB. BL(Ghana); LLM (Indiana)
PROMISSORY NOTE
• A promissory note is one kind of a Bill of Exchange. Section 83(1)
of Act 55 defines a promissory note as an unconditional promise
in writing made by one person to another signed by the maker,
engaging to pay on demand or at a fixed or determinable future
time, a sum certain in money to, or to the order of, a specified
person or to bearer.
• an unconditional promise
• in writing
• made by one person
• to another
• signed by the maker,
• engaging to pay,
• a sum certain in money
• on demand, or at a fixed or determinable future time,
• to, or to the order of, a specified person or to bearer
(Indiana)
• For cases discussing the characteristics of a
promissory note, see:
– Sabblah v. Tawiah [1966] GLR 145
– Directors of Orthodox Secondary School of Peki
v. Tawlma-Abels [1974] 1 GLR 419
• Section 84 provides that a promissory note
is inchoate and incomplete until it is
delivered to the payee or bearer.

CERTIFICATES OF DEPOSIT
• This is a promise to pay issued by a banker. By a

certificate of deposit, a bank acknowledges that
it has received a deposit from the depositor, and
promises to repay the depositor upon demand.
• Today, certificates of deposit are processed
electronically.

CHEQUES (INCLUDING MONEY
ORDERS)
• Section 72 of Act 55 provides that a cheque is
• Section 1(1) of Act 55 provides that “A bill of exchange is
an unconditional order in writing, addressed by one
person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum
certain in money to or to the order of a specified person
or to bearer.”

• A cheque must have the following characteristics:
– It must be an order
– The order must be unconditional
– It must be in writing
– Addressed by one person to a banker
– Signed by the person giving it
– Drawn on a banker
– Payable on demand
– Require the banker to pay
– On demand
– A sum certain in money
– To the order of a specified person or
– To bearer

• IS A BANKER’S DRAFT A CHEQUE?
• Section 82(b)
• “Any draft payable on demand drawn by a banker
upon himself, whether payable at the head office
or some other office of his bank;” is considered a
cheque; and the provisions of Sections 75 to 81 of
Act 55 relating to cheques shall apply to such
drafts and have effect in relation to such drafts,
as they have effect in relation to cheques.

• CAN OTHER DOCUMENTS SUBSTITUTE A CHEQUE?
• Section 82(a)
• “Any document issued by a customer of a banker
which, though not a cheque, is intended to enable a
person to obtain payment from that banker of the
sum mentioned in the document;” is considered a
cheque; and the provisions of Sections 75 to 81 of
Act 55 relating to cheques shall apply to such
documents and have effect in relation to them, as
they have effect in relation to cheques.

• CROSSED CHEQUES
• A cheque may be open or crossed.
• A crossed cheque is one which has two
parallel traverse lines drawn across its face
with or without words written on it in
addition to the crossing.
• When a cheque is crossed it can only be
paid to a banker.

TYPES OF CROSSING
• General crossing
– Where the cheque contains the two parallel lines simply it is a
general crossing. 75(1)(b)
– Where the cheque contains the two parallel lines with the words
“not negotiable” it is a general crossing. Section 75(1) (b)
– Where the cheque contains the two parallel lines plus the words
“and company” or any abbreviation of same between the two
parallel lines it is a general crossing. 75(1) (a)
– Where the cheque contains the two parallel lines plus the words
“and company” or any abbreviation of same between the two
parallel lines with the words “not negotiable” it is a general
crossing. 75(1)(a)

• Special crossing
– A special crossing is one which bears across its face an
addition of the name of a banker, 75(2)
– A special crossing is one which bears across its face an
addition of the name of a banker, with the words “not
negotiable” 75(2).
– In such cases the cheque is crossed specially and to
that specific banker. Sections 75(2) & 78(1).
– According to Section 78(1), a specially crossed cheque
is specific to the banker named and no other unless it
is crossed to an agent for collection and that agent
happens to be a banker.

• DETERMINATION OF A CHEQUE
• A banker’s authority to pay a cheque is
determined by:
– Countermand; that is stopping the cheque.
– Notice of the death of the customer;
– What of mental incapacity?
– What of bankruptcy?
– Where by contract banker is not required to
overdraw the account?


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ROWLAND ATTA-KESSON ESQ.

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9 ROWLAND ATTA-KESSON ESQ. LLB. BL(Ghana); Tuesday, February 27, 2018

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• LET US NOW CONSIDER A FEW KEY TERMS RELATING

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• This is a promise to pay issued by a banker. By a

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