Acceptance by intervention occurs in a similar context to acceptance for honor, specifically where a designated person steps in to accept a bill for the honor of a party to the instrument. In this scenario, an acceptor in case of need is explicitly specified by the drawer or an endorser directly on the bill. If the drawee refuses to accept the instrument, the holder may present the bill for the acceptance of this designated person. The acceptor in case of need can be one of the existing parties on the bill, the drawee themselves, or an entirely new third party.
In the case of acceptance by intervention, the holder possesses a degree of choice. Upon the drawee’s refusal to accept the bill, the holder may choose to ignore the intervention clause and immediately pursue legal recourse against the drawer and endorsers. Alternatively, the holder may present the bill to the specified acceptor in case of need. If this person accepts the bill, the party who originally specified them is no longer immediately liable to the holder for non-acceptance. However, the holder must then wait until the maturity date to claim payment or seek further recourse against the intervention acceptor. This provides a secondary path to payment that can be more efficient than immediate litigation.
The rights, obligations, and general legal effects regarding an acceptor in case of need are largely similar to those of a standard acceptor. They become primarily liable on the instrument once they have signed it, ensuring that the holder has a reliable party to look to for payment at the end of the term.
Liability for Improper Payment
A drawee faces significant risks if they effect payment to the wrong person, especially before the maturity date. If the drawee pays a party who is not the rightful holder before the instrument falls due, they may still be required to pay the actual drawer or the true holder later. The drawee is expected to act with due diligence and is liable for any undue payment resulting from their own fault or negligence.
A primary area of liability involves the verification of the regularity of endorsements. While a drawee is generally not required to verify the authenticity of every signature, they must ensure that there is an uninterrupted series of endorsements. For example, if the drawee pays the stated sum to a person without verifying that the bill was actually ordered to be paid to that specific individual through the chain of endorsements, they may be held liable for the loss. This underscores the drawee’s duty to ensure that the payment is made only to the person who can establish their right to the instrument through a valid and visible legal history.
When a holder chooses to present the bill to an acceptor in case of need rather than pursuing immediate recourse, does this choice legally discharge the subsequent endorsers from their secondary liability until the maturity date?