Cheques and remdies
1. Georgina draws a cheque on the XYZ Bank for the sum of $1,000, and gives it to her friend Violet in payment for services. The cheque is made payable ‘to bearer’ and is not crossed in any way. Subsequently, a thief steals the cheque from Violet. The thief approaches Nathan, a merchant, who supplies him with goods to the value of $1,000 in return for the cheque. Nathan knows nothing of the theft and is acting in good faith. He subsequently presents the cheque for payment to the XYZ Bank but the Bank dishonours the cheque as it has now heard from Georgina that the cheque has been stolen from her friend.
Relying on your understanding of the law, please answer all three of the following questions:
(a) Is the Bank entitled to dishonour Georgina’s cheque?
(b) Does Nathan have any right of action against any one in law? and
(c) Who might be ultimately liable for any loss on the cheque?