Bills of Exchange Act 1909

The Act binds drawers, drawees, acceptors, indorsers, payees, and holders of bills, including holders in due course; makers and payees of promissory notes; and bankers paying or collecting bills, drafts, and cheques outside the Cheques Act 1986. It governs accommodation parties (s 33) and persons signing in agency or representative capacity (s 31). The conflict of laws section (s 77) reaches transactions where a bill is drawn in one country but negotiated, accepted, or payable in another. The Act also reaches insolvency professionals because section 5(1) preserves the rules in bankruptcy relating to bills of exchange, cheques, and promissory notes.

Form and content. A bill must satisfy section 8 to exist at all. The drawee must be named or otherwise indicated with reasonable certainty (s 11). Where a bill is not payable to bearer the payee must be named or indicated with reasonable certainty (s 12). The sum payable is a sum certain even if it bears interest, instalments, or an indicated rate of exchange (s 14). A bill is payable on demand if so expressed or if no time for payment is expressed (s 15). A bill payable at a determinable future time is one expressed to be payable at a fixed period after date or sight, or after a specified event certain to happen (s 16). Sections 18, 19, and 20 regulate ante-dating, post-dating, computation of payment time, and the case of need.

Acceptance. An acceptance must be written on the bill and signed by the drawee (s 22). General and qualified acceptances are distinguished (s 24): a qualified acceptance is conditional, partial, local, qualified as to time, or by some only of multiple drawees. The holder may refuse a qualified acceptance and treat the bill as dishonoured by non-acceptance (s 49(1)).

Negotiation. Bills payable to bearer pass by delivery; bills payable to order pass by indorsement completed by delivery (s 36). Indorsements may be in blank or special (s 39) or restrictive (s 40). An overdue bill can only be negotiated subject to defects of title at maturity (s 41).

Holders and value. A holder for value is presumed where signature is on the bill (s 35(1)). A holder in due course is one who took a bill complete and regular on its face, before maturity, in good faith, for value, without notice of any defect of title (s 34). The holder in due course holds free of personal defences and prior defects (s 43(1)(b)).

Presentment. Presentment for acceptance is required where a bill is payable after sight (to fix maturity), where the bill stipulates it, or where the bill is payable elsewhere than at the drawee's residence or place of business (s 44). Section 46 sets the method, place, and excuses for presentment for acceptance. Presentment for payment is required to charge drawer and indorsers (s 50). Section 51 lists the excuses for delay or non-presentment. Notice of dishonour must be given to drawer and indorsers, with section 54 giving the rules for who can give it, in what form, and within what time, and section 55 setting out excuses.

Protest. Inland bills need not be protested to preserve recourse, but foreign bills must be protested for non-acceptance and for non-payment to preserve recourse against drawer and indorsers (s 56). Protest must usually be made at the place of dishonour, and noting within 48 hours after dishonour suffices, with formal protest extended later (s 56(4), (6); s 99 on noting equivalent to protest). Section 100 supplies a substitute when no notary is accessible: a householder or substantial resident may certify dishonour in the presence of two witnesses, and that certificate operates as a formal protest.

Holders have multiple powers: to refuse a qualified acceptance (s 49); to convert a blank indorsement into a special indorsement (s 39(4)); to treat a bill as dishonoured when acceptance is irregular but refused (s 46(2)(c)); and to insert the true date in an undated bill payable after date (s 17). The court has a power on lost bills under section 75 to order that the loss not be set up provided the plaintiff gives an indemnity. Under section 74, when a drawer, acceptor, or indorser refuses or fails to comply with the time-bound replacement scheme for a lost bill, a former holder may apply to a court of competent jurisdiction for an order directing them to draw, accept, or indorse a replacement bill on terms the court considers just and equitable.

A banker has practical powers and protections. The banker may refuse a stale cheque, defined as one that appears on its face to have been in circulation for more than twelve months (s 80). The duty and authority to pay are determined by countermand or notice of customer death (s 81). A paying banker who pays a crossed cheque in good faith and without negligence to a banker as required by the crossing is treated as if payment had been to the true owner (s 86). A paying banker who in good faith and in the ordinary course pays an unindorsed or irregularly indorsed cheque to another banker is deemed to have paid in due course (s 88B). A collecting banker who in good faith and without negligence receives payment of a cheque for a customer with no or defective title does not incur liability to the true owner (s 88D).

The Act does not create offences. Civil liability turns on the engagements of each party. By accepting, the acceptor engages to pay the bill according to the tenor of acceptance and is precluded from denying the existence and capacity of drawer and payee (s 59). By drawing, the drawer engages that the bill will be accepted and paid, with recourse to him or her on dishonour (s 60(1)). By indorsing, the indorser engages similarly to subsequent indorsees (s 60(2)). A stranger signing otherwise than as drawer or acceptor is treated as an indorser to a holder in due course (s 61). Damages on dishonour are liquidated and include the amount of the bill, interest, and noting and protest expenses (s 62), with re-exchange and interest substituting where a bill is dishonoured abroad (s 62(b)).

A bill is discharged by payment in due course by or on behalf of the drawee or acceptor (s 64); by acquisition by the acceptor at or after maturity (s 66); by express written waiver or delivery up of the bill to the acceptor (s 67); by intentional cancellation that is apparent on the bill (s 68); and by material alteration without assent of all parties liable (s 69), subject to the protection given to a holder in due course where the alteration is not apparent. Acceptance for honour supra protest, payment for honour supra protest, and notarial acts of honour are governed by sections 70 to 73, and after payment for honour the payer is subrogated to the rights of the holder against the party for whose honour payment was made (s 73(5)).

The Act runs on tight times. A bill must be presented for payment on the day it falls due unless payable on demand (s 50). Notice of dishonour must usually reach the addressee on the day after dishonour, or be sent off on the next available post (s 54(l)). A bill must be noted within 48 hours after dishonour (s 56(4)). When a bill is required to be presented for acceptance after a holder receives it, that must happen within a reasonable time (s 45). Where the time limited for doing any act under the Act is less than three days, non-business days are excluded (s 98(1)); where the day for any act falls on a non-business day the act may be done on the next business day (s 98(2)). Christmas Day, Good Friday, a Sunday, or a bank holiday is a non-business day (s 98(3)). For lost bills, the drawer, acceptor, or indorser has 14 days from request (or from indemnity or security being supplied) to issue, accept, or indorse the replacement (s 74(4), (7), (10)).

Section 5 expressly preserves the rules in bankruptcy and the rules of common law and law merchant, save where inconsistent with the Act. Section 6(2) defers entirely to the Cheques Act 1986 for instruments within its scope, which is why this Act is rarely the operative source for ordinary cheques today. Section 7 disapplies certain State laws to the extent specified in the First Schedule for bills, cheques, and notes drawn or made after the Act's commencement. The conflict of laws section (s 77) interlocks with private international law: place of issue governs requisites of form for the bill, place of contract governs requisites for supervening contracts, and place of dishonour governs duties to present, protest, or give notice. Section 77A excuses bills issued in Australia and presented or payable abroad from invalidity for failure to comply with stamp law. The Act also engages bankruptcy and insolvency law where a drawee is dead or bankrupt (ss 46(2), 51(2), 55, 81).

• Section 6(2) means cheques in the ordinary banking sense are not governed by this Act; users must read the Cheques Act 1986 first.
• An order to pay out of a particular fund is not an unconditional order, so it is not a bill (s 8(3)). Statements of account, demand letters, and similar documents do not become bills of exchange just because someone "fills in" details on them.
• Notice of dishonour is not optional: a drawer or indorser to whom notice is not duly given is discharged (s 53). The detailed rules in section 54 must be followed.
• Foreign bills require protest to preserve recourse; inland bills do not (s 56).
• Material alteration without assent avoids the bill, except as against a party who made or assented to the alteration and subsequent indorsers (s 69).
• A banker may refuse a stale cheque (over 12 months on its face) (s 80).

A trader receives a foreign bill for goods sold and presents it for acceptance on the drawee in Singapore. Acceptance is refused. Because the bill is foreign, the holder must have it protested for non-acceptance (s 56(2)) and give notice of dishonour to the drawer and indorsers within the time set by section 54(l). Failure to do so discharges the drawer and indorsers (ss 53, 56(2)).

A finance company holds a promissory note made by two co-makers and is paid by one. The note is discharged as against both makers because it is their joint and several note where signed under "I promise to pay" wording (s 91). The negotiation and payment provisions for bills apply with necessary modifications under section 95.

A taxpayer who tries to "convert" an Australian Taxation Office statement of account into a bill of exchange by writing on it and treating it as drawn fails on the face of section 8: the statement is not an unconditional order from the recipient to the ATO to pay anyone, so no bill of exchange has been created. The Federal Court has rejected this attempt on the application of sections 8, 25, and 50 (Atkinson and Wilmink, considered in the case-law brief).