I need your advice regarding the case below:
A corporate client comes to the bank with a cheque in order to be remitted by his bank for collection.
Cheque is endorsed on the back ( having the signature and stamp of the corporate client ) .
The remitting bank send to the collecting bank the endorsed cheque along with the remitting letter ( which contains the details of cheque , details of collecting bank and also the payment instruction for collecting bank ).
Having in view all from the above, do we need of remitting bank's endorsement ? Or is it enough above procedure ( without remitting bank's endorsement ?
Thanks and regards
If the cheque is endorsed in blank than title of the cheque passes simply by forwading/passing the cheques from one to the other. hence, in this case, the remitting bank need not endorse the cheque while forwardig to the collecting bank for the collection.
other case, if the cheque is endorsed to the order of remitting bank than the remitting bank need to endose the cheque further on the collecting bank.
Other experts may comment.
Thanks a lot for your always welcomed and valuable comments.
Another point I want to clarify is related to remitting for collection of promissory notes ( under ICC 522 ).
I will take an example followed by some questions:
Client "X" come to his bank ( remitting bank ) on 10.04.13 with a promissory note issued in euros, having a due date 20.05.13. Also give instructions to his bank to remit the pn for collection ( standard application for collection under URC 522 ).
Now, the questions:
Q1. Which will be the instruction for collecting bank (a) or (b) ?
a) deliver the document ( PN ) against payment - it means that the collecting bank needs to wait for payment instruction from PN's issuer in order to make the payment and further release the PN to issuer OR
b) at maturity 20.05.2013 please pay the amount of "X" euros representing the promissory note having series RNCB0007. ( what collecting bank should do with the PN at maturity 20.05.2013 if the issuer has no funds in his current account ? )
Which of them is correct from remitting bank point of view and what instruction should be followed by remitting bank. ?
Q2. The promissory note needs to be endorsed prior to be remitted for collection ? if so, the beneficiary of PN endorse it in favor of remitting bank and remitting bank needs to endorse further in favor of collecting bank ?
Q3. Assuming that we face with " the beneficiary of PN endorse it in favor of remitting bank and remitting bank needs to endorse further in favor of collecting bank ", if I am not wrong, in case of non payment at maturity, is the remitting bank liable somehow in his quality of endorser towards the beneficiary ?
I am waiting for your comments guys !!!
Please note the case presented above with the related questions and your eventual comments must take into account the URC522.
If the original PN has been sent out, the collecting bank would most likely retain the PN and simply request the Maker to accept to pay at maturity by way of a letter. As the Maker would most likely be a client of the bank, the bank may have its own formalities regarding this process, and may agree to set the funds aside on escrow from the client's account, but unless the bank is willing to avalise, (if requested) an advice of acceptance would be given without engagament or responsibility by the collecting bank. As the original PN would remain in the possession of the collecting bank, this would allow the PN to be protested by the payee if unpaid at maturity.
Regarding endorsement, a blank endorsement by the payee should suffice without requiring further endosement by the Remitting bank. The Collecting bank would in any case effect settlement to the Remitting bank, regardless of endorsement. Endorsement by itself (unlike avalisation or "acceptance") does not constitute engagement to pay, rather it perfects the right to receive proceeds.
waiting for comment of Abrar, I let you know that the endorsement of a bill of exchange , cheque, promissory notes etc , by the beneficiary to the collecting bank, bears the clause "for collection only", so there is not liability for the collecting bank towards the same beneficiary. I think that there is a standard form ,used by banks, containing all the instructions for the collecting bank regarding: payment or acceptance, if the accepted bill has to returned or hold for collection, who bears the cost, and instructions for protest in case of no-payment or no-acceptance and even the possibility to contact someone and receiving further instructions(expressly stated) the so called "in case of need".
Other comments appreciated
Assuming the the cheque has not been restrictively endorsed, a blank endorsement by the payee would allow the remitting bank to forward to the collecting bank and allow proceeds to be received to the remitting bank's account. The cheque in this case becomes a bearer instrument and any holder in due course (in this case, the remitting bank) is entitled to receive proceeds without requiring any further endorsement by the collecting bank. As far as the drawee bank is concerned, on presentation of the cheque, it is a simple matter of debitng its client's (drawer's) account and paying the proceeds to the presenter ( collecting bank).
Nobody dare to launch a comment ??? I am still waiting to see yr views.