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IMPORTANT FEDERAL AND STATE STATUTES AND DECISIONS AFFECTING THE
BANKING BUSINESS; INCLUDING FORMS, DEFINITIONS OF BANKING
AND LEGAL TERMS, TABLE OF CASES, ANNOTATIONS,

MAPS, BIBLIOGRAPHY AND A FULL INDEX.

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FULL TEXT

ACCEPTANCE AND CERTIFICATION

ance

DEFINITION

Distinguishing between acceptance and certification, la. Defined and distinguished.-A draws check on B

the drawer of a bill of exchange which requires acceptbank and the payee has it certified. According to the

engages that

on due presentment it will be Negotiable Instruments Act, certification for the holder

accepted while the drawer of a check makes no such discharges the drawer. A draws his sixty days draft

engagement. The term “acceptance” as originally unon B and the payee procures B's aoceptance. In this

derstood implied that the drawer requests the drawee to case as I understand the drawer is not discharged. As

pay the amount at a future date and this request the the Negotiable Instruments Aet provides that certifica

drawee “accepts.” In this meaning the term would tion of a check is equivalent to an acceptance, I would

have no application to checks which are not payable in

the future but only on demand. Where, instead of paylike to see this seeming inconsistency explained and

ing the check, the bank at the request or with the con. the difference between acceptance and certification defined.

sent of the holder or at the request of the drawer cer: Opinion: A check is only one species of a bill of

tified it to be “good," this was originally and is still

termed "certification.” The provision of the Negotiable exchange, namely, “A bill of exchange drawn on a bank,

Instruments Act that “where a check is certified by the payable on demand.” (Negotiable Instruments Act, s

bank on which it is drawn the certification is equivalent 185.) The acceptance of a bill of exchange “is the signification by the drawee of his assent to the order of

to an acceptance" is doubtless derived from the lanthe drawer. The acceptance must be in writing and

guage of the Supreme Court of the United States in

Merchants Bank v. State Bank, 10 Wall. (1870) 604, signed by the drawee." (Negotiable Instruments Act,

19 L. ed. 1008, which in sustaining the validity of a $ 132.) The Act provides that “except as herein otherwise provided, the provisions of this act applicable to

certified check used the following language: it bill of exchange payable on demand apply to a check"

"By the law merchant of this country, the certificate ($ 185) and it further provides that "where a check is

of the bank that a check is good is equivalent to accertified by the bank on which it is drawn the certifica.

ceptance. It implies that the check is drawn upon tion is equivalent to an acceptance” (§ 187) and fur

sufficient funds in the hands of the drawee, that they ther that "where the holder of a check procures it to

have been set apart for its satisfaction, and that they le accepted or certified the drawer and all indorsers are

shall be so applied whenever the check is presented discharged from liability thereon” ($ 188).

for payment. It is an undertaking that the check is But it does not follow because there is a special pro

good then and shall continue good, and this agreement vision, applicable only to checks which are certified for

is as binding on the Bank as its notes of circulation, the holder and not to bills of exchange generally, dis

a certificate of deposit payable to the order of the decharging drawer and prior indorsers, that the declara

positor, or any other obligation it can assume. The tion that certification of a check is equivalent to

object of certifying a check, as regards both parties, is acceptance of a bill of exchange makes the consequence

to enable the holder to use it as money. The transferee of certification for the holder the same in both cases

takes it with the same readiness and sense of security so far as the liability of the drawer is concerned. In

that he would take the notes of the Bank. It is availcase of check certification it is expressly provided that

able also to him for all the purposes of money. Thus the drawer is discharged, but this provision is applica

it continues to perform its important functions until in ble to check certification only and there is no similar

the course of business it goes back to the Bank for reprovision applicable to acceptance of bills of exchange

demption and is extinguished by payment. generally. It is obvious from the provisions of the Act

"It cannot be doubted that the certifying bank initself, which contain rules governing presentment for tended these consequences, and it is liable accordingly. acceptance of bills of exchange and recognize the con

To hold otherwise would render these important secutinuing liability of the drawer of an accepted bill by

rities only a snare and delusion. other provisions relating to the preservation of such “A bank ineurs no greater risk in certifying a check liability at maturity that the effect of acceptance of a

than in giving a certificate of deposit.

In well reg: bill for the holder is different from that of aceeptance ulated banks the practice is at once to charge the check of a check for the holder. The provision that certifi- to the account of the drawer, to credit it in 'certified cation is "equivalent to an acceptance” must be taken check account,' and when the check is paid, to debit as relating to the obligation of the bank but the accept- that account with the amount. Nothing can be simance of a bill of exchange other than a check is clearly pler or safer than this process. not the same thing, or equivalent to certification of a "The practice of certifying checks has grown out of check in its effect on the liabilities of the drawer and the business needs of the country. They enable the indorsers.

holder to keep or convey the amount specified with Paton's Digest.-65.

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