Home >> Dictionary Of Banking >> Abstract Of Title to Committee Of Inspection >> Bearer Cheque orBill

- Bearer Cheque or Bill

payable, person, indorsement, payee, indorsed and fictitious

- BEARER (CHEQUE OR BILL). "Bearer," in the Bills of Exchange Act, 1882, means the person in possession of a bill or note which is payable to bearer (Section 2).

" A bill is payable to bearer which is expressed to he so payable, or on which the only or last indorsement is an indorsement in blank " (Section 8, s.s. 3).

" Were the payee is a fictitious or non existing person the bill may be treated as payable to bearer " (Section 7. s.s. 3). A bill in these sections includes a cheque.

A bill (or cheque) payable to bearer does not require to be indorsed ; and a person cannot be sued upon it, so long as it is not indorsed by him. If, however, he indorses it, he may be sued thereon by any subsequent holder.

If a cheque drawn payable to bearer is indorsed " Pay J. Brown or order," it does not require John Brown's signature or any indorsement, as it is on the face of it a bearer cheque. Any indorsements on a bearer cheque need not be examined.

In practice, a bearer cheque may be altered by the payee from bearer to order, by simply striking out the printed word bearer, or by striking it out and writing the word order. Such an alteration does not require to be initialled.

An order cheque. however, can be altered on the face into a bearer cheque only by the drawer, who must initial the alteration if there are more drawers than one, each must initial.

When an order cheque is indorsed in blank, that is, is not made payable to any one else by the payee or indorser, it becomes a cheque payable to bearer. Any holder may con vert the blank indorsement into a special indorsement, and the cheque (or bill) would again become payable to order.

A cheque or bill payable to a fictitious or non-existing person is payable to bearer. In the case of Bank of England v. Fagliano Brothers (1891, A.C. 107), it was held that a fictitious or non-existing person included a real person who never had nor was intended to have any right to the bills. Lord Herschell

said : " I have arrived at the conclusion that whenever the name inserted as that of the payee is so inserted by way of pretence merely, without any intention that payment shall only be made in conformity therewith, the payee is a fictitious person within the meaning of the statute, whether the name be that of an existing person or of one who has no existence." A banker incurs no liability in paying, to the person presenting, an uncrossed cheque made payable to bearer by the drawer, even if the person who presents such cheque has stolen it. But in an exceptional case, such as where a cheque is payable to the " British Bank, Ltd., or bearer," a banker would require to be exceedingly careful in making inquiries before paying such a cheque to a stranger, for although it is payable to the bearer the banker knows that it is not the custom for a bank to send a cheque by a stranger to be cashed.

Where a person takes a cheque payable to bearer, it is advisable for him to get the transferor to indorse it and so make him a party to the cheque, as without the indorse ment the transferor could not be sued upon the cheque.

A cheque payable to " Wages or order," " Cash or order," " House or order " or to any such impersonal word. is now usually treated as being payable to " order " and requiring the indorsement of the drawer. Such cheques should, when indorsed, be paid only to the drawer. or his representative who is known to be authorised to cash " wages," etc., cheques. Some bankers consider that a cheque payable in that man ner is, by virtue of s.s. 3 of Section 7, quoted above, payable to " bearer," but the words " fictitious or non-existing person " can hardly be taken to include such words as " wages," " cash," etc.

In Scotland. it is customary to request the person receiving cash for a bearer cheque to indorse it. (See BILL OF EXCHANGE, CHEOCE.)