^{page 184 note 60} See Kessler, “Forged Indorsements” (1937) 47 Yale L.J. 863.CrossRefGoogle Scholar

^{page 184 note 61} Possessor, not holder. See n. 68 below.

^{page 184 note 62} See the Uniform Law on Bills of Exchange and Promissory Notes, sec. 16.

^{page 184 note 63} As we shall see, a number of statutory provisions have been enacted over the years, giving effect to forged indorsements.

^{page 184 note 64} 4 T.R. 28.

^{page 184 note 65} See sec. 23 of the Act.

^{page 184 note 66} See sec. 23 of the N.I.L.

^{page 184 note 67} Sec. 3–404 quoted in n. 95 of Section E, above.

^{page 184 note 68} “Holder” is defined in sec. 1–201 of the U.C.C. as follows: “‘Holder’—means a person who is in possession of a document of title or an instrument or an investment security drawn, issued or indorsed to him or to his order or to bearer or in blank.”

In a bill to order an indorsement is therefore required. A forged indorsement is inoperative, so that a person who obtains a bill on the strength of such an indorsement is not a holder.

^{page 184 note 69} As the transferor had no title to the bill nor possession thereof.

^{page 185 note 70} Sec. 3–417 of the U.C.C., quoted in n. 92 below.

^{page 185 note 71} See Aigler, and Steinheimer, , Bills and Notes (1962) 231.Google Scholar

^{page 185 note 72} See Chalmers, , Bills of Exchange, 2nd ed. (1881) 183–93.Google Scholar

^{page 185 note 73} I think that there is no reason why this should not be so on principle, as in suitable conditions estoppel may also operate under the N.I.L., not as statutory estoppel but as part of the general law of estoppel.

^{page 185 note 74} The duties of the holder towards the various parties liable under the bill must therefore be observed. The indorser's liability crystallizes only on maturity of the bill.

^{page 185 note 75} The indorser's liability does not depend upon the holder's duties being observed nor upon the maturity of the bill: see Aigler and Steinheimer, op. cit. 232.

^{page 185 note 76} See n. 83 below.

^{page 185 note 77} See n. 91 below.

^{page 185 note 78} See sec. 4 below.

^{page 185 note 79} This semble should be read as a holder for value in good faith. See n. 5 in Section E above.

^{page 185 note 80} Sec. 55 (2) (b) of the English Act; sec. 53 (2) (b) of the South African Act; sec. 60 (2) (b) of the Australian Act; sec. 133 (b) of the Canadian Act; sec. 55 (b) (2) of the Israeli Ordinance.

^{page 186 note 81} Sec. 55 (2) (c) of the English Act; sec. 53 (2) (c) of the South African Act; sec. 60 (2) (c) of the Australian Act; sec. 133 (c) of the Canadian Act; sec. 55 (b) (3) of the Israeli Ordinance.

^{page 186 note 82} Thence the rule that every indorsement after the forgery is equivalent to a new drawing and imposes a liability on the bill towards a person who acquired it after the indorsement. See Chalmers, , Bills of Exchange, 2nd ed. (1881) 188.Google Scholar

^{page 186 note 83} See Chalmers, , Bills of Exchange, 13th ed. (1964) 194.Google Scholar

^{page 186 note 84} Sec. 58 of the English Act; sec. 56 of the South African Act; sec. 63 of the Australian Act; sees. 137 and 138 of the Canadian Act; sec. 59 of the Israeli Ordinance.

^{page 186 note 85} See Fuller v. Smith (1824) R. & M. 49; Gusney v. Womersley (1854) 24 L.J. Q.B. 46.

^{page 186 note 86} See n. 73 above.

^{page 187 note 87} Secs. 65 and 66 of the N.I.L. See Britton, op. cit. 618–38.

^{page 187 note 88} Sec. 66 of the N.I.L. limits the application of the warranty to the holder in due course only, but it may reasonably be argued that the intention is to a holder for value in good faith. See n. 50 in Section E above.

^{page 187 note 89} Sec. 65 of the N.I.L.

^{page 187 note 90} Sec. 66 of the N.I.L.

^{page 187 note 91} See Ames, , “The Negotiable Instruments Law” (1900) 14 H.L.R. 241, 251–52.CrossRefGoogle Scholar

^{page 187 note 92} Sec. 3–417 of the U.C.C. which provides:

“(2) Any person who transfers an instrument and receives consideration warrants to his transferee and if the transfer is by indorsement to any subsequent holder who takes the instrument in good faith that

(a) he has good title to the instrument or is authorized to obtain payment or acceptance on behalf of one who has a good title and the transfer is otherwise rightful; and

(b) all signatures are genuine or authorized; and

(c) the instrument has not been materially altered; and

(d) no defense of any party is good against him; and

(e) he has no knowledge of any insolvency proceeding instituted with respect to the maker or acceptor or the drawer of an unaccepted instrument;

(3) By transferring without recourse the transferor limits the obligation stated in subsection (2) (c) to a warranty that he has no knowledge of such a defense.

(4) A selling agent or broker who does not disclose the fact that he is acting only as such gives the warranties provided in this section, but if he makes such disclosure warrants only his good faith and authority.”

^{page 188 note 93} See n. 73 above.

^{page 188 note 94} Sec. 4–207 of the U.C.C., which reproduces sec. 3–417 of the U.C.C, and adds: “(3) The warranties and the engagement to honor set forth in the two preceding subsections arise notwithstanding the absence of indorsement or words of guaranty or warranty in the transfer or presentment and a collecting bank remains liable for their breach despite remittance to its transferor. Damages for breach of such warranties or engagement to honor shall not exceed the consideration received by the customer or collecting bank responsible plus finance charges and expenses related to the item, if any.

(4) Unless a claim for breach of warranty under this section is made within a reasonable time after the person claiming learns of the breach, the person liable is discharged to the extent of any loss caused by the delay in making claim.”

^{page 188 note 95} The official explanatory note to sec. 3—417 states: “Where there is an indorsement the warranty runs with the instrument.” (p. 316.)

^{page 189 note 96} See Britton, op. cit. 618–30.

^{page 189 note 97} See the official explanatory note to sec. 3–417 at p. 316. But what is the damage which he suffered?

^{page 189 note 98} See n. 84 above and sec. 65 (4) of the N.I.L.

^{page 189 note 99} See Littauer v. Goldman 72 N.Y. 506; 28 Am. Rep. 171; and see Aigler and Steinheimer, op. cit. 242.

^{page 189 note 100} See Fenn v. Harrison (1790) 3 T.R. 757; Fenold v. Green, 1959, 175 F. 2d 247; Britton, op. cit. 632.

^{page 189 note 101} Sec. 3–417 (2) of the U.C.C. quoted in n. 92 above.

^{page 189 note 102} The warranty under sec. 3—417 of the U.C.C. is given (in a bill to order) to the holder. Here also the difficulty is that at the time of the forgery of the indorsement there is no holder. See n. 73 above.

^{page 189 note 103} See sec. 4, Conclusions, below.

^{page 190 note 104} For the difference between them see nn. 75 and 76 above.

^{page 190 note 105} See Paget, op. cit. 455.

^{page 190 note 106} See n. 100 above.

^{page 190 note 107} See Paget op. cit. 473.

^{page 191 note 108} See Britton, op. cit. 407 et seq.

^{page 191 note 109} The liability of the drawer towards the drawee bank may apparently sometimes be based upon principles of vicarious liability: see Britton, op. cit. 414.

^{page 191 note 110} Sec. 60 of the English Act and sec. 65 of the Australian Act. For other countries which adopted the English Act see sec. n. 7 in Section A above.

^{page 191 note 111} See n. 25 in Section A above. There is a difference between the signature of a receipt and that of an indorsement. See Shely v. Buchbrasa (1966) (II) 20 P.D. 608, 610. As for a signature outside the bank see Stapelberg N.O. v. Barclays Bank, 1963 (3) S.A. 120.

^{page 191 note 112} See Charles v. Blackwell (1876) 1 C.P.D. 548, affirmed (1877) 2 C.P.D. 151.

^{page 191 note 113} As the drawer is released from liability towards the payer under the basic transaction if the payment is made in due course: see the Blackwell case in n. 112 above.

^{page 191 note 114} Sec. 4–401 of the U.C.C. quoted in n. 9 above.

^{page 192 note 115} Sec. 3–406 of the U.C.C.

^{page 192 note 116} Sec. 3–603 of the U.C.C. quoted in n. 13 of Section D above.

^{page 192 note 117} See n. 67 above.

^{page 192 note 118} See n. 56 above.

^{page 192 note 119} See Section C above.

^{page 192 note 120} This problem therefore arises only when payment by the drawer does not entitle him to debit the drawer's account. If as a result of the statutory provisions in England (see n. 110 above) payment by the bank was made in due course, so that it is entitled to debit the drawer's account, there is no question of the drawee's right against the payer. See Leal & Co. v. Williams, 1906, T.S. 554, 559. This approach may be justified, inter alia, by the fact that the law creates, in such cases, a fiction of payment to the holder.

^{page 192 note 121} See n. 23 above.

^{page 192 note 122} See Goff, and Jones, , Restitution (1966) 496–99.Google Scholar

^{page 192 note 123} See Imperial Bank of Canada v. Bank of Hamilton [1903] A.C. 49. Goff and Jones, op. cit. 496–99 also support this view.

^{page 192 note 124} See London and River Plate Bank v. Bank of Liverpool [1896] 1 Q.B.7. This view is also supported by Chalmers, Bills of Exchange 13th ed. (1964) 207, and by Paget, op. cit. 359. The case is quoted with approval in Morison v. London County and Westminster Bank Ltd. [1914] 3 K.B. 356. In Adir v. Municipality of Holon (1964) II 18 P.D. 463 the case is cited with approval but the court appears to have adopted the test of a change of position for the worse.

^{page 193 note 125} See Britton, op. cit. 392.

^{page 193 note 126} The doubt is caused by the ambiguity of sec. 3–418 of the U.C.C., quoted in n. 37. Does this section lay down that apart from liability under the vendor's warranty every payment is final and there is no cause of action for restitution, or does it provide that if the vendor's warranty applies on principle, the provision relating to finality of payment is irrelevant and restitution may be demanded even if in fact no action on the vendor's warranty was instituted?

^{page 193 note 127} Sec. 3–417 of the U.C.C. quoted in n. 26 above.

^{page 193 note 128} Sec. 3–417 of the U.C.C. quoted in n. 26 above.

^{page 193 note 129} Sec. n. 126 above.

^{page 193 note 130} Sec. n. 25 above.

^{page 193 note 131} Sec. 4, Conclusions, below.

^{page 193 note 132} The owner of the bill is also its last holder. He is not a holder in fact as he is not in possession. The person in possession is not a holder because of the forged indorsement. We are therefore faced with a situation where there is no holder.

^{page 193 note 133} See n. 1 above.

^{page 194 note 134} As the drawee bank does not normally sign as acceptor. See Bank of Baroda v. Punjab National Bank [1944] A.C. 176. In the United States the bank may by certfication undertake liability under the bill. Sec. 187 of the N.I.L.; sec. 3—411 of the U.C.C. which provides:

“(1) Certification of a check is acceptance. Where a holder procures certification the drawer and all prior indorsers are discharged.

(2) Unless otherwise agreed a bank has no obligation to certify a check.

(3) A bank may certify a check before returning it for lack of proper indorsement. If it does so the drawer is discharged.”

^{page 194 note 135} See n. 56 above.

^{page 194 note 136} Except for the case when payment by the drawee bank to the person in possession of the bill amounts to payment in due course.

^{page 194 note 137} For these rules see n. 122 above.

^{page 194 note 138} See Paget, op. cit. 330 et seq. This right is also recognized in Canada (Falconbridge,, op. cit. 568 et seq.), in Australia (Rigby, op. cit. 225), and in Israel (Adir v. Municipality of Holon, n. 124 above). It is unknown in South Africa (Cowen, op. cit. 430 et seq.). I think that conversion is not caused by the payment but by the refusal to return the bill to its owner.

^{page 194 note 139} See Britton, op. cit. 418.

^{page 194 note 140} Sec. 3–419 of the U.C.C. which provides:

“(1) An instrument is converted when

(a)…

(b)…

(c) it is paid on a forged indorsement.

(2) In an action against a drawee under subsection (1) the measure of the drawee's liability is the face amount of the instrument. In any other action under subsection (1) the measure of liability is presumed to be the face amount of the instrument.

(3) Subject to the provisions of this Act concerning restrictive indorsements a representative, including a depository or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hand.”

^{page 195 note 141} An interesting question can arise if the drawee bank pays the amount of the bill to its owner, thereby becoming the owner of the bill. Does it now have a right on the bill against the drawer? Against the indorsers? Has the bill been paid?

^{page 195 note 142} For this defence see n. 110 above.

^{page 195 note 143} See Charles v. Blackwell (1876) I C.P.D. 358; Paget, op. cit. 32.

^{page 195 note 144} Sec. 79 of the English Act. See also sec. 1 of the Cheques Act, 1957 (5 & 6 Eliz. 2, c. 36). Similar provisions exist in the South African Act: see Cowen, op. cit. 425. An interesting question arises when the law does not give a defence to the drawer bank because it paid a crossed cheque in disregard of the directions of the crossing. Does it result in negating the statutory defence (as Byles believes—op. cit. 373) or in the creation of a new remedy for this breach (Paget's opinion, op. cit. 323). Chalmers takes no stand on this question: Bills of Exchange 13th ed. (1964) 267.

^{page 195 note 145} A number of American courts have held that refusal by the bank to pay to the owner amounts to the certification of the bill, which attracts liability on the bill. See Britton, op. cit. 420. The U.C.C. repealed these decisions by providing that the bank's refusal to pay does not constitute a certification: sec. 3–410 of the U.C.C.: “(1) Acceptance is the drawee's signed engagement to honor the draft as pre sented. It must be written on the draft….”

^{page 196 note 146} See n. 138 above.

^{page 196 note 147} See Ogden v. Benas (1874) L.R. 9 C.P. 513; Arnold v. Cheque Bank (1876) 1 C.P.D. 578.

^{page 196 note 148} See Kessler, , “Forged Indorsements” (1938) 47 Yale L.J. 874.CrossRefGoogle Scholar

^{page 196 note 149} See Britton, op. cit. 424. The court having accepted the possibility of ratifying a forged signature, some decisions were given to the effect that the owner of the bill is entitled to ratify it and consider the payment as made on his behalf.

^{page 196 note 150} Is the new owner a holder of the bill? According to the accepted view in England the reply seems to be in the negative. The indorsement is forged and no holding is possible on a forged indorsement. The judgment confirms the possessor's right on the level of property law; it does not make him a holder. It nevertheless seems to me that the new owner's right to the bill must be recognized; as owner of the bill he must also be entitled to the obligation. According to the approach of the U.C.C., payment by the possessor may be seen as ratification of the forged indorse ment.

^{page 196 note 151} This right he will need, as the person receiving payment paid twice: once when acquiring the bill and a second time to the owner of the bill. He may recover the first payment under the “vendor's warranty” and the risk will eventually be borne by the person who acquired the bill from the forger, or by the forger himself (if he can be found and if he is solvent).

^{page 196 note 152} Sec. 82 of the English Act; sec. 80 of the South African Act; sec. 175 of the Canadian Act; sec. 88 of the Australian Act; sec. 82 of the Israeli Ordinance. The English and the South African sections were repealed by the new legislation mentioned in nn. 153 and 154 below.

^{page 196 note 153} Sec. 4 of the Cheques Act, 1957.

^{page 196 note 154} Sec. 81 of the South African Act.

^{page 197 note 155} Sec. 3–419 of the U.C.C., quoted in n. 140 above.

^{page 197 note 156} For a criticism of the legislative technique see Britton, , “Defenses, Claims of Ownership and Equities, etc.” (1955) 7 Hastings L.J. 45.Google Scholar

^{page 197 note 157} See Goff and Jones, op. cit. 492–99.

^{page 197 note 158} Under English law unlawful payment to the person in possession may discharge the bill: see n. 110 above. In such cases no liability is, of course, incurred by the drawer of the bill.

^{page 197 note 159} Sec. 70 of the English Act; sec. 68 of the South African Act; sec. 75 of the Australian Act; sec. 157 of the Canadian Act; sec. 70 of the Israeli Ordinance. There is no parallel provision in the N.I.L.

^{page 198 note 160} See e.g. Nosh v. De Freville [1900] 2 Q. B. 72; Bodania v. Mahomed 1906, T.S 520; Britton, op. cit. 184.

^{page 198 note 161} Sec. 3–804 of the U.C.C. which provides:

“The owner of an instrument which is lost, whether by destruction, theft or otherwise, may maintain an action in his own name and recover from any party liable thereon upon due proof of his ownership, the facts which prevent his production of the instrument and its terms. The court may require security idemnifying the defendant against loss by reason of further claims on the instrument.”

^{page 198 note 162} See Britton, op. cit. 417.

^{page 199 note 163} See e.g. comment “Allocation of Losses From Check Forgeries Under the Law of Negotiable Instruments and the Uniform Commercial Code” (1953) 62 Yale L.J. 417.CrossRefGoogle Scholar

^{page 200 note 164} The doctrine of “distribution of risk” was developed in particular in connection with torts. See Gregory, and Kalven, , Cases and Materials on Torts (1950) Ch. 10, Ch. 11.Google Scholar For the operation of similar principles in the law of bills of exchange see Farnsworth, , Cases and Materials on Negotiable Instruments 2nd ed. (1965) Ch. 3Google Scholar; Farnsworth, , “Insurance Against Check Forgery” (1960) 60 Col. L.R. 284.CrossRefGoogle Scholar

^{page 200 note 165} See n. 30 above.

^{page 200 note 166} See n. 39 above.

^{page 201 note 167} Sec. 3–418 of the U.C.C. (quoted in n. 37 above) provides that finality of payment also applies to any person who altered his position in good faith for the worse by relying upon the payment, but this does not include a person who receives payment on a bill if although he acquired it in good faith he knew of the forgery at the time of payment.

^{page 201 note 168} See n. 58 above.

^{page 201 note 169} See sec. 3–302 of the U.C.C.

^{page 201 note 170} See Section F(d) above.

^{page 201 note 171} See sec. e (iii) above.

^{page 201 note 172} when the person receiving payment is a bank there is an apparent contradiction between the “doctrine of finality” and that of risk distribution. The former requires that the drawee should be denied the right of restitution. The latter enables the risk to be laid upon the person receiving payment, as, like the drawee, he may distribute the risk. This contradiction disappears if we consider the fact that under the dispositions of the U.C.C. the person receiving payment may always shift the risk onto the innocent party who acquired the bill from the forger.

^{page 201 note 173} It is interesting to observe that in spite of the different dispositions made by the English Act, it leads to the same solutions as in America. In both systems the risk is borne by the innocent party who acquired the bill from the forger. The English Act reaches this result through the protection it affords to the paying bank while laying the entire “primary” risk on the owner of the bill who may shift it to the person who received payment. The latter may have recourse to a former party until the innocent party who acquired the bill from the forger is reached. The criticism above against the provisions of the U.C.C. therefore applies with equal force to the English Act.

^{page 202 note 174} See p. 56 above.

^{page 202 note 175} See sec. b (4) above.

^{page 202 note 176} For cases when the duty of the drawee bank towards the drawer to pay the amount of the bill is determined, see sec. 75 of the English Act, sec. 73 of the South African Act, sec. 81 of the Australian Act, sec. 167 of the Canadian Act, sec. 75 of the Israeli Ordinance. The N.I.L. has no similar provision. The U.C.C. recognizes the drawer's right to countermand payment (sec. 4—403 of the U.C.C.). The drawer's death or insanity does not determine the duty and authority of the drawee bank to pay the amount of the bill as long as it has no notice thereof and is given reasonable opportunity to act (sec. 4—405 of the U.C.C.).

^{page 203 note 177} See Comment mentioned in n. 163 above.

^{page 203 note 178} See n. 12 above.

^{page 203 note 179} See n. 115 above.

^{page 203 note 180} See n. 92 above.

^{page 203 note 181} If the drawing is forged the holder of the bill has no right against any person whose signature was forged, but he may pursue the persons who transferred the bill to him, under the “vendor's warranty”. If the bill is to order, the holder has a direct right, against the party who acquired the bill from the forger. If the bill is a bearer bill the holder has a right against his immediate transferor who enjoys the same right, until liability falls on the person who acquired the bill from the forger. If the indorsement is forged, the person in possession of the bill has no rights against parties who preceded the forgery, but may claim from parties who signed after the indorsement. The risk does not fall on the owner of the bill, as he may have recourse, under the bill, against the parties who signed the bill before the forgery.

^{page 203 note 182} See Falconbridge, op. cit. 513.

^{page 203 note 183} See Lord Kenyon C.J.'s judgment in Mead v. Young (1790) 4 T.R. 28.Google Scholar

^{page 204 note 184} The grounds on which a drawer whose signature was forged is relieved of liability also apply for the release of an indorser whose signature was forged.

^{page 204 note 185} See n. 62 above.

^{page 204 note 1} See Section F above.

^{page 204 note 2} For a definition of these terms, see n. 3 in Section C above.

^{page 204 note 3} See Chalmers, , Bills of Exchange 2nd ed. (1881) 218.Google Scholar

^{page 204 note 4} See Britton, op. cit. 671.

^{page 204 note 5} For a definition of this term see n. 92 in Section H above.

^{page 205 note 6} But not if the material alteration was made accidentally. See Chalmers, , Bills of Exchange 13th ed. (1964) 218.Google Scholar

^{page 205 note 7} See Davidson v. Cooper (1843) 11 M. & W. 778, 799.

^{page 205 note 8} See Britton, op. cit. 674.

^{page 205 note 9} ibid. 660.

^{page 205 note 10} Sec. 64 of the English Act; sec. 62 of the South African Act; sec. 69 of the Australian Act; sees. 144 and 145 of the Canadian Act; sec. 64 of the Israeli Ordi nance; sees. 124 and 125 of the N.I.L.

^{page 205 note 11} See Chalmers, , Bills of Exchange 2nd ed. (1881) 216.Google Scholar For a broader definition see Suffel v. Bank of England (1882) 9 Q.B.D. 555, 568.

^{page 205 note 12} Sec. 125 of the N.I.L.

^{page 205 note 13} But not if accidentally made. See n. 6 above.

^{page 205 note 14} See Chalmers, , Bills of Exchange 13th ed. (1964) 217.Google Scholar

^{page 205 note 15} See n. 10 above.

^{page 205 note 16} See Paget, op. cit. 466–70.

^{page 206 note 17} See London Joint Stock Bank v. Macmillan [1918] A.C. 777.

^{page 206 note 18} See Scholfield v. Londesborough (Earl) [1896] A.C. 514.

^{page 206 note 19} See Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465.

^{page 206 note 20} Britton, op. cit. 666 et seq.

^{page 206 note 21} ibid. 665 et seq.

^{page 206 note 22} Sec. 3–107 of the U.C.C. which provides:

“(1) Any alteration of an instrument is material which changes the contract of any party thereto in any respect, including any such change in

(a) the number or relations of the parties; or

(b) an incomplete instrument, by completing it otherwise than as authorized; or

(c) the writing as signed, by adding to it or by removing any part or it.

(2) As against any person other than a subsequent holder in due course

(a) alteration by the holder which is both fraudulent and material discharges any party whose contract is thereby changed unless that party assents or is precluded from asserting the defense;

(b) no other alteration discharges any party and the instrument may be enforced according to its original tenor, or as to incomplete instruments according to the authority given.

(3) A subsequent holder in due course may in all cases enforce the instrument according to its original tenor, and when an incomplete instrument has been completed, he may enforce it as completed.”

^{page 206 note 23} See Britton, , “Defenses, Claims of Ownership and Equities &c.” (1955) 7 Hastings L. J. 1,44.Google Scholar For example, the addition of the words “consideration received” does not alter the contract between the parties, having no effect on their substantial rights, but it influences the modes of proof.

^{page 206 note 24} Sec. 3–407 of the U.C.C. quoted in n. 22 above.

^{page 207 note 25} Ibid.

^{page 207 note 26} See sec. 6 below.

^{page 207 note 27} See Chalmers, , Bills of Exchange 13th ed. (1964) 186.Google Scholar

^{page 207 note 28} See sec. 64 of the Eglish Act; sec. 62 of the South African Act; sec. 69 of the Australian Act; sec. 145 of the Canadian Act; sec. 64 of the Israeli Ordinance.

^{page 207 note 29} See n. 28 above.

^{page 207 note 30} I therefore think that liability under vendor's warranty may exist in addition to liability on the bill.

^{page 207 note 31} Sec. 54(a) of the English Act; sec. 52(a) of the South African Act; sec. 59(a) of the Australian Act; sec. 128 of the Canadian Act; sec. 54(1) of the Israeli Ordinance.

^{page 207 note 32} See Chalmers, , Bills of Exchange 13th ed. (1964) 184.Google Scholar

^{page 207 note 33} Sec. 17(1) of English Act; sec. 15(1) of the South African Act; sec. 22(1) of the Australian Act; sec. 35 of the Canadian Act; sec. 16(a) of the Israeli Ordinance.

^{page 208 note 34} See n. 84 in Section F above.

^{page 208 note 35} See n. 87 in Section F above.

^{page 208 note 36} See Britton, , Bills and Notes 2nd ed. (1961) 622.Google Scholar

^{page 208 note 37} See Section F above.

^{page 208 note 38} See Woodward, , “The Risk of Forgery or Alteration of Negotiable Instruments” (1924) 24 Col. L.R. 469CrossRefGoogle Scholar; Steffen & Sterr, “A Blue Print for the Certified Check” (1935) 13 N.C.L. Rev. 450Google Scholar; Greeley, , “The Effect of Acceptance of an Altered Bill” (1933) 27 Ill. L.R. 519.Google Scholar

^{page 208 note 39} See Britton, op. cit. 401.

^{page 208 note 40} See National City Bank of Chicago v. National Bank of Republic 300, Ill. 103, 132 N.E. 832, 22 A.L.R. 1153; Wells Fargo Bank & Union Trust v. Bank of Italy, (1931) 214 Cal. 156, 4 P 2d. 781.

^{page 208 note 41} Sec. 3–417 of the U.C.C., quoted in n. 92 of Section F. above.

^{page 208 note 42} See n. 92 in Section F above.

^{page 208 note 43} Sec. 3–413 of the U.C.C. provides: “(1) the maker or acceptor engages that he will pay the instrument according to its tenor at the time of his engagement.” Under another provision, the holder in due course does not warrant to the acceptor that no material alteration was made in the bill before acceptance: sec. 3–417 of the U.C.C. quoted in n. of Section F above.

^{page 208 note 44} See sec. 6 below.

^{page 209 note 45} See Chorley, , Law of Banking 4th ed. (1960) 65Google Scholar; Paget, op. cit. 460.

^{page 209 note 46} Paget, op. cit. 468; Charley, op. cit. 65.

^{page 209 note 47} Britton, op. cit. 363.

^{page 209 note 48} Ibid.

^{page 209 note 49} Sec. 4–401 of the U.C.C. which provides:

“(2) A bank which in good faith makes payment to a holder may charge the indicated account of its customer according to

(a) the original tenor of his altered item.”

^{page 209 note 50} The explanatory note to sec. 4–401 of the U.C.C. states that this provision complements the provision entitling the holder in due course to payment of the bill according to its original tenor (p. 421). I do not think that this is justified as the provision also applies when the person paid was not a holder in due course.

^{page 209 note 51} See London Joint Stock Bank Ltd. v. Macmillan and Arthur [1918] A.C. 777.

A similar rule applies in South Africa: see Union Government Bank v. National Bank, 1921, A.D. 121; Standard Bank v. Kaplan, 1922, C.P.D. 214.

^{page 210 note 52} See Britton, op. cit. 362.

^{page 210 note 53} (1827) 4 Bing. 253.

^{page 210 note 54} See the Macmillan Case in n. 51 above. This decision also supports the theory of estoppel: see page 1, op. cit. 462 et seq.

^{page 210 note 55} See Britton, op. cit. 662.

^{page 210 note 56} See Paget, op. cit. 462.

^{page 210 note 57} Sec. 3–06 of the U.C.C.

^{page 210 note 58} See sec. 6 above.

^{page 210 note 59} See Imperial Bank of Canada v. Bank of Hamilton [1903] A.C. 49.

^{page 210 note 60} See Britton, op. cit 399 et seq.

^{page 210 note 61} See n. 30 in Section F above.

^{page 210 note 62} For a criticism of these dispositions see Ames, , “The Doctrine of Price v. Neal” (1891) 4 H.L.R. 296Google Scholar, 306 and the conclusion of this section.

^{page 211 note 63} See n. 40 above. See also Ames, , “The Negotiable Instrument Law” (1900) 14 H.L.R. 241.CrossRefGoogle Scholar

^{page 211 note 64} See n. 40 above.

^{page 211 note 65} See Kansas Bankers Surety Co. v. Ford County State Bank (1959) 184 Kan. 529, 338 P. 2d. 309.

^{page 211 note 66} See n. 27 in Section F above.

^{page 211 note 67} Sec. 3–417 of the U.C.C. quoted in n. 26 of Section F above. See also sec. 4–207 of the U.C.C., quoted in n. 94 of Section F above.

^{page 211 note 68} Sec. 3–417 of the U.C.C. quoted in n. 26 of Section F above.

^{page 211 note 69} See n. 43 above.

^{page 211 note 70} See Summary below.

^{page 212 note 71} See Section F above.

^{page 212 note 72} Except in the case of an acceptance.

^{page 212 note 73} See sec. 5 above.

^{page 212 note 74} See sec. 3 above.

^{page 212 note 75} See sec. 3 above.

^{page 212 note 76} See Section F above.

^{page 214 note 77} See Britton, op. cit. 672.

^{page 214 note 78} For other instances of this objective not being reached by the U.C.C. see Beutel, , “Comparison of the Proposed Commercial Code, Article 3, and the Negotiable Instrument Law” (1951) 30 Nebraska L.R. 531, 552.Google Scholar

^{page 214 note 79} Sec. 3–115 of the U.C.C. provides that completing a bill against instructions is equivalent to a material alteration. Sec. 3–407 of the U.C.C. (quoted in n. 22 above) provides that a holder in due course may enforce payment of a document not duly completed, according to its tenor after completion.

^{page 214 note 1} See n. 80 in Section F above.

^{page 215 note 2} See Kessler, , Levi, , Ferguson, , “Some Aspects of Payment by Negotiable Instrument: A Comparative Study” (1935) 45 Yale L.J. 1373.Google Scholar

^{page 215 note 3} See Chalmers, , Bills of Exchange 13th ed. (1964) 338.Google Scholar

^{page 215 note 4} When liability arises on the basic transaction it will also arise on the securities given in connection with it. See Gunn v. Bolekow Vaughan & Co. (1875) 10 Ch. App. 491.

^{page 215 note 5} Sec. 3–802 of the U.C.C., which provides:

“(1) Unless otherwise agreed where an instrument is taken for an underlying obligation

(a) the obligation is pro tanto discharged if a bank is drawer, maker or acceptor of the instrument and there is no recourse on the instrument against the underlying obligor, and

(b) in any other case the obligation is suspended, pro tanto until the instrument is due or if it is payable on demand until its presentment. If the instrument is dishonored action may be maintained on either the instrument or the obligation; discharge of the underlying obligor on the instrument also discharges him on the obligation.”

^{page 215 note 6} See Byles, , Bills of Exchange 22nd ed. (1965) Chap. 33.Google Scholar

^{page 216 note 7} Although it does not reject them. The question is whether these assumptions continue to apply?

^{page 216 note 8} Sec. 3–802 of the U.C.C. quoted in n. 5 above.

^{page 216 note 9} See Hawkland, , Commercial Paper (1959) 72.Google Scholar

^{page 216 note 10} See Payana Reena, etc. v. Pana, Lana etc. [1914] A.C. 618.

^{page 216 note 11} See Alderson v. Langdale (1832) 3 B & Aid. 660; Atkinson v. Howdn (1835) 2 A. & E. 628.

^{page 216 note 12} See Britton, op. cit. 673; Williston, , “Discharge of Contract by Alteration” (1904) 18 H.L.R. 105.CrossRefGoogle Scholar

^{page 216 note 13} See Kessler, , Levi, , Ferguson, , “Some Aspects etc.” n. 2 above, 1373.Google Scholar

^{page 216 note 14} Ibid., 1382, 1396.

^{page 217 note 15} See Robinson v. Hawksford (1846) 15 L.J.Q.B. (N.S.) 377.

^{page 217 note 16} See Kessler, Levi, Ferguson, cit. 1382, 1396.

^{page 217 note 17} See McGary v. Currington (1860) 35 Ala. 696; Smith v. Miller (1873) 52 N.Y. 545.

^{page 217 note 18} See Hawkland, , Bills and Notes (1956) 102.Google Scholar

^{page 217 note 19} It is interesting to note that the Mandatory legislator in Palestine strayed from the common law approach concerning delay. Sec. 52 of the Ordinance provides: “When the drawer or indorser of a bill of exchange is discharged from liability on the instrument by reason of the holder's failure duly to present it or protest it or give notice of dishonour, the drawer or indorser shall not thereby be discharged from his liability, if any, on the consideration for the bill unless he has been prejudiced by the holder's failure to perform his duties, and then only to the extent of any loss which he may have suffered.”

^{page 217 note 20} Sec. 74 of the English Act; sec. 72 of the South African Act; sec. 79 of the Australian Act; sec. 166 of the Canadian Act; sec. 74 of the Israeli Ordinance.

^{page 217 note 21} Sec. 186 of the N.I.L.

^{page 217 note 22} Sec. 3–802 of the U.C.C., quoted in n. 5 above.

^{page 217 note 23} For the effect of delay on the liability on the bill, see sec. 3–502 of the U.C.C. which provides:

“(1) Where without excuse any necessary presentment or notice of dishonor is delayed beyond the time when it is due

(a) any indorser is discharged; and

(b) any drawer or the acceptor of a draft payable at a bank or the maker of a note payable at a bank who because the drawee or payor bank becomes insolvent during the delay is deprived of funds maintained with the drawee or payor bank to cover the instrument may discharge his liability by written assignment to the holder of his rights against the drawee or payor bank in respect of such funds, but such drawer, acceptor or maker is not otherwise discharged.

(2) Where without excuse a necessary protest is delayed beyond the time when it is due any drawer or indorser is discharged.”

^{page 208 note 24} See n. 24 in Section H above.

^{page 208 note 25} See Kessler, Levi, Ferguson, cit. 1400–05. See also Rotschild, , “Uniform Commercial Code's Undoing of an Obligation” (1965) 7 Boston College Ind. & Com. L. Rev. 65.Google Scholar See also Chalmers, , Bills of Exchange 10th ed. (1932) 270.Google Scholar

^{page 208 note 26} Hawkland, , Commercial Paper (1959) 74–75.Google Scholar

^{page 208 note 1} Part I of this Article (1968) 3 Is. L.R. 7, 36.

^{page 208 note 2} Ibid. 42.

^{page 208 note 3} See Section F, Summary.

^{page 219 note 4} See Section G.

^{page 219 note 5} Part I, op. cit.

^{page 219 note 6} Ibid. 31.

^{page 219 note 7} Ibid.. 35.

^{page 219 note 8} Ibid. 37.

^{page 219 note 9} Ibid. 28.

^{page 219 note 10} Ibid. 46.

^{page 219 note 11} See Section G, n. 57.

^{page 219 note 12} See Section G, Summary.

^{page 219 note 13} Part I, op. cit. 42.

^{page 219 note 14} Ibid. 44.

^{page 219 note 15} Ibid. 24.

^{page 219 note 16} Ibid. 21.

^{page 219 note 17} Ibid. 40.

^{page 219 note 18} Ibid. 35.

^{page 219 note 19} Ibid. 29.

^{page 219 note 20} Ibid. 32.

^{page 219 note 21} Section H, n. 22.

^{page 220 note 22} See Section F, n. 95.

^{page 220 note 23} See Section F, Summary.

^{page 220 note 24} See heading to sec. 3–418, “Finality of Payment and Acceptance”.

^{page 220 note 25} Part I, op. cit. 21 et seq.

^{page 220 note 26} See Section F, Summary.

^{page 220 note 27} See Section G, Summary.

^{page 220 note 28} Part I, op. cit. 31.

^{page 220 note 29} Ibid. 20.

^{page 220 note 30} Ibid. 37.

^{page 220 note 31} Ibid. 35.

^{page 220 note 32} Ibid. 40.

^{page 220 note 33} Ibid. 29.

^{page 220 note 34} See Sections F and G, Summaries.

^{page 221 note 35} Part I, op. cit. 21 et seq.

^{page 221 note 36} Sec Section F, Summary.

^{page 221 note 37} Ibid.

^{page 221 note 38} Ibid.

^{page 221 note 39} See Sections F and G, Summaries.

^{page 221 note 40} Part I, op. cit. 38.

^{page 221 note 41} Ibid. 32.

^{page 221 note 42} Ibid. 45.

^{page 221 note 43} See Britton, , “Holder in Due Course—A Comparison of the Provisions of the Negotiable Instruments Law with Those of Article 3 of the Proposed Commercial Code” (1954) 49 Northwestern U.L.R. 417Google Scholar, 430 et seq.

^{page 221 note 44} Sec. 3–406 of the U.C.C.

^{page 221 note 45} See Beutel, , “The Proposed Uniform Commercial Code as a Problem in Codification” (1951) 16 Law & Contemp. Prob. 141CrossRefGoogle Scholar; Beutel, , “Comparison of the Proposed Com mercial Code, Article 3 and the Negotiable Instrument Law” (1951) 30 Nebraska L.R. 531, 533.Google Scholar

^{page 222 note 46} Part I, op. cit. 16.

^{page 222 note 47} Sec. 3–419 of the U.C.C.

^{page 222 note 48} Sec. 3–417 of the U.C.C.

^{page 222 note 49} Part I, op. cit. 16.

^{page 222 note 50} Ibid. 17.

^{page 222 note 51} See n. 45 above.

^{page 222 note 52} Part I, op. cit. 40.

^{page 222 note 53} Ibid. 31.

^{page 222 note 54} Section F, n. 157.

^{page 222 note 55} See sec. 3–406 of the U.C.C.

^{page 222 note 56} See Section F, Summary.

^{page 223 note 57} Such as the influence of banking circles on legislation. See n. 45 above.

^{page 223 note 58} For the history of legislation see Part I, op. cit. 10 et seq.

^{page 223 note 58a} See e.g. Braucher, , “U.C.C. Article 3—Commercial Paper—New York Variations” (1962) 17 Rutgers L.R. 57Google Scholar; Cosway, , “Negotiable Instruments: A Comparison of Washington Law and the Uniform Commercial Code Article Three” (1965) 40 Wash. L.R. 281, 287, 295Google Scholar; Re, , “Some Effects of the Uniform Commercial Code on New York Law—Negotiable Instruments” (1951) 26 St. John's L.R. 26Google Scholar; Andrews, , “Should Article 3 of the Uniform Commercial Code Be Adopted in Ohio?” (1953) 14 Ohio L.J. 35.Google Scholar

^{page 223 note 59} See Beutel, , “Comparison of the Proposed Commercial Code, Article 3 and the Negotiable Instrument Law” (1951) 30 Nebraska L.R. 531.Google Scholar See also Cosway, “Negotiable Instruments etc.”, op. cit. n. 58a, 29.

^{page 224 note 60} See n. 40 above. Vol. 16 of The Law and Contemporary Problems is partly devoted to this question. For a list of articles see Uniform Commercial Code Bibliography.

^{page 224 note 61} It will of course have a great influence on the interpretation of the U.C.C. and on the consideration of future amendments, like the disputations between Ames and Brawslerhad on the N.I.L.

^{page 224 note 62} The provisions dealing with bills of exchange are an integral part—regarding both contents and form—from the general commercial legislation set out in other chapters of the U.C.C.