Question 1 I am presently holding two accounts at the Bank. The first (my ‘Numbe

Question

Question 1

I am presently holding two accounts at the Bank. The first (my ‘Number 1 Account’) has a credit balance of $5, 000 and the second (my ‘Number 2 Account’) has a credit balance of $10, 000. I decide to draw a cheque on my Number 2 Account for $ 13, 000 to meet an extraordinary expense. I do realise that there is insufficient funds in the Number 2 Account but I reason that the Bank does have sufficient funds to be able to meet the expense and as I have never had any cause to borrow money from the Bank before, or seek a Bank overdraft, there should be no problem. To my surprise, the Bank dishonours my cheque causing me considerable embarrassment as the payee seeks payment. I wish to take legal action against the Bank.

Advise me whether the Bank is entitled in law to dishonour my cheque in this way. In your answer you must cite the relevant case law and legal principles which support your conclusion.

Explanation / Answer

Answer :- The bank is very much right in dishonouring your chequeon account of insufficient funds issued for $ 13,000 since balance therein is just $ 10,000. The bank needs to consider only the balance lying in the account from wherein the cheque has been issued and not the balance lying in your any other account with the same bank.

In case of Jainchill vs citibank, (Court: Appellate division of the Supreme Court of New York, First Department) summary judgment was unanimously reversed, on the law, with costs, and summary judgment was granted dismissing the complaint on the merit. In this action for alleged dishonor of cheque drawn by plaintiffs corporation it appears without evidentary contradiction that:

a) the cheque was never presented

b) At all times from the time the cheque was drawn until the account was closed, the account either had no credit balance or a nominal credit balance to cover the cheque.

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