Is Canada Ready for the Paperless Cheque? An Analysis of the Historical and Practical Implications of Going Paperless

The Bills of Exchange Act (BEA) in Canada is modelled on its English counterpart from 1882. Both were adopted in an era of exclusive manual processing of paper instruments. Hence, under the BEA, a cheque (being a species of a bill of exchange) must be in writing. Its "issue" requires the "delivery" of the written cheque. "Delivery" is defined to mean "transfer of possession, actual or constructive, from one person to another." Its transfer by "negotiation" cannot be carried out without its delivery. In turn, its delivery for deposit confers on the collecting bank rights of a holder in due course against whom the drawer may not raise defences available to the drawer against the payee. Then, as a "holder," a "holder in due course" to whom the cheque was either issued or negotiated must be in possession of the paper. Finally, the delivery of the cheque for deposit confers on the collecting bank rights of a holder in due course.

In short, a cheque must be in a tangible form and to give rights, it must be physically handled.

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Republished in the National Banking Law Review, vol. 31, no. 4, August 2012.

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