❶INTRODUCTION

• It looks at the legal regime that governs the relationship

between the Bank and its Customer(s).
Customer(s)

• It seeks to define what a Bank is, and who a Customer is, and
the implication of their relationship.

• Describe the various contractual relationships between a

Bank and its Customer

• Their respective rights and obligations, and the general legal

framework that governs their conduct.

• Describe the various circumstances under which the

relationship may be terminated 1
❷BANKER/CUSTOMER RELATIONSHIP
¶ What is a Bank?
Bank
ᴥ a body corporate which is issued with a licence in
accordance with the Banking Act, to carry on the business
of banking –
s.90 of the Banking Act, 2004 (Act 673)
ᴥ Banking Business means;
(a)Accepting deposits of money from the public, repayable
on demand, or otherwise, and withdrawable by
Cheque, draft, orders or by any other means;

2
BANKER/CUSTOMER RELATIONSHIP CONTINUED

(b) Financing, whether in whole or in part or by way of

short, medium, long term loans or advances of trade,
trade
industry,
industry commerce or agriculture,
agriculture and

(c) Any other business that the Bank of Ghana may

prescribe or recognise as being part of the business of
banking
† The Permissible activities of a Bank are;
1. Accepting deposits from the public

2. Lending

3. Financial Leasing
3
4. Investments in Financial Securities
 Money Transmission Services
 Issuing and administering means of payment; credit cards,
traveller’s Cheques and Bankers’ Drafts
 Guarantees and Commitments
 Trading for own account or for account of customers in
 Money Market Instruments
 Foreign Exchange
 Transferable Securities
 Participate in the issue of securities and provision of related services
 Advice to undertakings on capital structure, acquisition and merger
of undertaking
 Portfolio Management and advice
 Keeping and administration of securities
 Credit Reference Services
 Safe Custody of valuables
4
 Electronic Banking
BANKER/CUSTOMER RELATIONSHIP CONTINUED
¶ Who is a Customer?
Customer
†The Banking Act does not define a Customer
†The Common Law definition of Customer
ᴥ a person who has an account with a Bank – La cave
& co v Credit Lyonnais
- A person who is about to open an Account , may be regarded
as a Customer – Woods v Martins Bank
- The fact that the Bank renders some form of service to a
person does not make him a Customer, in the absence of an
Account – Great Western Railway Co. v London & County
Banking Co. Ltd.
5
BANKER/CUSTOMER RELATIONSHIP CONTINUED
¶Basis of the Banker/Customer Relationship
(1) Contractual

(2) Debtor / Creditor

(3) Principal / Agent

(4) Bailor / Bailee

(5) Trustee / Beneficiary

(6) Adviser / Client

(7) Mortgagor / Mortgagee

6
BANKER/CUSTOMER RELATIONSHIP CONTINUED
• Implied terms of the contractual relationship between the Bank and
its Customer are;
(1) The bank undertakes to receive money and collect bills for its
customer;
(2) The proceeds received are borrowed by the bank with a promise
to repay against orders of the customer during banking hours;
(3) The bank undertakes not to cease business with the customer
without reasonable notice;
(4) The bank is not liable to repay until a demand has been made by
the customer
(5) The Customer undertakes to exercise reasonable care in
drawing his Cheques .
(6) The Bank owes a duty of secrecy to the Customer. – Joachimson v
Swiss Bank
Corporation

7
BANKER/CUSTOMER RELATIONSHIP CONTINUED
¶Duties of the Bank (to its Customer)
(1) To receive the customer’s cash, cheques and other instruments
for collection – Joachimson v Swiss Bank Corporation
(2) To honour customer’s cheques to the extent that;

(a) the amount is up to his credit balance

(b) the cheque appears to be regular on the face
(c) it is presented during banking hours at the account
holding branch or another branch of the bank.

8
BANKER/CUSTOMER RELATIONSHIP
CONTINUED
(3) To keep the customer’s affairs and status in confidence and
secrecy except;
(a) under compulsion of law
(b) public interest
(c) bank’s interest
(d) consent of the customer
- Tournier v National Provincial & Union Bank of
England
(4) To give reasonable notice before closing a current account -
Prosperity Ltd v Lloyds Bank

9
BANKER/CUSTOMER RELATIONSHIP CONTINUED
(5) To honour the word of its authorised agent –
Box v Midland Bank

(6) To exercise reasonable skill and care in carrying out

Customer’s instructions.

(7) Inform Customer if his signature has been forged on a

Cheque

(8) To supply a Statement of Account;

10
BANKER/CUSTOMER RELATIONSHIP
CONTINUED
 Inaccuracies in a Statement of Account
 A mistake by the Bank in over-crediting the account of the
Customer does not entitle the Bank automatically to reverse
the transaction.
 If the Customer shows that he has relied on the information
provided by the Bank and has altered his position in reliance
on same, the Bank would be estopped from disputing the
correctness of the statement – Lloyds Bank v Brooks
 Similarly, if the customer has acted to his detriment in
reliance on the statement of account submitted by the Bank,
the Bank would be estopped – Holland v Manchester &
Liverpool District Banking
11
BANKER/CUSTOMER RELATIONSHIP CONTINUED
 The Bank may be able to rectify errors within a
reasonable time if the customer has not been misled;
transaction reversed before customer sees it; or
 Customer has no basis to be misled; an extremely huge
amount being credited to the amount without any
expectation.
 A customer is not obliged to examine his statement of
account furnished by a Bank – Tai Hing Cotton Mill Ltd v
Lui Chong Hing Bank
 To place customers under such an obligation, Banks
should make it an express term in the contract and also
furnish the customer with all debit and credit vouchers.

12
BANKER /CUSTOMER RELATIONSHIP
CONTINUED
 The Tournier Case:
 Tournier was a customer of the Bank and had an overdrawn
account. The Manager of the Bank, called Tournier’s employers
to ascertain his home address. In the course of the conversation,
the Bank Manager divulged an unsolicited information to
Tournier’s employers that his account was overdrawn, was not
repaying the debt, and suspected Tournier was a heavy gambler.
Based on this information, Tournier was dismissed from his job.
He sued the Bank, and the court held that the Bank owed him a
duty to keep his affairs confidential, and that the Bank breached
this duty when it disclosed the status of his account to his
employers.
 The case laid down the four (4) exceptions to the Banker’s duty
of confidentiality owed to its customers indicated already (see
slide 9).
13
BANKER/CUSTOMER RELATIONSHIP -
CONTINUED
The Banking (Amendment) Act, 2007, Act 738, has provided
further statutory exceptions to the Banker’s duty of
confidentiality as follows;
1. A Customer who has defaulted on credit or charged card,
leading to its cancellation;
2.Customer is declared bankrupt, or in the case of a
company, being wound up;
3. Customer has passed away, and information is required by
his personal representative;
4.Civil proceedings between the Bank and the Customer or
the Account.
5. Information required by a colleague in the Bank or the
Auditor who requires or is entitled to know the information 14
in the course of his professional duties.
BANKER/CUSTOMER RELATIONSHIP - CONTINUED
6. Information required by another bank to assess credit
worthiness;
7. Bank is served with a Garnishee Order attaching money in
the Customer’s Account;
8. Upon the orders of the Court

9. Suspicious Transactions Report to the Financial

Intelligence Centre established under the Anti-Money
Laundering Act.
10. Information required by the Headquarters of a Bank
outside Ghana but with a branch in Ghana.
¶ The Banking Act as amended has placed both Directors and
Employees under an obligation to take an Oath of
Confidentiality regarding customer affairs. 15
BANKER/CUSTOMER RELATIONSHIP-CONTINUED
¶ Duties of the Customer (to the Bank)
(1) To exercise reasonable care in writing his cheque or
other authorisation so as not to mislead the Bank or
facilitate fraud. - London Joint Stock Bank Ltd v McMillan & Arthur
(2) To advise the Bank immediately he discovers his
signature has been forged on a Cheque or his Cheque
book is stolen. – Greenwood v Martins Bank
(3) To pay any overdraft immediately on demand. – Williams
and Glyn’s Bank v Barnes

(4) To
pay reasonable charges for the services rendered in
handling the Account. - Spencer v Wakefield – acquiescence by
customer was sufficient basis to entitle the bank to charge in the absence of express
agreement on rates or commissions.
16
BANKER/CUSTOMER RELATIONSHIP -
CONTINUED
¶ Bankers’ Opinion (Status Enquiry)
ᴥ They are statements relating to the position of a Customer or his
Account given by a Bank in response to a request usually from
another Bank (acting on behalf of its Customer).
ᴥ The right of the Bank to give such opinion is implied upon the
Customer opening an Account with the Bank.
ᴥ There may be risk associated with the exercise of this right if
not done carefully;-
(a) Libel
(b) Fraud
(c) Breach of contract by unauthorised disclosure
(d) Negligence
17
BANKER/CUSTOMER RELATIONSHIP -
CONTINUED
¶ Guidelines in replying to an enquiry
(1) Exercise great care in drafting – write on facts.

(2) Rely on facts within your knowledge and from the

Accounts. No outside opinion.
(3) Don’t be specific on the exact state of the Account. Be
general, unless specifically requested.
(4) If it relates to a company, disclose, if there are any
debentures.
(5) Usually put in a disclaimer

(6) It should be given by an authorised officer of the Bank.

Authorised officer incurs no personal liability.
(7) Keep a record of the requests and the replies.
18
 BANKER/CUSTOMER RELATIONSHIP-CONTINUED
¶Appropriation of payments
ᴥ It arises where a Customer owes more than one debt to the
Bank, and pays in money that cannot fully pay all the debts.
ᴥ where the Customer indicates which debts the payment
should be applied to, or that it is meant to meet certain
Cheques issued, the Bank must observe the instructions.
ᴥ if the Customer gives no indication as to how the payment
should be appropriated, then the Bank has the right to
appropriate in accordance with the rule in Clayton’s case
which is to the effect that, where there is a continuous,
unbroken, running account with payments in and out, in the
absence of appropriation by the person paying in, or failing
him, the person receiving payments , the earlier payments –
in are, in the absence of special circumstances, applied to the
debits in strict chronological order. 19
BANKER/CUSTOMER RELATIONSHIP-CONTINUED
¶Bankers’ Set Off
ᴥ it is the right of the Bank to combine or consolidate an account
of the Customer against another account of the same customer
to ascertain the net position of the Customer.
ᴥ the accounts need not be at the same branch of the Bank, it is
enough if the accounts are with the same Bank.
ᴥ three conditions must be present or satisfied before a right of set
off can be exercised;
(1) It must be for certain sums:- the Bank must establish the
amount of money (actually) in the account.
(2) It must be between the same parties:- the person who owes
money on a debit account must be same to whom money is
owed on a credit account.
(3) It must be in the same right:- they both must be in the same 20
categorisation.
BANKER/CUSTOMER RELATIONSHIP-CONTINUED
ᴥ a right of set off cannot be exercised in the following
instances;
(1) unmatured or contingent liabilities;
(2) Agreement between the Bank and the Customer
against set off; - Buckingham& Co. v London & Midland Bank
Ltd
(3) Account contains trust funds

¶Banker’s Lien
ᴥ it is the right of the Bank to hold on to a customer’s
property in its possession in satisfaction of or pending
the satisfaction of the obligation owed the Bank by the
Customer 21
BANKER/CUSTOMER RELATIONS-
CONTINUED
ᴥthe obligation need not be in connection with the
particular transaction under which the Bank holds the
Customer’s property.
Eg. Bank collects Cheque for a Customer with an
overdrawn account, the Bank has a lien over the
Cheques. Or the Bank collects documentary bills of
exchange, it has a lien over the documents, and the
rights to use the goods to clear the debt.
ᴥthe Banker’s lien cannot be exercised where;
(1) property or security is deposited with the Bank for
safe custody;
(2) property or security is held in trust by the Customer;
(3) credit balance in the customer’s name 22
BANKER/CUSTOMER RELATIONSHIP-CONTINUED
 ¶Termination of the Banker/Customer Relationship
(1) Closure of Account;

(2) Death of Customer;

(3) Mental Incapacity of Customer;

(4) Bankruptcy of Customer;

(5) Winding up of corporate customer

(6) Winding up of Bank

23
END OF LECTURE

24
 NEGOTIABLE INSTRUMENTS

BY EMMANUEL ADOMAKO NUAKOH

STRUCTURE OF PRESENTATION
 GENERAL INTRODUCTION
 GENERAL DEFINITION OF NEGOTIABLE INSTRUMENT
 MEANING OF TERMS

26
 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
 27
GENERAL INTRODUCTION
GENERAL DEFINITION OF
NEGOTIABLE INSTRUMENT

According to investopia, “A negotiable instrument

is a written order or unconditional promise to pay
a fixed sum of money on demand or at a certain
time. A negotiable instrument can be transferred
from one person to another. Once the instrument
is transferred, the holder obtains full legal title to
the instrument.”
MEANING OF TERMS
(A.) Instrument: According to R.M. Goode, Commercial Law, 3rd
ed., 2004, p. 476, an instrument is “… a document of title to
money (rather than goods).”

LS Sealy & RJA Hooley, Commercial Law (T, C & M), 4th ed.,
2004, p. 516 also defines an instrument as “… a document which
physically embodies a payment obligation so that the possessor …
(following any necessary endorsement in his favour) is presumed
to be entitled to claim payment of the money it [the document]
represents.”
 (B.) Negotiable: LS Sealy & RJA Hooley, Commercial Law
(T, C & M), 4th ed., 2004, p. 521 defines negotiable as
 “… a document of title embodying rights to the payment of
money or security for money, which, by custom or legislation,
is (a) transferrable by delivery (or by indorsement and
delivery) in such a way that the holder pro tempore may sue on
it in his own name and in his own right, and (b) a bona fide
transferee for value may acquire a good and complete title to
the document and the rights embodied therein, notwithstanding
that his predecessor had a defective title or no title at all.”
DEFINITION IN DIAGRAM
PAYMENT METHODS
 Payment methods are the instruments, procedures, and
institutions which enable users to meet payment

33
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

34
 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;
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:

35
 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.)
ORIGIN OF NEGOTIABLE INSTRUMENTS.

 The bill of exchange, which is the earliest type of

negotiable instrument, is generally regarded as having

36
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.
 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.
37
 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.

38
 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.

39
 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

40
 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.)
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

41
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)
DEFINITION OF BOE
 ‘an unconditional order in writing, addressed
by one person to another, signed by the

42
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’.
S. 1(1),Act 55
 The definition sets out the requirements in a
nutshell.
 It may be helpful to start by describing the

43
parties in a straightforward type of
transaction:
 A billis 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

44
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 back bones of the transaction.
 The issues are expanded below.
SAMPLE BILL OF EXCHANGE
ACCEPTANCE
 The drawee, B (the bank here), will probably be asked
to accept the bill as well as pay it.

46
 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

47
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

48
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).
THE FORM OF BOE
 From the definition above, other requirements must be
satisfied:
 It must be unconditional

49
 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
UNCONDITIONAL ORDER

 This means that there must be no qualification which

would make payment uncertain or give rise to

51
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.
 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.

52
 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.
 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

53
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.
 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.

54
 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.
 Theremust be a clear order to pay; even if
the expression of the order is courteous, it
must be a requirement and not a request.

55
 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.
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

56
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
ADDRESSED BY ONE PERSON TO
ANOTHER
 There must be one person as drawer, and another,
usually a bank, as drawee.

57
 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.
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

58
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 or her agent.
 The ‘mark’ of a person who is illiterate is a
satisfactory signature.
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

59
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)
AT A FIXED OR DETERMINABLE
FUTURE TIME
 A bill may be said to be payable at a fixed period after
date or sight.

60
 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.
 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

61
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.
 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

62
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
 A SUM CERTAIN IN MONEY

63
 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.
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

64
 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.
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

65
simply 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.
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.

66
 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:
 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

67
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.
 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;

68
 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;
 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);

69
 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.
THE RELATIONSHIPS BETWEEN THESE PARTIES, THE
PROBLEMS WHICH MAY ARISE AND THE APPROPRIATE
DEFENCES ARE EXAMINED AS BELOW;
Capacity:
 generally, any person with capacity to contract may sign a bill; liability is co-

70
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.
 71
NEGOTIABLE INSTRUMENT UNDER
GHANA LAW
CLASSES OF NEGOTIABLE INSTRUMENTS:

 PROMISES TO PAY
 Those that are promises to pay money
 e.g. promissory notes and certificates of deposit

72
 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.
 DEFINITION OF KEY TERMS:
[SECTION 97 OF ACT 55]
1. DRAWER
 The drawer is the party who draws a negotiable instrument.

73
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.
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.
PAYEE

74
5.
 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]
 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

75
 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)
 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.

76
 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
PROMISE TO PAY
 CERTIFICATE OF DEPOSIT
 This is a promise to pay issued by a banker. By a certificate of

77
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
ORDERS TO PAY
 CHEQUES (INCLUDING MONEY ORDERS)
 “A chequeis a bill of exchange drawn on a banker payable

78
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.
 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

79
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.
DETAIL DISCUSSION OF THE VARIOUS
NEGOTIABLE INSTRUMENTS

 BILLS OF EXCHANGE
 Section 1(1) of the Bills of Exchange Act, 1961 (Act 55):

80
 “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.”
 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

81
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)

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:

82
 (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, February 8, 2020).
 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.]
 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).

83
 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.
 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.

84
 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
 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.

85
 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).
 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

86
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.
 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

87
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
 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

88
 (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.”)
 At a fixed or determinable future time.
 Section 9 of Act 55.
 Uncertain –A promissory note payable with interest 12
months after notice.

89
 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.
 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

90
 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.]
 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.

91
 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.
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

92
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.
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).

93
 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).
 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

94
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)!
 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

95

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).
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.

96
 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.
ENDORSEMENT

 Endorsement takes place when the name and/or the

signature of the transferor is written on the instrument and

97
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.
 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

98
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.
 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

99
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.
TYPES OF ENDORSEMENT

 An endorsement may be made in blank or special or

contain terms making it restrictive.
 BLANK ENDORSEMENT

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 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.
 SPECIAL ENDORSEMENT
 A special endorsement specifies the person to
whom, or to whose order, the bill is to be payable.

101
 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.
 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

102
 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.
HOLDER, HOLDER FOR VALUE, HOLDER IN DUE
COURSE
 HOLDER
 Act 55 defines very carefully what is meant by a 'holder of a bill'.

103
 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
 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).

104
 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.
 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,

105
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.
 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

106
 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).
 (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!

107
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)
 (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

108
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.
 (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,

109
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.

 (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

110
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.
 (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

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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.
 (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

112
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.
 (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

113
 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
 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

114
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

115
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.
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

116
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
 For
cases discussing the characteristics of a
promissory note, see:
 Sabblah v. Tawiah [1966] GLR 145

117
 Directors of Orthodox Secondary School of
Peki v. Tawlma-Abels [1974] 1 GLR 419
 Section84 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

118
repay the depositor upon demand.
 Today, certificates of deposit are processed
electronically.
SAMPLE CERTIFICATE OF DEPOSIT
 CHEQUES (INCLUDING MONEY
ORDERS)
 Section 72 of Act 55 provides what a cheque is
 Section 1(1) of Act 55 provides that “A bill of exchange

120
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

121
 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
SAMPLE CHEQUE
 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

123
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

124
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

125
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

126
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)
CROSS CHEQUES
 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

128
“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:

129
 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?
 FINANCIAL REGULATION

130
 It looks at how the activities of Financial
Institutions are controlled in a Financial
System so as to ensure stability.
 The Bank of Ghana Act, 2002 (Act 612)
defines a Financial System as “ a network of
deposit taking and non-deposit taking
financial institutions such as a brokerage firm,
insurance company, pension fund, investment
company, which carries on the business of or
whose business is any of the following
activities; 131
 Taking of deposits of money from the public
repayable on demand and withdrawable by
Cheques, drafts, orders or other means;
 Financing of any activity by way of creative
financial assets such as loans and advances,
securities, bank deposits or otherwise, than its
own;
 Companies dealing in shares, stocks, bonds or
other securities;
 Leasing, letting or delivering goods to a hirer
under a hire purchase agreement;
132
 Carrying on by insurance companies of any
business other than insurance;
 Collecting of money or accepting employer
contributions and paying it out for legitimate
claims or for retirement benefits”
 Categories of the Financial System
 From the above definition the Financial System
can be categorized as follows;
 Banking

133
 Capital / Securities Market
 Insurance

 Pensions

 Alternatively, the Financial System may be put in two

main categories; Bank and Non-Bank institutions.
 Function of the Financial System

 The broad function of the Financial System is to

mobilise funds and resources in the form of savings
and deposits and to allocate them mainly in the form
of capital, loans among others – intermediation.
134
 Essentials of an efficient Financial System
 These are factors that contribute to the
Financial System performing in the manner
that would ensure it attain its objective.
 They include;
 Effective Regulation: there should be
independent regulatory bodies to regulate the
activities of participants based on clearly
defined regulatory processes and practices.

135
 Supportive Legal Framework: There must be
clearly defined laws which determine the rights
and obligations of participants within a
framework that ensures enforcement.
 Supportive Financial Infrastructure: This
includes institutions such as secondary markets
(stock exchanges, bond markets) as well as
systems and practices that facilitate financial
transactions;
 Trading and settlements systems to ensure
payment 136
 Healthy Competition: Competitive level playing
fields as well as wide dissemination of market
information to enable customers make informed
choices.

 Judicious mix of local and foreign participants

 Competent, honest and solvent professionals

 Variety of financial assets and instruments.

137
ELEMENTS OF FINANCIAL REGULATION
 Effective regulation is an important element of
regulation and therefore it is paramount to
ascertain the elements of financial regulation.
 The International Monetary Fund (IMF) has
identified four (4) main elements of ensuring
financial stability;
 Regulatory Governance: it refers to the capacity of
the regulatory bodies to make decisions without
interference, and to formulate, implement and
enforce sound regulatory policies and practices.
138
 The institutional Framework which provides the
legal basis for regulatory governance involves
four main components;
 First there must be legislation which provides the
legal basis for the establishment of an
independent regulatory body.
 In Ghana the Financial System is regulated by
three institutions;
 Bank of Ghana

 Securities and Exchange Commission and

 National Insurance Commission. 

139
 Secondly, the Statute must define the
objectives and functions of the regulatory
body.

 Thirdly, the Statute must define the

enforcement powers and capabilities of the
regulatory body.

 Fourthly,
the regulatory body must have
power to make rules, regulations and guide
lines.
140
 The main principles under this element are;

 Objectives of regulations

 Independence and adequate resources

 Enforcement powers and capabilities

 Clarity and transparency of regulatory processes

 External participation, such as Auditors. 141

 Prudential Framework: it comprises the rules,
directives and regulatory requirements that set
forth the structure to govern the operations of
the financial firms.
 They enforce the capability of financial
institutions to cover risks associated with their
operations.
 Minimum Capital Requirement
 Credit Limits
 Liquidity Ratio
142
 The main principles here include;

 Risk Management

 Risk Concentration

 Capital Requirements

 Corporate Governance

 Internal Controls.
143
 Regulatory Practices: the techniques and
mechanisms for supervision and monitoring
 Group-wide supervision

 Monitoring and on-site inspection

 Reporting to supervisors
 Co-operation and information sharing
 Confidentiality
 Licensing, ownership transfer, and corporate
control
 Qualifications
144
 Financial Integrity and Safety Nets

 Markets (integrity and financial crime)

 Customer protection

 Information, disclosure and transparency

145
  BANKING REGULATION
 Banking system is at the heart of the financial
system because of the functions it performs,
which includes;
 It allocates or channels resources through
credit decision process and market pricing to
the most efficient users.
 Provides a medium for receiving and payment
for goods and services
146
 Objectives of banking regulation
 To ensure financial stability and stability of
individual banks and reduction of financial crime
 To induce and retain market confidence by ensuring
that only honest, competent and solvent institutions
and practitioners are in the system
 To protect customers, investors and depositors
through regulating the range of risk assumed by
entities, ensuring that adequate information is given
and disclosures made to investors.

147
 To set and maintain starts reflecting
international standards.
 To ensure healthy competition

 The objective of banking regulation is to ensure

that appropriates steps are in place to deal with
basic problems of banking which includes;
 Unwise investments and bad loans

 Lending to individuals, industries and business

without proper due diligence and without
ensuring that they are capable of repayment.
148
 Speculation and risky dealings in foreign
currencies and futures instruments
 Inadequate security

 How the Bank of Ghana regulates the Banking

System
 Licensing
 Prudential regulation
 On-site and off-site examination
 Powers of investigation
149
 Power to give directives and make regulations

 Power to produce guidelines

 Powers of enforcement

 Sanctions for financial crime

 Cooperation and information sharing

150
THANK YOU

AND

GOOD LUCK

151