crossed cheque/conversion of cheque

a) Where a cheque is uncrossed, the holder may cross it either generally or specially;

b) However, where it is crossed generally, the holder may cross it specially;

c) However, where it is crossed generally or specially, the holder may cross it “not negotiable”. So also is the case where a cheque is crossed to the banker;

d) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another bank;

e) However, where it is uncrossed or crossed generally to a banker for collection, he may cross it especially to himself. Section 79 Bill of Exchange Act Cap B8 LFN 2004

a) Where a cheque is uncrossed, the holder may cross it either generally or specially;

b) However, where it is crossed generally, the holder may cross it specially;

c) However, where it is crossed generally or specially, the holder may cross it “not negotiable”. So also is the case where a cheque is crossed to the banker;

d) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another bank;

e) However, where it is uncrossed or crossed generally to a banker for collection, he may cross it especially to himself. Section 79 Bill of Exchange Act Cap B8 LFN 2004

To understand the effect of a crossed cheque, it is important to understand that a cheque can be crossed under the following heads. General crossing, special crossing, not negotiable and account payee:

1. The effect of a cheque crossed “not negotiable” implies that the holder of the cheque cannot have and is not capable of giving a better title to the cheque than that which the person from whom he took it had. As such, every person who takes a cheque crossed “non-negotiable” takes it at his own risk as his title to the money gotten by means of the crossed cheque is as defective as his title itself.

2. The effect of a cheque crossed “account payee or account payee only” is that the proceeds of the cheque can only be paid to the person whose name is on the cheque and not the bearer.

3. The effect of a specially crossed cheque is that the cheque bears across its face an addition of the name of the banker, then the cheque is payable only to the name of the banker in the crossing. So also, where a cheque bears across its face an addition of the words “and company” or any other abbreviation between two (2) parallel line (whether horizontal or vertical) then the cheque is a general crossing and shall be payable as accordingly stated in the cheque. Great Western RY v. London & County Banking Co. (1901) AC 414; Section 78(1)(2) and 83 Bill of Exchange Act Cap B8 LFN 2004.

No, it is not only the issuer of a cheque that can cross the cheque. The drawer (issuer), the holder of the cheque and the banker can cross a cheque. Section 79 Bill of Exchange Act Cap B8 LFN 2004

A cheque is said to be crossed where the cheque bears across its face the word “and company” or “not negotiable” “account payee” or where the cheque bears on its face the name of the banker. Section 78(1)(2)(a)(b) and 83 Bill of Exchange Act Cap B8 LFN 2004; Universal Guarantee PTY Ltd. V. National Bank of Australia PTY Ltd. (1965) 2 All ER 98 102

Yes, a cheque crossed either generally, specially, or account payee can as well be crossed “not negotiable”. Section 78(1)(2) Bill of Exchange Act Cap B8 LFN 2004

A banker on whom a cross cheque is drawn has a duty to refuse payment where the cheque is crossed specially to more than one banker except when it is crossed to an agent for collection who is a banker. The banker has a duty to pay a cheque crossed in accordance to how it is crossed and to whom it is crossed. Section 81(1),(2) Bill of Exchange Act Cap B8 LFN 2004.

It is the court who usually determines whether or not a bank has acted in good faith. In order to determine the good faith of the bank and whether the bank was negligence or not, the court will look at the inquiry which was made by the bank upon collecting the cheque and whether the circumstances was so out of the ordinary course that it ought to have aroused doubt in the banker’s mind. The court will generally look at the reasonable care the banker undertook in reference to the interest of the true owner. Nigerian Breweries V. Muslim Bank (1963) LLR 78; Hannan’s Lake View Central Ltd. Armstrong & Co. (1900) 16 TLR 236

Where a banker on whom a cheque is drawn pays a cheque or pays the proceeds of a cheque to a person otherwise than in accordance to how it is crossed, such banker shall be liable to the true owner of the cheque for any loss the true owner may sustain. Section 81(2) Bill of Exchange Act Cap B8 LFN 2004

Where it is evident that the bank took reasonable care before paying out the cheque and the bank did this in good faith and without negligence, then the bank will not be liable to the true owner. Section 82 Bill of Exchange Act Cap B8 LFN 2004

Yes, the bank will be liable to the true owner for the actual sum of money paid to the third party. A cheque marked “account payee” is an effective direction to the collecting bank and if he ignores it, he does so at his peril. Abimbola V. Bank America Ltd. (1978) NCLR 425