Question 244. - (1) Can a bank legally pay a demand draft, payable in sterling, drawn upon it by an English bank, at a less rate than that provided in section 163 of the Bills of Exchange Act?

(2) At what rate should a cheque be paid when drawn in sterling though otherwise upon an ordinary cheque form, dated, say, Toronto, and sent for collection by an English bank?

Answer. - (1) The rate at which a bank should pay a sterling demand draft, drawn on it by an English correspondent, is fixed by section 163 of the Bills of Exchange Act. If the bill is drawn simply for so much sterling money without any reference to a rate of exchange, it should be paid at the rate for sight draft- at the place of payment on the day the bill is payable.

(2) It would be unusual for a cheque to be drawn in Canada, upon a Canadian bank, payable in pounds, shillings and pence. If such a cheque were drawn we think the bank would probably be justified in regarding it as an order to pay the current value of a similar amount of British gold, i.e., to convert the sterling at $4.86 2/3. In remitting to an English correspondent for such a cheque it would have to be treated as drawn for the amount in Canadian currency computed as above, and the exchange calculated accordingly.