Instructions for Collection The collecting bank is to be governed in all matters concern ing presentment, demand, and notice, by the laws and customs which prevail in its locality. If the transmitting party sends special instructions which differ from local practice, the bank is bound to conform to these instructions; but in the absence of such instructions the transmitting party is assumed to consent to the local law, rules, regulations, and practices.
It is a disputed point whether the usages, either express or implied, of the bank must be specifically made known to the persons depositing items for collection, but in general such per sons are bound by the usages of the bank, whether the usages are known to them or not. Such usages can only vary the details of presenting, demanding, and notifying, and cannot justify the omission of any of these fundamental acts or the substitution of any other act as equivalent for any of them. To illustrate: If it is the custom of banks in a city to accept certified checks on members of their clearing house association instead of actual money in payment of collections, that would be a legitimate bank usage.
When instructions are given by the customer as to the method to be pursued in collecting and protesting his items, the bank is bound to carry out in detail those instructions, and, if it appoints subcollecting agents, is bound to forward fully and accurately to those agents these instructions as well as others which the local law requires for the protection of the customer. If the bank dis regards any of these instructions and loss is incurred, it is liable. These instructions are given in the remitting letter or on a ticket attached to the item. If a bank misreads its instructions it is liable, but if really doubtful instructions are given and the bank errs by a reasonable interpretation, it is excusable in court.
If a time draft, drawn by consignors of goods on consignees, is forwarded to a bank without instructions but with bill of lading attached covering the goods, the bank is justified in assuming that the consignor intended that the bill of lading should be sur rendered upon acceptance of the draft rather than upon the final payment; business usages or high perishability of the goods and other evidence would confirm this conclusion. Court decisions differ, however, on this point.
However, if the bill of lading is made deliverable to the con signor or his order, the bill should not be delivered upon accept ance but held until payment. Bills of lading accompanying a sight draft should not be surrendered until the draft is paid.
Time of Presentment for Acceptance or Payment Drafts payable at a future day must be presented promptly for acceptance; failure to present a draft promptly is regarded as a breach of the due diligence required from the bank. Prompt
ness in presenting for acceptance is important, since if the draft is accepted it binds the drawee, but if it is not accepted the owner may commence action against the drawer or indorser on notice and protest, without waiting for the day of payment. All bills payable at sight or after an uncertain event, as after sight or demand, must be presented for acceptance. Demand bills need not be presented for acceptance.
The bills must be presented for acceptance during business hours of the prospective acceptor, and they must be presented to the drawee or some person authorized to accept or refuse accept ance on his behalf. The presenter should exhaust every reason able means to find the drawee or his agent. Presentment must be made at the place of business or the domicile of the drawee, and if the drawee is not at his office or home, the presenter should wait a reasonable time for his return. Under the Uniform Negotiable Instruments Law, the drawee is allowed twenty-four hours within which to decide whether to accept the draft or not.
If it is accepted, it becomes a direct obligation of the acceptor; if it is not accepted, the presenter must protest it and notify the drawer and indorsers and may then sue them without waiting until maturity of the draft. If the drawing of the bill was a fraud on the holder, or if the residence of the drawee cannot be discov ered with reasonable diligence, the bill is treated as dishonored.
Items must be presented for payment within business hours. If payable at a fixed time, they must be presented on the day of maturity. Where days of grace are allowed, the items must be presented on the next business day following their receipt if the drawee is in the same place as the payee; but if in a different place, they must be sent forward to a subcollecting agent by regular mail on the day following receipt, and this agent in turn must present them on the day after he receives them. This is the general rule as to reasonable promptness but may be varied as circumstances warrant. In the case of drafts with bill of lading attached, drawn payable "on arrival of goods" or "on arrival of car," some banks make daily inquiry of the transportation com pany to learn the time of arrival, so as to insure prompt present ment of the draft and avoid any liability that might be incurred through delay. This procedure becomes quite impossible in a very large bank handling great numbers of such items, and the bank depends upon the maker or drawee to give notice.