What are the causes for dishonour of bills?

A bill may be dishonoured either by refusal of acceptance or by refusal or default of pay­ment. A partial or qualified acceptance, where a general one is due, may also be considered a case of dishonour.

The time after which a bill may be declared as dis­honoured is fixed by law and custom at twenty-four hours after presentation for acceptance, or at three days (called days of grace) after presentation ‘or pay­ment. All bills not payable on demand are entitled to days of grace.

The consequence of dishonour is the right accruing to the holder, against the drawer and each and all the indorsers of a bill, for the recovery of the sum thereby represented; for which, after complying with the required formalities, he may draw on any of them, and, in case of refusal, have legal recourse against them.

Any of the indorsers paying a dishonoured bill acquires, of course, the same right against all prior parties, and so does the drawer against the acceptor.

Action on Dishonoured Bills.-

By the Bills of Exchange Act, 1855, known as Keating’s Act, passed to prevent unjust delay for the payment due to the holder of a dishonoured Bill of Exchange, summary procedure may be taken in the County Court for bills over ten and up to fifty pounds. The action must be brought against the debtor within six months; and if he does not obtain leave to defend, and appear, within twelve days, final judgment will be signed against him. After such time, an ordinary action must be taken.

The time for taking proceedings dates from maturity, in the case of non-payment; and from the date of the bill, in the case of non-acceptance.

There are two steps to be taken by the holder of a dishonoured bill, before bringing an action to enforce his claim for reimbursement, namely:

(a) To give the parties timely notice of dishonour.

(b) To have the bill legally protested.

The treatment of inland and that of foreign dis­honoured bills is not exactly alike, inasmuch as the notice of dishonour alone is required to preserve re­course on an inland bill, while no action can be brought against the parties liable to a foreign bill unless” the formality of protest has duly been complied with.

An inland bill, if above ^5, may be protested also, should the holder choose. Such a step is often taken as a precautionary measure, in order to preserve the right of avoiding the delays of an ordinary action.

A bill of exchange ceases to be of any legal value when six years have elapsed since it was due

Should the drawer choose to avoid protest in case of dishonour, he must write on the bill one of the following expressions:-retour sans protet; sans frais ET sans frotet; sans frais de retour, which, in England, render protest unnecessary.

Notice of Dishonour.-

The object of the notice is both to inform the parties of the fact, and at the same time make them aware that they will be called upon to pay.

Although the provisions of the law admit even of a verbal notice, it is always advisable and safer to give notice in writing.

There is no proper form of notice determined by law; it is, however, required that it should contain all the necessary information, lest it may prove insufficient.

The following is a form of notice recommended by reliable legal writers:

I hereby give you notice that the Bill of Exchange, dated January the 20th, drawn by A. B., of Hull, on and accepted by C. D.₍ of London (47, William Street), for £200, payable three months after date to A. B. or his order, and indorsed by A. B. to E. F., of Leeds, and by E. F. to G. H., of London, and by G. H. to you, and also by you, whereof I am now the holder, has been duly presented for payment, but was dishonoured and is unpaid, and I request you immediately to pay me the amount thereof.

All the parties to a bill of exchange, the drawee excepted, are entitled to receive notice of dishonour, both in the case of non-acceptance and of non-payment. The fact of not having received any such notice, within a reasonable time after the dishonour has taken place, discharges a party from liability, as he may fairly presume the bill to have been duly paid when due.

As a rule the holder of a dishonoured bill should give notice of dishonour to the last indorser, who, in his turn, gives notice directly to the preceding party, and thus back to the drawer.

He is not bound, how­ever, to keep to such a course, as the law empowers him to address his claim for reimbursement to any of the parties, from the drawer to the last indorser. In such a case it would then be possible that some one of such parties might not receive notice, and would then be released, in course of time, from liability.

In order to avoid the possibility of such a case, it is therefore advisable for the holder to give notice of dis­honour to all prior parties, or, at least, both to the last indorser and to the other party or parties from whom he intends to claim payment.

Protest and Noting.-

The holder of a dishonoured bill should have it protested in the place where accep­tance or payment has been refused.

The protest is to be drawn up by a notary public, and, in the absence of one, may be legally superseded by a simple declaration affirmed by a citizen in the presence of two witnesses.

The declaration need merely state the fact of dis­honour, as in the following specimen:

The notarial protest consists of a solemn declaration, under the hand and seal of a notary, stating that the bill has been duly presented by him to the drawee and acceptance or payment demanded, which was refused.

The usual form of a notarial protest runs as follows:

In the case of foreign bills this course must, as already stated above, be strictly followed, since a notarial protest is considered by the laws of most foreign nations as the only legal evidence of dis­honour, and therefore necessary to enforce the holder’s rights abroad.

As already explained, however, such a formality is not necessary for an inland bill, the holder of which has only to give notice of dishonour in urder to preserve his right of recourse.

The drawing up of a deed of protest is customarily carried out in England by two different operations, the one being called noting, the other, extending a protest.

Noting is the preliminary step to protest. It consists of a summary entry in the notary’s official register, stating the demand of acceptance or payment and the consequent dishonour of the bill, a copy of which is inserted in the register.

The date of protest and the notarial charges for minuting, attested by the notary’s initials and seal, are noted on the face of the bill. The noting charges on a bill of exchange are fixed by special schedules, and amount to a very low figure.

Should the full form of protest be required in the course of action, it may be extended at any time by the notary, under the date of the noting, and directly enforced.

Legal proceedings are not often resorted to in trade for the recovery of a dishonoured bill. The system of dealing with cases of dishonour proves, therefore, very beneficial to business men, as it saves for them both time, trouble, and money.