DAMAGES FOR REFUSAL TO PAY CUSTOMERS CHEQUE

• Date: 06 February 2019

"We think it is necessary, at this stage, to trace the history of this aspect of the law relating to damages for breach of contract. The role or predominating business of banker is the business of banking which consists in the main in the receipt of monies on current or deposit account and the payment of cheques drawn by, as well as the collection of cheques paid in by, a customer. See also Atkin, L.J. in Joachimson v. Swiss Bank Corporation (1921) 3 K.B. 110 at 127. Therefore, the receipt of money from an account of his customer by a banker constitutes the latter the debtor of the former (Foley v. Hill (1848) 2 H. L. Cas. 28) and the banker undertakes to pay any part of the money thus due from him to the customer against the written orders of the customer (Joachimson v. Swiss Bank Corporation (supra). Accordingly, the relation so constituted is that of principal and agent and, therefore, a cheque drawn on the banker by the customer represents the order of the principal to his agent to pay, out of the principal’s money in his hands the amount stated on the cheque to the payee endorsed on the cheque. Therefore, it has long been established that refusal by a banker to pay a customer’s cheque when he holds in hand an amount, equivalent to that endorsed on the cheque, belonging to the customer amounts to a breach of contract for which the banker is liable in damages. The only question, which arose, in these circumstances, has always been that relating to the quantum or amount of damages. The general rule for measuring a quantifying damages for breach of contract was that established by the leading case of Hadley v. Baxendale (1854) 9 Exch. 341 which is that the party in breach is liable in damages in the amount which flows directly and naturally from his failure to keep his own part of the contract or bargain provided that such damage could reasonably have been within the contemplation of the parties at the time when the contract was made. But it rarely happens that a banker knows the circumstances under which a customer has had to issue a cheque which he refused to honour and, this makes it very difficult to apply the rule in Baxendale (supra) in measuring, damages in those circumstances. It is on this account that damages awarded for wrongful dishonour of cheques by a banker are generally nominal, save in the instances which the law has come to regard as exceptional; and these constitute the, exceptions with which we will deal anon. Direct and/or natural damage arising from a breach of contract by a banker to honour the cheque of his customer apart, there is, however, also the serious likelihood of considerable danger to the reputation of a customer and generally to business; (if he the customer is engaged in business). People generally, whether or not in business, do not deal with a person whose cheques are not paid, although it is conceded that instances of disinclination to deal with such a person more readily abound in the field of business. As it is always extremely difficult to have an accurate estimate of the extent of damage under this ‘head’, it has, therefore; been laid down by a long line of cases beginning with that of Marzetti v. Williams (1830) IB & Ad 415 that damages in such cases are "at large", which is to say that in such...