No, ‘Y’ cannot on the basis of the cheque drawn sue the bank if the bank rejects the cheque. This is because no privity of contract exists between the bank and ‘Y’. Schroeder V. Central Bank of London (1876) 34 LTR. 735
No, ‘Y’ cannot on the basis of the cheque drawn sue the bank if the bank rejects the cheque. This is because no privity of contract exists between the bank and ‘Y’. Schroeder V. Central Bank of London (1876) 34 LTR. 735
The fact that the cheque was rejected by the bank because it was written too long ago (more than 6 months ago) or because it was not presented within certain time does not mean that the payee’s right to sue on the cheque has failed. Where the cheque is rejected as ‘stale’, and the payee then approach the drawer to redraw a new cheque or re-date the cheque, where the drawer refuses, the payee can sue the drawer on the dishonoured cheque. Sterling Products (Nig.) Ltd. V. Dimkpa (1973) 2 ALR Comm. 75; Laws V. Rand (1857) 140 ER 812
The issuance and the subsequent acceptance of a cheque is only a conditional discharge of a debt (after all, the worthiness or value-ness of the cheque depends on the Drawer’s account being sufficiently funded at the time it is presented). When the cheque is dishonoured, the debt revives to its original form, so that the creditor is at liberty to either sue on the cheque or on the contract that gives rise to the issuance of the cheque. Nigerian Concrete Industry Ltd. V. Machado (1965) NCLR 10
The right to sue on a cheque arises when the cheque becomes due, that is, the date on it has come, and it gets presented to the bank and it gets dishonoured by reason of non-payment. Section 42(2) Bill of Exchange Act Cap B8 2004 LFN.
Where a cheque is not presented to the drawee (bank) for payment, the right to sue on the cheque will not arise. However, presentment will be dispensed with in the following instances:
a) Where after exercising reasonable diligence, presentment could not be effected;
b) Where the drawee (bank) does not exist;
c) Where there is no obligation between the drawer and the drawee to accept or pay the bill and the drawer has no reason to believe that the bill would be paid if presented. Section 46(2) Bill of Exchange Act Cap B8 LFN, 2004.
‘Y’ can request ‘X’ to re-date the cheque or that ‘X’ should issue a fresh cheque. However, if ‘X’ refuses, ‘Y’ can claim against ‘X’ the amount of ‘X’ indebtedness to him on the basis of the dishonoured cheque. ‘X’ must satisfy the court that he had a valid contract with ‘Y’ and the cheque was drawn to satisfy the indebtedness. Sterling Products (Nig.) Ltd. V. Dimkpa (1973) 2 ALR Comm. 75
It is the fact of the case before the court and the nature of the bill (cheque) that determines whether a cheque was presented for payment within a reasonable time. It is the court who determines what reasonable time is. The court has held that a cheque presented after the Nigerian Civil war was done within a reasonable time notwithstanding the delay. Ingyengierefake V. Giadom (1974) NCLR 528; Laws V. Rand (18570 27 LJCP 78.
No, notwithstanding that a cheque is stale, such cheque must be presented for payment. It is only when the cheque is dishonoured that the payee’s right to sue on the cheque may arise. In fact, non-payment of cheque discharges the drawer from debt. Section 45 and 446(2a) Bill of Exchange Act Cap B8 LFN 2004
Yes, where a payee (Y) indorse a cheque issued him by the drawer (X) in favour of a third party (Z) and such cheque is dishonoured by the bank, ‘Z’ can legitimately claim on the dishonoured cheque against ‘X’ as a holder in due course. However, ‘Z’ must show that he has furnished consideration to ‘Y’ and such consideration aid the transfer of the cheque from ‘Y’ to him. Proving that the cheque was issued to him (Z) for consideration would not be a difficult thing for Z to do, for as long as it was issued to him in good faith, that is, not by fraud or anything of the sort, it is evident and easily pressumed that the transfer of the cheque from ‘Y’ to ‘Z’ was aided by a consideration. Section 30(1) Bill of Exchange Act Cap B8 2004 LFN. Economic Export Ltd. Kasumu (1966) NCLR 104
Yes, there is the presumption that where a bill of exchange (cheque) is drawn, it has been drawn for value. As long as it is evident that the transfer of the cheque from ‘Y’ to ‘Z’ was aided by a consideration, it becomes unnecessary whether or not the payee (Y) furnish consideration for the cheque originally. Note that the consideration is the monetary value or the act that makes a contract binding and enforceable. Section 30(1) Bill of Exchange Act Cap B8 2004 LFN. Younis V. Compagnie Maritime Et Commerciale (Nig.) Ltd. (1972) 9 CCHJ5
Where a cheque is drawn, it is presumed to have been done for a valuable consideration. However, where it is admitted or proved that the acceptance, issue or negotiation of the bill (cheque) was done by fraud, illegality, duress, force or fear then the value is questioned and the holder has the burden to prove that value had been given in good faith before the alleged illegality. Section 30(1) Bill of Exchange Act Cap B8 2004 LFN. Economic Export Ltd. Kasumu (1966) NCLR 104
A bill become negotiated when it is transferred from one person to another in such a manner that the person it was transferred to become the holder and enjoys the right associated with the bill Section 30(1) Bill of Exchange Act Cap B8 2004 LFN. Younis V. Compagnie Maritime Et Commerciale (Nig.) Ltd. (1972) 9 CCHJ5
Yes, to successfully sue on a dishonoured cheque, the payee is obligated to do the following:
a) He must present the cheque for payment within a reasonable time after the cheque becomes payable.
b) Notice of the dishonour must be given to the drawer or the person who endorsed the cheque. Section 48 Bill of Exchange Act Cap B8 LFN, 2004; Section 48(1) Bill of Exchange Act Cap B8 LFN, 2004. Ingyengierefaka V. Giadom (1974) NCLR 528.
No, the bank cannot convert the money in a customer’s account for its own use. Obanta Community Bank Ltd. V. Olufemi Kayode Ajayi 3 PLR/2001/254 (CA).
Where an official of a bank fraudulently converts money in the account of a customer for his own use, the bank will be liable to the sum converted. However, the bank can sue the staff to recover the sum. Obanta Community Bank Ltd. V. Olufemi Kayode Ajayi & Ors. 3 PLR/2001/254
Yes, for ‘Y’ to successfully sue on the dishonoured cheque and in his own name, he must be in possession of the cheque. Only a holder of a bill of exchange may sue on the bill. A holder is a payee or endorsee of a bill or note who is in possession of it. Section 2 Bill of Exchange Act Cap B8 LFN 2004; Section 38(a) Bill of Exchange Act Cap B8 LFN 2004; Esso Standard (Nig.) Ltd. V. Akanbi (1970) NCLR 1
Where the payee (Y) has returned the cheque to the drawer (X) because the bank dishonours it. It is advised that the payee takes advantage of the rules of court and serve a notice to produce on the Defendant
No, it is not compulsory for the creditor to sue on the cheque in other to succeed for a claim against the debtor as contained in the Bill of Exchange Act. A creditor can sue on ‘goods sold and delivered’ where it is the basis of the contract with the debtor on or any other ground form the basis of his contract with the debtor that necessitated the issuance of cheque by the debtor. He can actually use the dishonoured cheque only as Evidence that he has not been paid the contract value. Nigerian Concrete Industry Ltd. V. Machado (1965) NCLR 10
Where a person is in possession of a bill, such person is said to be a holder in due course where he has taken a bill (cheque) which is regular on its face on the condition that;
a) He had no notice that the cheque had been previously dishonoured or that he became a holder of it long before it was overdue.
b) That he took the bill (cheque) for value and sincerely without any deceit and that the time it was given him, he had no notice of any defect in the title of the person who negotiated it. Section 29 Bill of Exchange Act Cap B8 2004 LFN.
No, the fact that ‘A’ draws a cheque of a certain amount and issues a cheque of same to ‘B’ does not mean that ‘A’ has assigned the said amount to ‘B’ as money in the bank cannot be assigned. A cheque is a request for payment and nothing more. Schroeder V. Central Bank of London (1876) 34 LTR 735
Notice of dishonour will not be necessary:
a) Where after due diligence notice could not be given or the notice could not get to the drawer;
b) Where the need to give notice has been waived either expressly or by conduct;
c) Where the drawer and the drawee are same person;
d) Where the drawer is the person upon whom the cheque is presented for payment;
e) Where the drawee does not exist or has no power to contract;
f) Where the bill has been countermanded;
g) Where there is no obligation to pay the bill. Section 50(2) Bill of Exchange Act Cap B8 LFN 2004