THE UNIVERSITY OF DODOMA

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

COMPUTERIZED ACCOUNTING APPLICATIONS

(AF 223)

BILLS OF EXCHANGE

1.0 Introduction
1.1 Bill of exchange
A BOE is an unconditional order in writing, addressed from 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 rate, or at determinable future time, a sum certain of money to or in order of a specified
person, or to a bearer (Bills of Exchange Act, Cap. 215, R.E, 2002, section (3), sub.(1)).
A BOE is payable on demand if it indicates so or the date for payment has not been
indicated. And it is payable on future date if is provided so and the date for payment has been
indicated except on Sunday or public holidays.
1.1.1 Bearer
A person in possession of a bill or note for payment. Where a payee is fictitious or non-
existing the bill may be treated as payable to bearer (BOE Act, Cap.215, R.E, 2002, section
(7),sub.(3)).
1.1.2 Holder
A payee or endorsee of a bill or note who is in possession of it, or the bearer thereof.
1.2.3 Unconditional order
If an order contains a condition, then the instrument is not a BOE. For instance a note
containing a statement “Pay Mr. Jumbe Tshs. 50,000.00 on the condition that he delivers
10Kg of goods” is not a BOE.
1.2.4 Payable on demand
No time of payment is expressed on the BOE. When this is so, it is regarded as the ordinary
bill until when the date for payment on the bill becomes due then it is considered as the
BOE.

2.0 Validity of the BOE (BOE Act, Cap.215, R.E, 2002, section (4)).
A bill is not invalid by reason that;
 It is not dated.
 Does not specify the value given, or any value given thereof.
 Does not specify the place where it is drawn or the place where it is payable.

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3.0 Parties to a bill of exchange
3.1 The Drawer
A person who prepares the bill.
3.2 The Drawee
A person whose name the bill has been drawn. A bill may be addressed to two or more
drawees whether they are partners or not (BOE Act, Cap.215, R.E, 2002, section (6),
sub.(2)).
3.3 The Payee
A person to whom the bill has to be paid. A bill may be made to two or more payees jointly,
or it may be made payable in the alternative to one of two payees, or to one or some of
several payees, or a bill may be made to the holder of the office for the time being (BOE Act,
Cap.215, R.E, 2002, section (7), sub.(2)).
3.4 The Endorsee
A person to whom the bill has been transferred by way of endorsement by the payee.

4.0 Capacity of parties (The Law of Contract Act, Cap.345, R.E, 2002, section (11)).
 A person must be of age of majority according to the law to which is subject.
 Must be of sound mind.
 Must have not been disqualified from contracting by any law to which he is subject.

5.0 Circumstances which render a title of a person to be defective

Provided under The Law of Contract Act, Cap.345, R.E, 2002, section (14),sub.(2)) & (BOE
Act, Cap.215,R.E, 2002, section (29),sub.(2)).
Any agreement entered without taking into consideration the capacity to contract of either
party or is influenced by the following circumstances is said to be void and the title of the
person negotiated a BOE is defective:
 Coercion
 Mispresentation
 Fraud
 Undue influence
 Mistake

6.0 A BOE is said to be negotiable if it meets the following conditions

Provided under the BOE Act, Cap.215, R.E, 2002, section (8), sub (2-5)
 It is payable whether to order or bearer.
 It is payable to bearer whether it is expressed to be so payable, or on which only or the
last endorsement is the endorsement in blank.
 It is payable to order whether it is expressed to be so payable, or which is expressed to
be payable to a particular person, or does not contain words prohibiting transfer, or
indicating an intention that it should not be transferable.

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  It is either originally or by endorsement, is expressed to be payable to the order of
specified person, and not to him or his order, it is nevertheless payable to him or his
order at option.

5.0 Prerequisites for acceptance of BOE

Provided under BOE Act, Cap.215, R.E, 2002, section (17), sub.(2).
 BOE must be written and signed by drawee and the mere signature of the drawee
without additional words. Any party whose signature appears on a bill is prima facie
deemed to have become a party for value.
 It must not express that drawee will perform his promise by any other means than the
payment of money.

6.0 Holder in due course

Provided under BOE Act, Cap.215,R.E, 2002, section (29),sub.(1))
A holder is said to be in due course if;
 He became the holder of it before it was overdue, and without notice that it had been
previously dishonoured if such was the fact,
 He took the bill in good faith and for value, and that at the time the bill was negotiated to
him he had no notice of any defect of the title of the person who negotiated it.

7.0 Value and holder for value

7.1 A valuable consideration for BOE may be constituted by (BOE Act, Cap.215,R.E, 2002,
section (27),sub.(1));
 Any consideration sufficient to support a simple contract
 An antecedent debt or liability and such a debt or liability is deemed valuable
consideration whether the bill is payable on demand or at a future date.
7.2 Holder for value (BOE Act, Cap.215,R.E, 2002, section (27),sub.(2&3))
 Where the value at any time been given for a bill the holder is deemed to be the holder
for value as regard the acceptor and all parties to the bill who became parties prior to
that time.
 Where the holder of the bill has alien on it arising from contract or by implication of
law, he is deemed to be the holder for value to the extent of the sum for which he has a
lien.
7.3 Rights and privileges of the holder in due course
 A holder whether for value or not, who derives his title to a bill through the holder in
due course, and who is not himself a party to fraud or any illegality affecting it, has all
the rights of that holder in due course as regards the acceptor and all parties to the bill
prior to that holder (BOE Act, Cap.215,R.E, 2002, section (27),sub.(3)).
 He may sue on the bill in his own name.

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  Where he is the holder in due course, he holds the bill free from any defect of title of
prior parties, as well as from mere personal defenses available to prior parties among
themselves, and may force payment against all parties liable on the bill.
 Where his title is defective;
 If he negotiates a bill to a holder in due course, that holder obtains a good a complete
title and complete title to a bill,
 If he obtains payment of the bill the person who pays him in due course gets a valid
discharge for the bill (BOE Act, Cap.215,R.E, 2002, section (38)) & (BOE Act,
Cap.215,R.E, 2002, section (27),sub.(3)).

8.0 Liabilities of parties

8.1 Liabilities as acceptor (BOE Act, Cap.215,R.E, 2002, section (54))
The acceptor of a bill by accepting it;
 Engages that he will pay it according to the tenor of his acceptance
 Is precluded from denying a holder in due course
 The existence of the drawer, genuineness of his signature, his capacity and authority
to draw the bill
 In case of a bill payable to drawer’s order, the then capacity of the drawer to
endorse, but not the genuineness or the validity of his endorsement
 In case of a bill payable to the order of the third party, the existence of the payee and
the then his capacity to endorse, but not the genuineness or the validity of his
endorsement.
8.2 Liabilities as drawer or endorser (BOE Act, Cap.215,R.E, 2002, section (55))
8.2.1 The drawer of a bill by drawing it;
 Engages that on due presentment it shall be accepted and paid according to its tenor, and
that if it be dishonored he will compensate the holder, or any endorser who is compelled
to pay it, provided that the requisite proceedings on dishonor be duly taken.
 Is precluded from denying to a holder in due course the existence of the payee and his
then capacity to endorse.
8.2.2 The endorser of the bill by endorsing it
 Engages that on due presentment it shall be accepted and paid according to its tenor, and
that if it be dishonored he will compensate the holder, or subsequent endorser who is
compelled to pay it, provided that the requisite proceedings on dishonor be duly taken.
 Is precluded from denying to a holder in due course the genuineness and regularity in all
respects of the drawer’s signature and all previous endorsement.
 Is precluded from denying to his immediate or subsequent endorsee that was the bill at
the time of endorsement a valid and subsisting bill, and that he had then a good title.

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9.0 Promissory notes
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 fixed or determinable future time, a
sum certain in money, to, or the order of, a specified person or a bearer (BOE Act,
Cap.215,R.E, 2002, section (89),sub.(1)).
A note which is on the face of it purports to be both made and payable within Tanzania is an
inland note and any other note is foreign.
A promissory note may be made by two or more makers, and they may be liable jointly or
jointly and severally according to its tenor.
Where a note runs “I promise to pay” and it has been signed by two or more persons, it is
deemed to be joint and several note.
Unless otherwise provided, as stipulated under the BOE Act, Cap.215,R.E, 2002, section
(95),sub.(2), promissory note corresponds to BOE, where the maker of the note shall be
deemed to correspond with the acceptor of the bill, and the first endorser of the note shall be
deemed to correspond with drawer of an accepted bill payable to drawer’s order.
9.1 Liability of a maker
A maker of a promissory note by making it,
 Engages that he will pay it according to tenor.
 Is precluded from denying to a holder in due course the existence of the payee and his
then capacity to endorse.

10.0 Cheques
10.1 Definition of cheque
The cheque Act, 1969 section (1) defines a cheque as a bill drawn on a bank and payable on
demand.
Therefore, a cheque is an unconditional order in writing addressed by some person to a
bank, signed by the person giving it, requiring the bank to pay on demand a sum certain in
money to a specified person, or his order or bearer.
10.2 The difference between cheques and ordinary bills
 A cheque must be drawn on a bank and only payable on demand, while a bill can be
drawn on any person (including a bank) and payable on demand or at a fixed or
determinable future time.
 A cheque is not accepted by a bank, while a bill is acceptable. Acceptance is the way in
which the drawee becomes liable of the bill. The acceptance of the bill is the signification
by drawee of his assent to the order not the drawer. Thereafter the drawee becomes the
acceptor and the principal debtor of the bill. However the drawee is not obliged to accept
the bill.
 Only a cheque can be crossed.

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11.0 A cheque book and types of cheques
A cheque is printed by a bank and issued with other cheques to make a book (a cheque
book) with the name of the bank (and branch) and emblem printed on each cheque. Each
cheque also carries the cheque number, bank number and account number. Furthermore,
there are printed words and open spaces left for words to be filled in. An important fact is
that all these appear on one side of the cheque, and the other side is usually left blank.

12.0 Material parts of a cheque

12.1 Date
This is the date of the cheque and it shows when the order was made on the banker. If there
is no date on the cheque it is said to be incomplete and the drawer or the customer or payee
can complete or the customer or the payee can complete it by filling in the date. But if the
cheque has a date in the future then it cannot be paid as it is post-dated. It can only be paid
on or after the date shown on the cheque.
If the cheque is of a distant past i.e. six months and or beyond it is said to be stale or expired
and it cannot be paid too.
12.2 Name of Payee
Payee is the person who is supposed to be paid by the banker on drawer’s order. The payee
can be the customer himself or any other named person.
The person drawing a cheque has to fill the name of the payee otherwise the banker will not
know who to pay. After the payee’s name follows printed words or order and sometimes or
bearer.
12.3 Amount
A bill of exchange (including cheques) is by definition an order to pay a sum certain in
money. This is a very important part of a cheque. One of the characteristics of a bill of
exchange is that of certainty. A bill has to be clear especially on the amount involved (called
tenor). To be sure of this, the amount is usually written both in words and figure. Both have
to agree. Where there is a difference between the amount in words and figure, the banker is
bound to take the amount in words as the correct amount to be paid. In case of doubt, the
banker can dishonor the cheque.
12.4 The signature of the drawer
A cheque is basically an order to pay. Unless the cheque is signed there will be no order and
it will not be a cheque.
If a cheque is not signed it is most probably incomplete and the drawer can complete it
before presenting it again. A cheque with a signature different from specimen signature kept
by the bank will not be paid as it has no order (or mandate) of the customer. There is
nothing the payee can do to be paid except to get another cheque from the drawer.

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13.0 Types of cheque
13.1 Bearer and Order Cheques
A cheque is bearer if it is payable to bearer i.e. any one or person in particular. This means
any person who presents it over the counter can get paid. Normally such cheques will be
written “ Pay Msambwije or bearer”. Here the identity “Msambwije” is not important since
any person i.e. bearer can get paid.
This type of cheque can be equated to a cheque payable cash.
A cheque is an order cheque if it is to be paid to a person or to the order of that named
person or his order. Thus a cheque written “Pay Msambwije or bearer” is an order cheque
because the payee be Msambwije or a person to be named as payee by Msambwije.
13.2 Pay Cash or Order Cheques
Sometimes account holders write personal cheques (i.e. cheques payable to themselves) by
filling in the word “Cash” in the space for the payee’s name such that the mandate reads
“Pay cash or order”.
Such cheques are treated as bearer cheques because “cash” is not a named payee or a person
who can endorse the cheques to anyone else so as to make it payable to order. With such
cheques it is the intention of the drawer to get cash and not intended that the bill/cheque
circulate any further.
If a bearer cheque falls into wrong hands and it is presented for payment, it will be paid and
the loss falls on the drawer.
13.3 Open and Crossed cheques
A cheque is said to be “open” when there is nothing on its face to show that it is to be paid
otherwise other than cash to payee or any person presenting it for payment. The most
common example is a cheque drawn by a customer in favor of himself, so as to get cash
from the bank. Such a cheque will have no other “directives” on its face apart from the usual
i.e. date, name of payee, amount and signature.
A crossed cheque is therefore a cheque marked in such a way that the bank has to pay it
through an account. The aim of crossing being to remove the cheque from being paid over
the counter.

14.0 Crossing a cheque

Crossing means drawing two parallel lines on the face of a cheque with or without words.
The words which normally accompany the lines (places between the lines) are;
“& Co”, or “Not Negotiable”, or “Payee’s Account Only”, or “CRDB Bank PLC Only”.
A crossing of two lines with no words means the cheque has to be paid through an account
but does not specify the bank.
Such crossing is known as general crossing. Similarly where the crossing consists of two
lines with the words “& Co”, or “Not Negotiable”, or “Payee’s Account Only” are also
known as general crossing.

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 The crossing becomes special crossing if there is the name of a bank indicated as part of the
crossing. This means the cheque must be paid into an account at the named bank.
More likely than not, the words NOT NEGOTIABLE will accompany the crossing whether
general or special.
Where a person takes a crossed cheque which bears on it the words “Not Negotiable” he
shall not have and shall not be capable of giving it a better title to the cheque than that
which the person from whom he took it had (BOE Act, Cap.215,R.E, 2002, section (81)).
This means that if a cheque is stolen and the person who gets it, even for value, does not
acquire the right to money represented by the cheque and he can give no right to the money
to any other person i.e. the negotiability of the cheque is arrested.

15.0 Altered cheques

Not all alterations (changes) on the cheque will make it invalid. In order to make a cheque
invalid and not payable, the alteration must be material i.e. touching on the material parts of
the cheque and must be authorized by the drawer.
When alterations are made without the consent of the drawer they in effect change the
character of the order of the drawer. The banker would have no justification to debit the
customer’s account.
When a cheque is paid and it shows alterations on its face the question will always be
whether or not such alterations were authorized by the customer. The banker will argue that
the alterations were either made by the customer or were authorized by him.

16.0 Blank cheques

Strictly speaking, a blank cheque is not a cheque since it does not bear any person’s order. It
is mostly known as a cheque leaf.
Where a blank cheque is stolen and a thief fills in the particulars in the material parts of it,
then the banker will have no reason to refuse to pay, even if the cheque is filled at the
counter. As per BOE Act, Cap.215,R.E, 2002, section (20), the payee will be completing an
incomplete bill.
Where a cheque is completely blank without a drawer’s signature, an attempt to sign it
would be forgery and even if the forger is so skillful and the banker fails to notice the fraud,
it will still pay the forged document.
It can be seen therefore that a signed blank cheque is not that blank. It can facilitate fraud;
the blank cheque is reinforced with crossing so that it is ultimately paid through a bank
account.

17.0 Endorsement of cheques

An endorsement is a mark or writing on the back of the cheque made intentionally to order
the drawee on how or to whom the cheque should be paid.

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 An endorsement can be a way of passing title from the endorser to the endorsee but can also
be for other purposes.
Where endorsement is for the purpose of transferring title, then there must be evidence to
show there was an intention to transfer money from one person to another.

18.0 Types of endorsement

18.1 Special endorsement
In a special endorsement, the name of the person to whom, or to whose order, the cheque is
payable is specified. There is no doubt as to who the payee is. Even if the words ‘or order’
are not included in the cheque, the cheque is still payable to the payee or his order. This is
because a cheque or endorsement, if it is made payable to a specified person and not to that
person or his order, may be payable to him or his order at the option of the payee. If X
writes above his own signature “Pay Y or order”, it would constitute a special endorsement.

18.2 Blank endorsement

An endorsement is blank where the payee does not name a specific person to be the
endorsee, but puts only his signature on the cheque. The effect of this is that this cheque
which contains a blank endorsement is payable to bearer.
Blank endorsement must be the only or the last endorsement in order for it to be payable to
bearer. For example, if X signs on a cheque which is payable to X or order, endorses it by
only affixing his signature, such an endorsement is blank and the cheque is payable to bearer
on mere production of the cheque.
18.3 Restrictive endorsement
An endorsement is restrictive when it has the effect that the cheque may not be further
negotiated. It is restrictive if the cheque contains a provision that the endorsee is only
authorized to deal with the cheque as prescribed and not to transfer ownership of the cheque.
For example: “Pay D Only”, or “Pay D for the account of X”, or “Pay D or order for
collection”.
The effect of a restrictive endorsement is to confer the right to receive payment of the bill
and to sue any party whom the endorser could have sued for the payment of the cheque. He
may not transfer his rights as endorsee unless he is specifically authorized by the
endorsement to do so.
18.4 Conditional endorsement
If a cheque is conditionally endorsed, the drawee may disregard the condition and pay the
endorsee whether or not the condition has been fulfilled or not.
Example: “Pay to X or order the amount of Tshs. 100,000/- when X permanently resides in
Dodoma”. If X was paid before he permanently resided in Dodoma, such a payment would
be valid.

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19.0 Discharge of cheques
To discharge a cheque means to make it cease to be an order on a banker for payment, to
extinguish all the rights and liabilities arising on it. In short to make it worthless.
19.1 Different ways to discharge a cheque
19.1.1 Discharge by payment in due course
This happens when the paying bank pays the holder the proceeds of the cheque in the
normal course of business and the cheque is duly stamped “PAID”. Once a cheque is paid,
it ceases to have any validity and cannot be negotiated or be sued upon.
If a cheque is paid but not in due course e.g. if the endorser has to pay it instead of the
drawer it is not discharged. It can still be sued upon by the endorser who was forced to pay
it.
19.1.2 Discharge by waiver
Waiver means “Letting it go” or forgiving the debtor and releasing him from the
obligation to pay. With cheques, this can be done either expressly in writing or it can be
implied from the conduct of the payee e.g. where the payee/holder intentionally cancels
the cheque or where intentionally lets it to lapse.
19.1.3 Discharge by material alteration
Where the material parts of the cheque are changed or altered, it ceases to be a cheque and
a banker is no longer obliged to pay.
19.1.4 Discharge by merger
Merger occurs when the drawer or endorser becomes one and the same person with the
payee. This happens where the cheque is negotiated back to the drawer or endorser. It
becomes obvious that the drawer or endorser and payee are one and the same person and
its mandate cancels out. Nobody is liable on it.

20.0 Payment of cheque

A cheque is essentially an order to the bank to pay a named person from the account of the
customer. The payee is sometimes the customer him/herself, where s/he can draw a cheque
in favour of her/himself e.g. when s/he wants to draw cash.
Payment of cheque is generally taken as a conditional payment. This is because in between
the time of issuing the cheque to payee to the time of its actual presentation to the banker for
payment anything can happen to deny payment to the payee.

21.0 Some problems associated with payment of cheques

 A banker paying a wrong person.
 A banker paying a proper payee but contrary to the instructions of the customer.
 Paying into a wrong account.
 Refusing to pay.

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22.0 Conditions for payment
The duty to pay the customer’s cheque is not absolute; it depends on a number of factors
such as:
22.1 Availability of fund
The banker has the duty to pay the cheque as presented and to pay it in the sum certain. The
underlying assumption is that there is sufficient fund to satisfy the cheque and to keep the
account open. If the fund is not sufficient to meet the cheque or if it is just sufficient, the
banker can refuse to pay except if the customer wishes to close the account.
Where the bank refuses to pay a customer’s cheque, this is called dishonor of a customer’s
cheque. The usual words accompanying dishonor are “Refer to drawer”.
Where the cheque presented needs clearance before it is paid, the banker will be right to
refuse to pay until it is cleared.
22.2 Correctness of the cheque
A cheque being a BOE must carry its own validity on its face. Apart from certainty, a BOE
should be seen to be valid. If a cheque shows elements or signs of irregularities or such
things like erasures, changes in writings, additional wordings, alterations without initialing
them, the banker may refuse to pay since such a cheque is not proper or regular on its face.
Besides, a cheque can be dishonoured if it is incomplete and also if there are obvious
mistakes or incorrect matters in the material parts of the cheque.
22.3 Proper presentation of a cheque
A banker’s duty to pay does not arise unless and until the cheque has been duly presented
for payment.
The customer or payee has the duty to present the cheque for payment and this duty is
discharged when the cheque is presented:
 At the bank where the drawer has an account
 During working hours
 Before the cheque is overdue
22.4 The validity of order to pay
The order to pay will be valid if:
 The drawer signed the cheque and the signature(s) is/are genuine
 The drawer is alive, or if he is dead then the bank has no notice of death. In case of a
company, no notice of receivership, liquidation etc has been served on the bank.
 The drawer is not bankrupt.
 The cheque has not been countermanded.
 The account of the drawer is not subject to withdrawal by another cheque.
 There is no garnishee order from court of law.
The death of the customer terminates the banker-customer relationship as soon as the banker
has a notice of death. Even where a personal representative of deceased is appointed, he
does not carry on with the account. He must start afresh (BOE Act, Cap.215,R.E, 2002,
section (75)).

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22.5 Effect of garnishee order
A garnishee order is an order from the court of law requiring the bank not to pay out either
any money or a specified amount of money from a customer’s account until directed
otherwise.
There are various reasons why courts issue orders, but the important point that once a bank
receives such order payments of customer’s cheques may not be made.
The important things to note about the garnishee order are;
 In order to be effective, the order must be correctly drawn and be complete in every
detail, signature, seal of the court, identity of the customer and the like.
 A garnishee order is effective as of its date and the date it is served on the bank. It
affects or rather blocks transactions on the future.
 It attaches the customer’s money with the bank as at the time it is presented and served
upon the bank.
Payment will only be done when a cheque is cleared for payment, and at this point we say a
cheque will have been paid conditionally.

23.0 The protection of the paying bank

As stipulated under BOE Act, Cap.215,R.E, 2002, section (60,75&80) & Cheque Act, 1969
the paying bank is protected under the following scenarios;
23.1 Paying on forged endorsement
BOE Act, Cap.215,R.E, 2002, section (60) stipulates the fact that the banker who pays a
BOE when the endorsement is forged or was not given under the authority of the person it
purports to be.
The banker can invoke this protection by showing that the payment was made:
 In good faith
 In the ordinary course of business
The key word is that the banker must have acted honestly in paying the cheque.
23.2 Paying cheque not endorsed or irregularly endorsed
Cheque Act,1969, section (2) has extended the protection even further to cover irregular
endorsements. Thus bankers’ protection is almost absolute even for drafts so long as
payment is done in good faith.
BOE Act, Cap.215,R.E, 2002, section (91) provides that “A thing is deemed to be done in
good faith within the meaning of this ordiance where it is in fact done honestly whether it is
done negligently or not”.
23.3 Protection in relation to crossed cheques
A crossing cheque is material part of a cheque. It orders the banker as to how the cheque
should be paid. BOE Act, Cap.215,R.E, 2002, section (80) protects a banker who pays the
cheque according to the crossing such that the cheque being paid to a different person, it
will be deemed to have been paid to the owner.

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 Again the protection is available if the banker paid the cheque in good faith and without
negligence.

24.0 A collecting banker

Simply stated, a banker is called a collecting banker when it is called upon to collect as an
agent of its customer, the proceeds on a cheque drawn on another banker. The collecting
bank will have no interest in the proceeds except to make sure that the money will be paid
into the customer’s account.

25.0 Duties of a collecting banker

25.1 Good faith
As an agent of the customer, the collecting banker in a fiduciary relationship and has to act
in good faith.
25.2 To act diligently i.e. without negligence
Negligence can be the failure of a person to take due care where the circumstances demand
that such care be taken.
To act diligently, the collecting banker should check:
Endorsement, name of payee, signature of the drawer, crossings.

26.0 Statutory duties of the collecting banker

The law stipulates specific duties for collecting banker viz:
26.1 Duty to present cheques without delay
BOE Act, Cap.215,R.E, 2002, section (45) provides that the collecting banker has a duty to
present the cheque to the drawee bank for payment and to do so without delay.
The drawer and endorser (if any) may be discharged if the cheque is not presented promptly.
The question of time has nothing to do with the cheque becoming “stale” or expiring,
although these may as well happen.
Possible consequences of delay:
 Drawer may become insolvent
 Drawer may become bankrupt
 Endorser may be discharged
 Drawer may die
 Drawer may suffer damage as a result of delay (BOE Act, Cap.215,R.E, 2002, section
(74)).
26.2 Notice to dishonor
When the drawee bank dishonours the cheque presented for collection the collecting bank as
an agent of the customer (payee) should give notice to customer to the effect that his cheque
has been dishonored. The customer can give notice to the drawer or endorser as the case
may be.

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 A notice to dishonor is normally a formal document but it will be enough if the collecting
bank hands back the returned cheque to the customer.

27.0 The protection of a collecting bank

Cheque Act, 1969, section (5) provides the following:
Where a banker in good faith and without negligence (sect (5), sub. (1);
 Receives payment for a customer of an instrument to which this applies, or
 Having credited a customer’s account with the amount of an instrument to which this
section applies, receives payment thereof for himself, and the customer has no title, or
has a defective title, to the instrument, the banker shall incur no liability to the true
owner of the instrument by reason of having received payment thereof.

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