Dishonour.—A bill is dishonoured by non-payment (a) when it is duly presented for payment and payment is refused or cannot be obtained, or (b) when presentment is excused and the bill is overdue and unpaid. Generally speaking, when a bill is dishonoured by non-payment, an immediate right of recourse against the drawer and indorsers accrues to the holder. And so, generally, when a bill has been dishonoured by non-acceptance or non-payment, notice of dishonour must be given to the drawer and each indorser, and any drawer or indorser to whom such notice is not given is discharged. But where a bill is dishonoured by non-acceptance, and notice of dishonour is not given, the rights of a holder in due course subsequent to the omission will not be prejudiced by the omission. And where it is dishonoured by non-acceptance, and due notice of dishonour is given, it will not be necessary to give notice of a subsequent dishonour by non-payment unless the bill shall in the meantime have been accepted.
Notice of dishonour, in order to be valid and effectual, must be given in accordance with the following rules :—(1) The notice must be given by or on behalf of the holder, or by or on behalf of an indorser who, at the time of giving it, is himself liable on the bill. (2) The notice may be given by an agent either in his own name or in the name of any party entitled to give notice, whether that party be his principal or not. (3) Where the notice is given by or on behalf of the holder, it enures for the benefit of all subsequent holders and all prior indorsers who have a right of recourse against the party to whom it is given. (4) Where notice is given by or on behalf of an in dorser entitled to give notice as hereinbefore set out, it enures for the benefit of the holder, and all indorsers subsequent to the party to whom notice is given. (5) The notice may be given in writing or by personal communica tion, and may be given in any terms which sufficiently identify the bill, and intimate that the bill has been dishonoured by non-acceptance or non-pay ment. (6) The return of a dishonoured bill to the drawer or an indorser is, in point of form, a sufficient notice of dishonour. (7) A written notice need not be signed, and an insufficient written notice may be supplemented and validated by verbal communication. A misdescription of the bill will not vitiate the notice unless the party to whom the notice is given is in fact misled thereby. (8) Where notice of dishonour is required to be given to any person, it may be given either to the party himself or to his agent in that behalf. (9) Where the drawer or indorser is dead, and the party giving notice knows it, the notice must be given to a personal representative if such there be, and with the exercise of reasonable diligence he can be found. (10) Where the drawer or indorser is bankrupt, notice may be given either to the party himself or to the trustee. (11) Where ..there are two or more drawers or indorsers who are not partners, notice must be given to each of them, unless one of them has authority to receive such notice for the others. (12)
The notice may be given as soon as the bill is dishonoured ; but must be given within a reasonable time thereafter. In the absence of special circum stances, notice is not deemed to have been given within a reasonable time unless (a) where the person giving and the person to receive notice reside in the same place, the notice is given or sent off in time to reach the latter on the day after the dishonour of the bill ; (b) where the person giving and the person to receive notice reside in different places, the notice is sent off on the day after the dishonour of the bill, if there be a post at a convenient hour on that day, and if there be no such post on that clay, then by the next post thereafter. (13) Where a bill when dishonoured is in the hands of an agent, he may either himself give notice to the parties liable on the bill, or he may give notice to his principal. If he give notice to his principal, he must do so within the same time as if he were the holder, and the principal upon receipt of such notice has himself the same time for giving notice as if the agent had been an independent holder. (14) Where a party to a bill receives due notice of dishonour, he has after the receipt of such notice the same period of time for giving notice to antecedent parties that the holder has after the dishonour. (15) Where a notice of dishonour is duly addressed and posted, the sender is deemed to have given due notice of dishonour, notwithstanding any miscarriage by the post-office.
Delay in giving notice of dishonour is excused the delay is caused by circumstances beyond the control of the party giving notice, and not im putable to his default, misconduct, or negligence. When the cause of delay ceases to operate, the notice must be given with reasonable diligence. Notice of dishonour is dispensed with—(a) When, after the exercise of reasonable diligence, proper notice cannot be given to, or does not reach, the drawer or indorser sought to be charged : (b) By waiver, express or implied. Notice of dishonour may be waived before the time of giving notice has arrived, or after the omission to give due notice : (c) As regards the drawer in the following cases, namely, (1) where drawer and drawee are the same person; (2) where the drawee is a fictitious person or a person not having capacity to contract ; (3) where the drawer is the person to whom the bill is presented for payment ; (4) where the drawee or acceptor is as between himself and the drawer under no obligation to accept or pay the bill; (6) where the drawer has countermanded payment : (d) As regards the indorser in the following cases, namely, (1) where the drawee is a fictitious person or a person not having capacity to contract, and the indorser was aware of the fact at the time he indorsed the bill ; (2) where the indorser is the person to whom the bill is presented for payment; (3) where the bill was accepted or made for his accommodation.