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GAZETTE
NOVEMBER 1991
Chalmers & Guest on
Bills of Exchange.
Edited by A.G. Guest [Sweet &
Maxwell] £110
The last edition (the 13th) of
Chalmers
was published in 1964. A
reflection of the extent of the
changes that have taken place in
the law and practice of banking
since then is that the work has ex-
panded from 420 to 836 pages.
Although the pattern of previous
editions is followed, in that the text
is presented in the form of a
section-by-section commentary on
the Bills of Exchange Act, 1882 and
the Cheques Act, 1957, Professor
Guest has rewritten the text com-
pletely, "leaving very little of the
old Chalmers". The helpful practice,
rare nowadays, of providing illustra-
tions is also continued but based
this time on decided cases.
Bills of exchange were first brought
into use by the Florentines in the
12th century as an instrument by
which a trade debt, due in one
place, was transferred in another,
thus avoiding the necessity of
transmitting cash from place to
place. As they developed in
England, however, bills of exchange
became flexible paper currency.
Chalmers summed up the diff-
erence well when he said that in
France and the other civil law
systems a bill of exchange
represented a trade transaction
whereas in England it was merely
an instrument of credit.
In both Britain and Ireland the law
is largely to be found in the 1882
Act as modified by the Cheques
Act, 1957 (in Britain) and the
Cheques Act, 1959 (in Ireland).
Further changes have been
effected in Ireland by the Central
Bank Act, 1989, section 132 of
which inserts a new section 45A
into the 1882 Act to permit the
"truncation" of cheques. This is a
process which replaces physical
presentation with an electronic
message and enables banks to
make greater use of electronic
means of data transfer. The 1989
Act makes a number of other
amendments which should be
noted, namely the substitution of a
new paragraph (1) in section 14 of
the 1882 Act and the insertion of
a new section after section 3 of the
Cheques Act, 1959. Furthermore
the Building Societies Act, 1989
amends the definition of " bank" in
section 2 of the 1882 Act to
include a building society.
Professor Guest identifies a number
of other changes wh i ch are
necessary to bring the 1882 Act up
to date. He doubts, for instance,
whether the Act permits the use of
instruments denominated in units
of account such as the ECU. In the
United Kingdom the government
has announced (Cm. 1026) that it
will amend the 1882 Act so that
the expression "a sum certain in
money" in section 3 (1) is defined
to include a monetary unit of
account established by an inter-
governmental institution or by
agreement between two or more
States. The UK government also
proposes to amend the 1882 Act to
recognise a guarantee given by way
of an "aval". As Guest points out
(p. 459), an aval is a common
practice in most EC Member States
and is essentially "a guarantee of
payment of a bill". Quite simply a
third person guarantees the
payment of a bill by signing it. The
liability of the giver of an aval is not,
however, the exact equivalent of
that of a guarantor in English or
Irish law since, as Guest explains,
his undertaking is valid even when
the liability which he has guaran-
teed is inoperative for any reason
other than defect in form.
On a more practical level another
area where amending legislation
would appear to be required is
cheque crossing. The expression
" not negotiable" written on a
cheque is not generally understood.
It does not mean that the cheque
cannot be transferred, it means
only that if it is transferred the
holder does not get better rights of
ownership than the person from
whom he received it. There is
undoubtedly a need for a clear
method of making cheques non-
transferable and perhaps this
should be done by giving legal
status to the words "Account
Payee only". As Guest points out
(p. 642) such words are not "words
prohibiting transfer, or indicating
that the cheque should not be
transferable". Nevertheless, in
practice, they may render the
cheque transferable only with
difficulty or not at all "for a banker
may refuse to collect a third party
cheque so crossed in the absence
of explanation as to why it is being
collected for his customer who is
not the payee".
Irish cases on negotiable instru-
ments are not particularly common,
the most important recent case
probably being
Creative Press Ltd.
-v- Harmon
[1973] I.R. 313. Section
83 (1) of the 1882 Act provides that
a promissory not is an un-
conditional promise in writing made
by one person to another, signed by
the maker, engaging to pay on
demand or " a t a fixed or
determinable future time" a sum
certain in money to a specified
person. Each of the defendants
signed a document which stated
that they, jointly and severally,
promised to pay the plaintiff "on or
before the 1st day of November,
1970" the sum of £2000. The
point at issue was whether an
instrument payable "on or before"
a specified date was invalid as a
promissory note since it was not
payable at a fixed future time.
Pringle J. refused to apply the
English Court of Appeal decision in
Williamson -v- Rider
[1963] 1 Q.B.
89, preferring to follow instead the
decision of the Supreme Court of
Canada in
John Burrows Ltd. -v-
Subsurface Surveys Ltd.
(1968) 68
349