University of Makeni - Sylvanus Koroma Campus - Yoni

Law Department – Mercantile Law

Lawyer Jalloh’s explanations of Bill of Exchange Act CAP 227of the Laws of
Sierra Leone 1960

Law (LLB II)

Mercantile Law (Negotiable Instrument – Bill of Exchange) CLASS
Date: 29/05/021
Topic: Definition and elements of Negotiable Instrument & Bill of Exchange
What Is a Negotiable Instrument? A negotiable instrument is a signed document that promises a sum
of payment to a specified person or the assignee. In other words, it is a formalized type of IOU "I owe
you,” A transferable, signed document that promises to pay the bearer a sum of money at a future date
or on-demand. The payee, who is the person receiving the payment, must be named or otherwise
indicated on the instrument.
Because they are transferable and assignable, some negotiable instruments may trade on a secondary
market.

Basically there are three types of negotiable instruments, they are:

I. Bills Of Exchange
II. Promissory Note and
III. Checks

Examples of Negotiable Instruments

One of the more common negotiable instruments is the personal check. It serves as a draft, payable by
the payer’s financial institution upon receipt in the exact amount specified. Similarly, a cashier’s check
provides the same function; however, it requires the funds to be allocated, or set aside, for the payee
prior to the check being issued.

Negotiable instrument are determine by the law because the law reorganised them as such. It was the
common law that was initially governing negotiable instrument. This was the period in which the batter
system was in operation, but as the world grew to advance the coin was invented and later moves to
papers until now when checks are used.

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Tracing the history of Negotiable Instrument, it is worth noting that the first negotiable instrument arose
in the word during the first crusade (11th century) when Christians and Muslims were fighting over
themselves; because at that time people were not safe with regards moving with their monies and goods
and services, there were merchants who trusted themselves. An example of this could be Mr. Sesay
being in Freetown while Mr. Bangura is in Makeni. Mr. Sesay’s relationship with Mr. Bangura is very
cordial. So rather than Mr. Kamara bringing his money all the way from Freetown to Makeni he will
give Mr. Sesay his 15 gold and Mr. Sesay will write a document saying that “Mr. Bangura pay Mr.
Kamara 15 gold” Mr. Sesay will then sign and sealed it and as far as that was concern it was good
money. That means Mr. Kamara works with a piece of paper telling him what he is entitled.

Definition of Bill of Exchange: The Bill Of Exchange Act Cap 227 of the Laws of Sierra Leone 1960 is
the statute that we will be using and it is important to note that the Bill of Exchange Act cap 227 is a
direct copy of 1882 Bill of Exchange Act of the United Kingdom, they were however at the time not
applicable in Sierra Leone until in 1960 when those laws were consolidated and made part of our laws.
And this is only applicable to Bills of Exchange, Promissory Note and checks.

According to section 3. (I) of CAP 227 of the Bills Of Exchange Act of the Laws of Sierra Leone 1960.
“A bill of exchange is an unconditional order in writing addressed by one person to another,
signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or
at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified
person or to bearer.”

From the above definition, the following could be said to be the elements of the Bills of Exchange:

The Bills of Exchange should be:

1. Unconditional
2. Order
3. In writing
4. Signature of the person giving
5. Demand
6. Determinable time
7. Sum Certain
8. Specific person
9. Bearer

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 10. Address to a person

Before discussing the above, it is first important that the parties to bills of exchange are discussed. And
the parties are:

 Drawer: is the party that issues a bill of exchange – the 'creditor'

 Drawee: is the party to which the order to pay is sent - 'the debtor'.
 Acceptor: The drawee becomes the acceptor when he/she/it has written the acceptance on the
bill of exchange.
 Payee: is the party to which the bill of exchange is payable
 Indorser: a person who signs the check or instrument to transfer it to an other
 Indorsee: the person to whom a check or instrument is transferred by indorsement

Analyses of the elements of a bill of exchange

√ Unconditional: The bill of exchange shall always be free of any conditions. The payment to be
made on order shall be unconditional and the same qualifies the instrument to be a bill of
exchange. For example you cannot tell a bank to pay M. S. Sesay the sum of Le 10,000,000 if he
graduates. The use of words such as As a consequence of, As a result of, As long as, As soon
as, Assuming, Because, Before, But for, Even if, If, If only, Once, Only if, On the condition
that, Provided, Providing, Since, Therefore, Unless, Until, When, Whenever, Wherever,
Whether, Yet etc are conditional and as such cannot be Bills of Exchange. A bill of exchange
simply tells you “pay” or “Order”.

√ Order: The bill of exchange is an unconditional order. Hence, the instrument shall have the
instruction i.e. an order to pay to certain person or to the order of. The use of the phrase “Please
pay” in Bills of exchange is not a request it is still a command. As far as the law is concern you
are being polite and they said that politeness does not remove the precatory nature
(recommended, expected, or expressing a hope or wish. Precatory expressions are commonly
used in wills and trust).
√ In Writing: The bill of exchange which was made shall be in writing. Mere words of order are
not a valid instrument and that doesn't satisfy the rule to be a bill of exchange. With electronic
development it is said that printed materials also comes under writing. The key element of
writing is that the Bills of exchange have to be on a paper and physical that we can touch in other
words it has to be on a piece of paper.

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√ Signature of The Person Giving: The drawer of the bill of exchange shall sign the instrument.
He is the one who gives the order to pay. The drawer is the payee or the payee could be the
holder of the bill also. There are situations in which someone can sign on his behalf. Two
conditions in which someone can sign on behalf of the drawer is that of the agent signing on
behalf of his Principal and secondly the secretary of a company signing on behalf of the
company. It is also necessary to mention that an authorised signature is different from forgery.
An unauthorised signature can be ratified by the authorised person to sign it while a forgery
cannot be ratified as it is “void ab initio”, which means "to be treated as invalid from the outset”
and most importantly it is against the Forgery Act of 1816.

√ Demand: A promise or order is "payable on demand" if it (i) states that it is payable on

demand or at sight or otherwise indicates that it is payable at the will of the holder, or (ii) does
not state any time of payment.

√ Determinable Time: Bills of exchange payable at sight (sight drafts) Maturity at sight is
formally based on expressly using words "at sight", "at presentation", "after sight", etc.
Another option consists in not stating the day of maturity as mentioned above. With bills of
exchange at sight the due day is not determined clearly in advance. The due day is the day when
the bill of exchange is presented to the respective person for payment. Bills of exchange payable
at a fixed period after sight (time drafts) An example of time draft is a bill of exchange which
is due "one month after sight". The time stated in the bill runs from the day of acceptance of the
bill or the protest. Therefore acceptance must bear a date. If the bill was not accepted, or the date
of acceptance was not stated the bill must be protested. Bills of exchange payable at a fixed
period after the date of drawing (time drafts) these are bills in which maturity is stated at a
fixed period after the day of drawing, for example, "pay in a month after drawing". Bills of
exchange payable on a fixed day (fixed time drafts) It is the usual determination of maturity date,
for example, "on 21st August 2001". Maturity of the bill of exchange may only be determined
by the four methods mentioned above. Bills of exchange with a different maturity date are
inadmissible. Now a few notes on various cases of invalid bills of exchange because of a
defective determination of their maturity. The law expressly declares as invalid bills of exchange
with successive maturity (installment bills of exchange).
The maturity date must be existing; otherwise the bill is invalid (for example, "on 31st
November 2001"). A year must be unconditionally stated. Also, there must be only one maturity
date clear from the bill. Therefore it is inadmissible to state the maturity date so that it will be

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 more days, for example, "pay in August 2005", as such a bill would have 31 days of maturity in
total. Also, bills of exchange with maturity "until 22nd August 2005" or "during ten days
since the day of drawing" will be invalid. These data are defective because of the prepositions
"until" and "during" as it is not clear on which concrete day from the remaining time such a
bill would be mature. Inadmissible are also alternative determinations of maturity ("pay on
2/7/2001 or 5/11/2001", "pay at sight or in two weeks after sight") and also bills of exchange in
which the maturity is determined not only by a concrete day but also by an hour ("pay on 4th
January 2005 at 13.00").
√ Sum Certain: The sum of money shall be certain. Additions to the same of subtractions shall
not be accepted unless there is an interest clause and the same shall be mentioned in percent.
Other conditions to the sum of money shall be void. The sum certain includes instalment
payment in other currencies. Although according to our current law any bill of exchange express
in foreign money shall be paid in Leones.
√ Specific Person: An order instrument must name the payee with reasonable certainty. · An
instrument whose terms intend payment to no particular person is payable to bearer.
√ Bearer: the payment in this case is made to anyone who is holding the bill of exchange.
√ Address to A Person: the payment must be made to the particular person whose name is stated
in the bill of exchange.

Note: Date, number, place, etc on bill of exchange: These are not required by the law and they are not
essential. The important issue is order to pay certain sum of money unconditionally to the payee or to
the order of or also to the bearer of the bill of exchange. The bill of exchange however shall be stamped
to give legal validity to the same.

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Law (LLB II)
Mercantile Law (Negotiable Instrument – Bill of Exchange) CLASS
Date: 05/06/021
Topic: Acceptance
What Acceptance is with regards the Bill of Exchange Act? Acceptance means assent to the
unconditional order of a Bill of Exchange. Usually, the acceptor in this regard is the drawee although
there is a very high likelihood that he has someone who accept and someone from whom that money is
drawn. There are times in which the acceptor and the drawee are two different people, so the base point
is that usually the drawee is the acceptor that means the drawee who is the person to whom the
unconditional order is made, as soon as the Bill of Exchange is presented to him, he sees it and he may
either accept or refuse in the event the drawee accepts he now moves from being a drawee to an
acceptor. And it is of importance to mention that amongst the people liable to a bill of exchange the only
person that may not be liable is the drawee, because he has an option of either accept or reject. For one
reasons or another the drawee has the option to accept or refuses to accept the Bill of Exchange and the
event he refuses to accept then the holder of the bill that means the person to whom it is paid or the
agent of the person that is supposed to be paid may treat the bill as dishonoured and this could be seen in
section 17(1) “The acceptance of a bill is the signification by the drawee of his assent to the order
of the drawer.”
It is important to note that an agent of the drawee can also accept a bill of exchange on behalf of the
principal (the drawee) within his authority this could also be done either by ratification, by contract or
by estoppel where an agent of the drawee accept the bill of exchange as far as the law is concern it is
deem to be accepted. It may be find quit strange for a drawee and the acceptor being different, but
however there are certain circumstances in which the drawee is only there to give the money but there is
someone who can accept that is however more informal than a formal bases. For example if you draw a
check on the bank the bank is the drawee but an agent of the bank who is the taller or the bank manager
can accept the check but never forget that a bill of exchange is not restricted to a check and remember in
the definition of a bill of exchanges there is nothing there that say it’s something drawn in the bank but
rather an unconditional order in writing, so that means Mr. Sesay can put something down on a piece of
paper address to Mr. Jaloh but to be accepted by Mr Kamara. It is also possible that the drawer can be an
acceptor, he can draw a bill of exchange with his name on it as the payee, and this kind of bill is usually
known as accommodation Bill. An Accommodation Bill refers to a bill which is drawn by a drawer who
happens to be a drawee in some certain circumstances or who happens to be the payee. For instances I
want to go to the bank and get some money from my account I draw a bill of exchange in my name in

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my check I will write “Pay Mohamed Sallieu Sesay”, I go through the whole process of presenting an
Id card in this case I am a drawer on one hand and a drawee on the other hand.
How a Bill of Exchange address to a firm is been accepted? What happen in a situation in which the
drawee in this circumstance is not a bank but a firm? Let us say a law firm or a business firm, how
acceptance does takes place in that regard? In answering this question it is important to note that a firm
is a partnership and in a partnership liability is shared amongst partners as such it is a general rule that
when a bill of exchange is drawn on a firm then all the partners must sign. However, partners can also
appoint one or more members of the partnership to be signing on behalf of them all. And it is important
to note that such partner should sign in the name of the firm and not on their personal behalf. If they
sign in the name of the firm then the firm becomes liable but if they sign in their personal behalf then
they became liable and not the firm in the event that anything went wrong.
Types of Acceptance
There are two types of acceptance, they are:
√ General and
√ Qualify acceptance
General acceptance: for general acceptance, it means the acceptor accept the bill as it is, it does not
have any conditions, it does not have any qualifications as to exercise the right, there is no “if” there is
no “but”. It is instantaneous that means as soon as the bill of exchange was presented to him he must
satisfy that the drawer’s signature is on that bill of exchange as soon as he signs or he write accepted and
signs that is that he doesn’t do anything beyond that. That is general acceptance, that means you accept
it without any reservation, any qualifications.
Qualified acceptance: In a qualified acceptance, the drawee accepts to pay however, that payment is
subject to the fulfilment of certain terms and conditions. If that term or condition is not fulfilled then he
cannot complete payment. In the event the drawee gives a qualified acceptance the payee has the right to
either treat the qualified acceptance as valid that means he accepts the qualified acceptance or he might
reject it and considered the bill to be dishonoured and then he can sue to curt as seen in 44 (1) “The
holder of a bill may refuse to take a qualified acceptance, and if he does not obtain an unqualified
acceptance may treat the bill as dishonoured by non-acceptance”. But in the event he accept the
conditions imposed by the acceptor as between the both of them (the payee and the acceptor) everything
is well. But when it comes to the liability of the drawer it’s a different ball game.
If the payee accepts the qualified acceptance what is the liability of the drawer? In this case the
drawer for the main time is discharged from any liability on that bill. However if you send a notice to
the drawer or indorser of a bill the drawer or the indorser of the bill has to within a reasonable time

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accept or reject the fact that you accepted a qualified acceptance if he accepted to the qualified
acceptance then he becomes liable again. This also extend a situation where in notice has already been
sent to the drawer or the indorser and he stays silence, as far as the Bill of Exchange Act is concern in
that situation silence is consent. This is seen in section 44(3) “When the drawer or indorser of a bill
receives notice of a qualified acceptance, and does not within a reasonable time express his dissent
to the holder he shall be deemed to have assented thereto.”
Types of Qualified Acceptance

According to section 19 of the bill of exchange, the following are the types of qualified acceptance

Qualified Acceptance as to condition S.19 (2) a: this is saying that the acceptor has accepted to pay
upon the fulfilment of certain conditions. The nature of such condition should be such that it should be
lawful, must not be vague, and must be achievable and possible.

Qualified Acceptance as to Partial S.19 (2) b: Acceptance made for payment in instalments i.e. the
condition is that I will pay you X amount from this amount of the Bill of Exchange until this date and
then I will pay you x amount on the later date, in other words it is the acceptance by which drawee
agrees to discharge the bill in instalments. This is very key to section 44(2) “Where a qualified
acceptance is taken and the drawer or an indorser has not expressly or impliedly authorised the
holder to take a qualified acceptance, or does not subsequently assent thereto, such drawer or
indorser is discharged from his liability on the bill. The provisions of this sub-section do not apply
to a partial acceptance whereof due notice has been given. Where a foreign bill has been accepted
as to part it must be protested as to the balance.” It means in the event a qualified acceptance is
given and that is partial, whenever the payee refuses to accept payment you can go straight and effect
payment because he had accepted to pay at a given time the balance payment.

Qualified Acceptance as to Local S.19 (2) c: that is to say, an acceptance to pay only at a particular
specified place by the acceptor or by any other person. An acceptance qualified as to place is one by
which the drawee undertakes to pay a bill only at a specified place and not anywhere. For example, an
acceptance reading as ‘Accepted payable at M. S. Commercial Bank only’, or ‘Accepted payable at
‘M. S. Commercial bank and not elsewhere’. It must be noted that the usage of the words ‘only’ or
‘not elsewhere’, is important to render an acceptance qualified otherwise it will be treated as general
acceptance. For example, if a bill is accepted reading as ‘Accepted payable at M. S. Commercial’,
then it will be a general acceptance and not a qualified one for the fact it does not explicitly state that the
bill is nowhere payable except at M. S. Commercial bank.

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Qualified Acceptance as to Local S.19 (2) d: This relate to the time at which payment should be made.
An acceptance can be made qualified as to time. If the drawee while accepting a bill of exchange
undertakes to pay the bill at a time different from that mentioned in the instrument itself, whether sooner
or later. For instance, a bill drawn payable 60 days after date and accepted in words reading as
‘Accepted payable 75 days after date‘. Or, ‘Accepted payable 30 days after date‘, the acceptance is
qualified as to time.

Qualified acceptance as to drawee S.19 (2) e: At an event where the Bill of Exchange is made to
various drawees it means you are creating an option, for Instance Mohamed, Salamatu, Aminata pay M.
S Sesay the sum of this amount of money that means an unconditional order has been given to three
drawees and if one of those drawees accepts a bill of exchanges then the other two drawees are not
liable but then a single drawee can make a condition that I am only going to pay if the other drawees
have accept to pay that is in the event where in you have a lot of drawee on a bill of Exchange and one
drawee is feared of incurring sole liability they can put the condition that liability can be shared amongst
the other drawees in other words an acceptance made by one or more of the several drawees but not by
all, is also a qualified acceptance. As a rule, however, if a bill is drawn on several persons (not being
partners), acceptance must be made by all. If only some of the drawees accept the bill and even one of
them refuses to accept, the holder has a right to treat the bill dishonored. The case of a partnership firm
is, however, different wherein due to agency relationship, acceptance by any one or more drawees
(partners) is considered acceptance by all and therefore, will be binding on the firm.

When a bill is shown or is presented to a drawee the expectation is that he accept what has been ordered
by the drawerer to pay, however the same drawee can accept a bill of exchange before it is even drawn,
he can accept the Bill Of Exchange Before it is even sign, he can accept a defective bill of exchange.
That means a bill of exchange fulfilling 3(1) he may accept to pay on that bill him being the drawer, in
the event he accept he becomes the acceptor he becomes liable. But his acceptance is not only limited to
bill of exchange fulfilling all the requirement in section 3(1) but also in the circumstance wherein the
Bill Of Exchange is incomplete (note that a bill of exchange is not only limited to a check, an A4 paper
giving an unconditional order in writing address to the drawee fulfilling all conditions of section 3(1) is
a bill of exchange in that regard). There might be time where in the drawer will just put his signature on
a piece of paper with the intention that payee or another person might fill up the bill of exchange on a
later date and let say the drawer has already inform the drawee that I have given someone a blank A4
paper with the sum of five hundred thousand to be filled on a later date he can accept it if he wants to
but here is the catch in the event he accept it before it is complete any amount that is in that Bill of
Exchange then you the drawee that accepts will be held liable because you accept a Bill of Exchange
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when it was incomplete as to the amount you pay or the Bill of Exchange is incomplete or it might not
contain the names of the person you are going to pay, in that regarde the drawee may still accept but the
sooner he accept then he becomes liable.

Presentment for payment: this is referring to the situation wherein the payee takes the bill of exchange
to the drawer and presents it to the drawee. There are two types of presentments, one which is the
presentment for acceptance which can also be known as the presentment for payment or we have a
presentment for acceptance and then later you present the bill for payment. That is a bill that just say
“Pay M. S. Sesay” the day I present it to the drawee, I present it for him to accept it, as soon as he accept
it then that means he is to pay me.) In the sense that the first presentment is a presentment for
acceptance that means you give the drawee the bill for him to accept to pay you, whiles you have
presentment for payment. An example for further understand this could be, in the event you have a bill
of exchange that says pay six month after the date on this bill, that means in as much as I have been told
that I should be paid within six months I can take the bill of exchange to the drawer and present it to him
for him to accept to pay me then when the six months has elapse I will present the bill to him again for
the second time but this time is not for him to accept payment but for him to pay me. Taking for
instance when you take a check to the bank you give it to the cashier you have presented it to him for
him to accept to pay the amount on it no he sooner he takes out the money and give it to you that means
not only you have presented the bill for acceptance to be made but also you have presented it for him to
pay on the Bill. However, alternatively there must be a circumstances in which a bill of exchange is
drawn but you are not to be paid instantaneously, you are to be paid six weeks / one month or so after
but on the day you received that bill of exchange you can take it on that very day to the drawee, the
drawer will sign signifying that the bill has been presented to him for acceptance. When you come the
next day you will bring the same sign bill of exchange but at this time you are not presenting it for
acceptance but rather for payment.

There are three situations for presentment for acceptance and they are:

Firstly, where the bill is payable after sight presentment is clearly necessary in order to fix the maturity
of the instrument: remember that as far as the bill of exchange that has an order to pay on a later date is
concern that bill has not been mature the time the bill is considered to be mature is when the due date for
payment arises

Secondly, where a bill is non-payable elsewhere that that as the residence or the business place of the
drawee, it must be presented for acceptance before it can presented for payment.

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The third circumstance is where the bill itself expressly says that the payee must present it for
acceptance before they pay him any amount of money, for example I left it open pay Ishmael the sum
of Fifty Million Leones but she must present it for acceptance

Form and Nature of Acceptance

In law when you hear the word form it simply mean how is something supposed to be drafted, or written
down and when you hear of substance you don’t consider how it is written down but rather the law
behind it.

The form of acceptance can be seen in section 17 “The acceptance of a bill is the signification by
drawee of his assent to the order of the drawer. (2) An acceptance is invalid unless it complies
with the following conditions, namely (a) It must be written on the bill and be signed by the
drawee. The mere signature of the drawee, without additional words, is sufficient. (b) It must not
express that the drawee will perform his promise by any other means than the payment of
money.” A bill of exchange is an unconditional order in written so therefore the acceptance from the
drawee should also be in written, that means the word “accepted” followed by a signature is considered
a valid acceptance but it must be written on the bill. However the mere signature of a drawee can still be
considered as an acceptance that means if the drawee just signed on the back of the check or he signs on
the check as far as the Bill Of Exchange Act is concern that is a valid acceptance by the drawee.

It is important to note that paragraph (a) says you should not write anything on that bill of exchange
signifying anyother other than payment that is when you say I accept that means you don’t pay in kind
you don’t pay in goods but you pay in money the sum on that bill of exchange for example if you say
accepted and state 15 catton on onions that is not payment, you don’t use something that is of value like
that equivalent on the bill of exchange.

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Law (LLB II)
Mercantile Law (Negotiable Instrument – Bill of Exchange) CLASS
Date: 12/06/021
Topic: Negotiation of Bills.
The technical term regarding the transfer of a bill of exchange is Negotiation of a bill of exchange. This
is seen in section 31. (1.) “A bill is negotiated when it is transferred from one person to another in
such a manner as to constitute the transferee the holder of the bill.”

According to the interpretation section of a bill of exchange act, a “Holder " means the payee or
indorsee of a bill or note who is in possession of it, or the bearer thereof.

There are three types of holders under the same bill of exchange act, they are:

 Mere Holder
 Holder for value and
 Holder in due course

They both share the characteristics of the fact that they are all holders. What makes them difference is
what will give them the entitlement to claim should the bill of exchange is dishonoured.

Mere Holder: if I write out a bill of exchange and I put it in favour of Abu Bakarr Kamara for the sum
of Le 1,000,000 as far as the bill of exchange act is concern he is just a mere holder, he is refer to a mere
holder because Abubakar Kamara has not supply any consideration. I just decided giving him money
without doing anything for me, I don’t have any debt to him nor any liability I just decided gifting him a
bill of exchange and the supply of consideration is the key different between a mere holder and both a
holder for value and holder in due cause.

Whenever the mere holder comes in court to say that the bill of exchange has been dishonoured I want
to sue the drawer the only defense the drawer has is to say there is a total non-existence of consideration,
and 90% of the times such a defines is accepted by the court.

Holder for value: this is a holder that has supply consideration for a bill of exchange. He has given
something of value for a bill of exchange. As per section 27 of the Bill of Exchange Act, a holder for
value is one who gives consideration for the bill of exchange 27. (1.) Valuable consideration for a bill
may be constituted by (a.) Any consideration sufficient to support a simple contract vaine. (b.) An
antecedent debt or liability. Such a debt or liability is deemed valuable consideration, whether the
bill is payable on demand or at a future time. (2.) Where value has at any time been given for a

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bill the holder is deemed to be a holder for value as regards the acceptor and all parties to the bill
who became parties prior to such time. (3.) Where the holder of a bill has a lien on it, arisingeither
from contract or by implication of law, he is deemed to be a holder for value to the extent of the
sum for which he has a lien.

A very important case to consider in this is the case of Oliver v Davis and Another (1949) CA
Holder for value
Oliver v Davis and Another (1949) CA
Davis owed Oliver £350 and gave him a post-dated cheque for £400. However, when it fell due Davis
was unable to honour it and so discharge the debt. So he asked his fiancée’s sister, Miss Woodcock, to
give Oliver a cheque for £400, in order to discharge his debt to Oliver. This she did. Oliver did not
present the cheque at once and meanwhile Miss Woodcock, discovering that Davis never intended to
marry her sister, stopped the cheque. Oliver sued Miss Woodcock on the cheque and she argued that
there was no consideration for it. The only consideration was the discharge of a debt of a third party,
namely Davis. Section 27(1) of the Bills of Exchange Act provides that ‘valuable consideration for a bill
may be constituted by … (b) an antecedent debt or liability’.
Held the antecedent debt must be due from the maker or negotiator of the instrument and not from a
third party. As the debt was Davis’ and not Woodcock’s, Oliver’s claim would fail.
It is important to note that the consideration is past consideration and the maxim about past
consideration is “Past consideration is no consideration” but in some way in section 27(1) allows for
past consideration but the catch is “consideration must flow from the promisee” and in the case above
consideration did not flow from the promise.
The burden of proof in trying to proof that there is a lack of consideration is placed on the drawer and
this can be seen in section 21(3) “Where a bill is no longer in the possession of a party who has
signed it as drawer, acceptor, or indorser, a valid and unconditional delivery by him is presumed
until the contrary is proved.” What this section is saying is that no sooner you sign a check to transfer
it to the next person there is a presumption that all the right and liability under that check has flown and
one of such right is the fact that the other party has provided consideration to you and this is referred to
as a rebuttable presumption.
Holder in Due Course: this is seen in section 29. (1.) A holder in due course is a holder who has
taken a bill complete and regular on the face of it, under the following conditions ; namely, (a.)
That he became the holder of it before it was overdue, and without notice that it had been
previously dishonoured, if such was the fact: (b.) That he took the bill in good faith and for value,
and that at the time the bill was negotiated to him he had no notice of any defect in the title of the

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person, who negotiated it. (2.) In particular the ' title of a person who negotiates a bill is defective
within the meaning of this Act when he obtained the bill, or the acceptance thereof, by fraud,
duress, or force and fear, or other unlawful means, or for an illegal consideration, or. When he
negotiates it in breach of faith, or under such circumstances as amount to a fraud. (3.) A holder
(whether for value or not), who derives his title to a bill through a bolder in due -course, and who
'is not himself . a party to any fraud or illegality affecting it, has all the rights of that holder in due
course as regards the acceptor and all parties to the bill prior to that holder.
This section is very strict for any one mistake you make in as much as you did everything in good faith
even a defective bill of exchange can render you not to be a holder in due course. Here are very
important facts that you should be aware of firstly they said that the bill of exchange must be complete
and regular on the face of it and they mean must be complete and regular in the face of it, the parties as
in the drawer’s name must be regular, the dreweree’s name must be reguar it must conform with the
whole of section 3 of the Bill of Exchange Act. If it conforms with section 3 then it’s a regular bill, even
your indorsement must be regular if not then it cannot be considered as a complete bill as seen in the
case of Arab Bank Ltd v Ross (1952) CA
Holder in due course
Arab Bank Ltd v Ross (1952) CA
Ross made a promissory note payable on demand to ‘Fathi and Faysal Nabulsy Company or order’. One
of the partners of that firm indorsed the note ‘Fathi and Faysal Nabulsy’ omitting the word ‘company’
and discounted it to the Arab Bank. The Arab Bank claimed against Ross arguing, inter alia, that they
were ‘holders in due course’. Section 29(1) of the Bills of Exchange Act states that a holder in due
course must take the bill ‘complete and regular’ on the face.
Held the Arab Bank were not holders in due course. The omission of the word ‘company’ raised a
reasonable doubt whether the payees and the indorsers were the same. (The bank succeeded on its other
claim as holders for value.) It is worth noting that when you are said to be a holder in due course it
means you are free from the defecting title of the previous holder that indorse it to you, as you will
remember that the previous holder obtained a check by fraud if that check bonuses and he takes me to
court what would I say he obtained the check by fraud that means he doesn’t have a good title to the bill
of Exchange but if that check was negotiated to Timbo who was unaware that I the holder did obtained
that check by any illegal means as far as the court is concerned he is going to be deemed a holder for
value.
Just to a know, the holder in due course doesn’t include the original payee of the bill of exchange and
that was decided in the case of Jones Ltd v Waring and Gillow Ltd (1926) HL

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Jones Ltd v Waring and Gillow Ltd (1926) HL
A rogue owed Warings £5,000. So he fraudulently induced Jones Ltd to give him a cheque for £5,000
payable to the order of Waring and Gillow Ltd. The cheque was paid and later, when the fraud was
discovered, Jones claimed for repayment of the proceeds because of mistake. One defence argued by
Warings (who had acted in good faith) was that they were ‘holders in due course’ within s 21(2) of the
BEA and so entitled to keep the proceeds.
Held that defence would fail because a ‘holder in due course’ did not include the original payee of a
cheque. Judgment (3:2) was given to Jones on the principle of Kelly v Solari (1841), that money
honestly paid by a mistake of fact was recoverable.
If we have a bill of exchange wherein the figures that are written are different from the words in the
check which one takes precedence over the others?
The word takes precedence as per section 9(2.) “Where the sum payable is expressed in words and
also in figures, and there is a discrepancy between the two, the sum denoted
by the words is the amount payable.” This is very important for when we are considering between
regular and irregular bill. For instance if you are supposed to issue a check for one million Leones and
rather than writing one million Leones in figures you wrote one billion Leones what the court will look
at is what is written in words so it follows from section 9(2) that that is still a regular bill.

Are all Bills of exchange negotiable / transferable? According to section 8 of the bill of exchange act
in as much as the idea is there that you can transfer a bill of exchange to anyone that you want the
drawer or the indorser can restrict negotiability of a bill of exchange. You can put words prohibiting
saying that by matter of signature pay Salamatu Kabia only as soon as he has written that definitely only
Salamatu kabia would be paid from that Bill of exchange. He has prohibited further negotiations from
the bill of exchange or the event wherein it is clearly written on the bill of exchange by either the drawer
or the indorser “non-negotiable” that means you cross out the check or the bill of exchange that means
the only person who can claim any amount of money from that bill of exchange is the payee and that
payee cannot transfer the bill of exchange. In the event in which he forces himself to transfer that Bill of
Exchange the person to who he transfers it has his only right extend to the person who transfers it to
him, he cannot sue the drawer because the drawer has initially prohibited transfer the bill of exchange. It
is also important to note that you can also limit your liability to a bill of exchange that means if you sign
a bill of exchange and use the words “without recourse to me” you are absolving yourself from
liability at the end of the day. However, in the event the person who you give that check goes to the

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bank and that check bonuses they can still give a notice of dishonour to you but for someone who the
Bill of exchange is negotiated to further down the line you are absolve of liability. So in as much as the
bill of exchange on one hand gives you the right to limit your liability on the other hand it gives the
immediate person that you give the right to treat the check as dishonour from that regard, so let say I’m
selling a hundred or rice and we both agreed that it’s a million Leones for all those bags of rice and we
know the volatility of the U.S. dollars when it comes to our exchange rate if that man said that without
recourse to me that means he gives the Bill of Exchange which by the time it is going to be paid the
money is going to lose value I’m definitely going to find a way of saying that it is dishonoured but if I
negotiate a check further to another person that person cannot come against the drawer of the bill of
exchange because he has already limited his liability, this is so because you are a holder for value and
you are entitle for the value that you have given by virtue of the Bill of Exchange Act, but if you are just
a mere holder and the drawer write without recourse on it that definitely his argument will be there is no
consideration.
In continuing the transfer of a bill of exchange, we need to consider what is known as an order bill and a
bearer bill, when we understand the meaning of those two types of bills then we can understand how
bills of exchange are transfer.
Bearer Bill: this is referred to a bill that is payable to the bearer, this can be found in section 31(2) “A
bill payable to bearer is negotiated by delivery.” As far as the Bill of exchange is concern if im
giving a check for the sum of one million leones to Mr. Jalloh by just delivering it to him I did not sign
at the back with my signature, I did not write anything denoting that I have transfer the check to Mr
Jalloh then as far as the bill of exchange is concern by virtue of section 31(2) it is a bearer bill, so that
means all that is to deliver the bill to him.
Order Bill: this is found in section 31(3) “A bill payable to order is negotiated by the indorsement
of the holder completed by delivery.” It means it is completed by signature of the holder and delivers
it over to the indorsee.
Another thing we need to put at the back of our mind is that in as much as we have said that a bearer bill
is a bill that is just negotiated by delivery it has been held also in certain cases that one a bill that has a
blank indorsement (We have two types of indorsement) the types of indorsement that is made in a bill of
exchange also determine whether a bill is a bearer bill or an order bill.
The types of indorsement in a bill of exchange can be found in sections 34, but however section 32
gives the prerequisite of a vilad indorsement and it states:
Section 32. An indorsement in order to operate as a negotiation, must comply with the following
conditions, namely

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(1) It must be written on the bill itself, and be signed by the indorser. The simple signature of the
indorser on the bill without additional words is sufficient (that means if the indorser bearly signs at
the back of the bill of exchange it is sufficient). An indorsement written on an allonge or on a " copy
" of a bill issued or negotiated in a country where " copies " are recognised is deemed to be
written on the bill itself; (2) it must be an indorsement of the entire bill . A partial indorsement,
that is to say, an indorsement which purports to transfer to the indorsee a part only of the amount
payable or which purports to transfer the bill to two or more indorsees severally, does not operate
as a negotiation of the bill;(that means if you are indorsing a bill you cannot indorse part of the money.
Let say im giving a check of three million Leones and I owe Dr. Kabia two million leones, I cannot
indorse the check that please pay Dr. Kabia the sum of two million leones, no if you are indorsing you
are indorsing the whole bill of exchange.)
(3) where a bill is payable to the order of two or more payees or indorsees who are not partners,
all must indorse unless the one indorsing has authority to indorse for the others; (4) where in a bill
payable to order, the payee or indorsee is wrongly designated, or his name is mis-spelt, he may
indorse the bill as therein described, adding, if he think fit, his proper signature; (5) where there
are two or more indorsements on a bill, each indorsement is deemed to have been made in the
order in which it appears on the bill until the contrary is proved;(that means in the event where the
bill is transfer from I1 (indorser 1) to I 2 (indorser 2) as far as the law is concern they are going to take
the order of top to the bottom except the contrary is proved so that means Jalloh Indorse at the bottom,
Cole indorse at the top left corner, Mis Kamara indorse on the right corner on the bill of exchange so as
far as they are concern for the one who indorse at the top start their to the bottom but the it is left to the
indorsee to bring evidence that the last person who is supposed to indorse the bill is Jalloh) (6) an
indorsement may be made in blank or special. It may also contain terms making it restrictive.
We now come to section 34 since we have considered the prerequisite fir a valide indorsement.
(34) (1) An indorsement in blank specifies no indorsee and bill so indorsed becomes payable to
bearer. This is very simple, in indorsing the bill of exchange the usual expectation for the normal
practise is that at the back of the bill of exchange I will write pay Sundifu or order or pay Kamara only
and sign at the back of the check, but if I merely sign the bill of exchange without specifying who the
indorsee is that mean I did not tell anybody who it could be payable to, as far as the bill of exchange is
concern that is a blank indorsement and it follows further that a blank indorsement on a bill of exchange
becomes a bearer bill.
So coming back to our definition the two things that make a bill a bear bill are signature and Mere
delivery, blank indorsement at the back of the bill, and this takes us to section 34 (2) which talks of a

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special indorsement A special indorsement specifies the person to whom or to whose order the bill
is to be payable. So if a bill of exchange is indorsed in blank that makes it a bearer bill but if it is a
special indorsement it becomes an order bill.
The third type of a bear bill is a bearer bill paid to a fictitious person and this is seen in section 7 (3)
Where the payee is a fictitious or non-existing person the bill may be treated as payable to bearer.
It could be recalled at the start of the class we stated that there are times wherein the drawee and the
acceptor are different people i.e. the acceptor is the one that accept payment and the drawee the person
who make the payment is a different person the best way to understand that is when we look at the case
of Bank of England v Vagliano Bros (1891) HL: A clerk employed by Vagliano forged the drawer’s
signature to a series of bills and made them payable to ‘C Petridi & Co’, which was the name of a real
company doing business with Vagliano. In ignorance of the forgeries Vagliano accepted the bills
payable at the Bank of England. The clerk then forged the indorsement of C Petridi & Co as payee and
presented them to the Bank of England, who paid him £71,500 on them. The clerk never intended that
Petridi should be paid. At issue was whether the bank was entitled to pay the bearer of the bills and
consequently debit the amount from Vagliano’s account. Section 7(3) of the Bills of Exchange Act
provides that ‘Where the payee is a fictitious or non-existing person the bill may be treated as
payable to the bearer.’ However, Vagliano argued that as the name of the payee was the name of a real
company it was not ‘fictitious’; to be fictitious the name must be nothing but one of the imagination.
Held (6:2) the bank were entitled to pay the bearer and debit Vagliano’s account accordingly. This was
because (5:3) the proper meaning of ‘fictitious’ is ‘feigned’ or ‘counterfeit’ and not ‘imaginary’ and
so it does not matter whether the name is of a real person or not. Also (4:4), the bank was misled by the
conduct of Vagliano.

Vinden v Hughes (1905): A clerk was employed by Vinden to fill out cheques with the names of
various customers, obtain the signatures of his employers and then post the cheques to the respective
customers. Over a three year period the clerk made out 27 cheques to the order of various customers,
obtained his employer’s signatures, forged customers’ indorsements and sold them to Hughes, who took
in good faith. Hughes was paid on the cheques by Vinden’s bank. Vinden sued Hughes for the return of
the money. Hughes relied on s 7(3) of the Bills of Exchange Act which provided: ‘Where the payee is a
fictitious or non-existing person the bill may be treated as payable to the bearer.’
Held when Vinden drew these cheques they did not use the names as pretence; consequently, the payees
were not ‘fictitious’ within the meaning of s 7(3). Vinden were entitled to recover the money.

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What is a conditional Indorsement: this is defined in section 33 “Where a bill purports to be
indorsed conditionally, the condition may be disregarded by the payer and payment to the
indorsee is valid whether the condition has been fulfilled or not. That means if at the end the day you
have an indorser who indorses a Bill of Exchange stating that pay M. S. Sesay if Old Edwardian wins
the Sierra Leone Premier League, that in some way is a conditional indorsement that is the signature of
the indorsement is connected with an event that has to happen before the indorsement is said to take
effect, as far as section 33 is concern that can be disregarded by the one who is going to make the
payment be it the acceptor or the drawee that means in as much as you have already inform the person
who is going to pay that pay this man if Old Edwardian wins the premier League the one who makes the
payment can disregard this condition and still pay at the end of the day.

Restrictive Indorsement: this is seen in section 35: 35. (1) An indorsement is restrictive which
prohibits the further negotiation of the bill, or which expresses that it is a mere authority to deal
with the bill as thereby directed, and not a transfer of the ownership thereof, as, for example, if a
bill be indorsed " Pay D only," or " Pay D for the account of X," or " Pay D or order for
collection."
The effect of such an indorsement is that it free the indorser from any further liability if the person to
who he indorses to indorses it to another person, so that means I 1 put a restrictive indorsement on the
Bill of Exchange to I 2.when you put a restrictive indorsement that means I 2 cannot transfer it to any
other person as far as that indorsement is concern I 2 is the one who is to take the payment that is the
indorsee. Indorser number 2, but if the indorser number two tries to pass that Bill of exchange to
indorser number 3 then indorser number 2 will be held liable.
35(2) A restrictive indorsement gives the indorsee the right to receive payment of the bill and to
sue any party thereto that his indorser could have sued, but gives him no power to transfer his
rights as indorsee unless it expressly authorises him to do so.
Those are the three types of indorsement, the first type is the Blank and special indorsement, the second
is the Conditional and the third is the restrictive and these are the three types of indorsement found in
the Bill of Exchange Act.
The right and power of the holder of a bill of exchange
This could be seen in section 38. The rights and powers of the holder of a bill are as Rights of the
follows- holder.
( 1) He rna y sue on the bill in his own name.

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(2) Where he is a holder in due course, he holds the bill free from any defect of title of prior parties as
well as from mere personal defences available to prior parties among themselves, and may enforce
payment against all parties liable on the bill. (3) Where his title is defective (a) if he negotiates the bill to
a holder in due course that holder obtains a good and complete title to the bill, and (b) if he obtains
payment of the bill, the person who pays him in due course gets a valid discharge for the bill.

North and South Wales Bank v Macbeth (1908) HL: Macbeth was fraudulently induced by White to
draw a cheque in favour of Kerr, a real person. White then forged Kerr’s endorsement on the
cheque and paid it into his own account at his bank, who received the money from Macbeth’s bank.
Macbeth sued White’s bank for the recovery of the money. The bank claimed it was protected by s 7(3)
of the Bills of Exchange Act, which provided that: ‘Where the payee is a fictitious or nonexisting person
the bill may be treated as payable to the bearer.’ Held although misled, Macbeth intended that Kerr
receive the proceeds of the cheque. Thus the payee (Kerr) was not a ‘fictitious person’ within s 7(3).
Thus Macbeth could recover from the bank.

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