569.Subsection (1) explains what is meant by the “funds attached” rule. It describes the rule of Scots law whereby, when a Act of exchange (e.g. a cheque) is presented for payment, the amount stated on the Act is assigned to the holder of the Act. Where insufficient funds are available to satisfy the Act, such lesser amount as is available is assigned to the holder of the Act.
570.Subsection (2) provides for the abolition of the “funds attached” rule in relation to cheques. The abolition has effect only in relation to cheques presented for payment after this section comes into force.
571.Subsection (3) establishes that the meanings of terms used in this section are as defined in the Acts of Exchange Act 1882. Specifically:
“Act of exchange” has the meaning given in section 3 of the Act, namely “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer”; and
“cheque” means “a Act of exchange drawn on a banker payable on demand” as defined in section 73 of the Act.
572.Subsection (4)(a) amends section 53(2) of the Acts of Exchange Act 1882, in which the “funds attached” principle is set out. The amendment provides that section 53(2) no longer applies in relation to cheques.
573.Subsection (4)(b) repeals section 75A of the Acts of Exchange Act 1882, which was inserted by section 11 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 to deal with a problem that arose in relation to stopped cheques in the context of the operation of the “funds attached” rule. With the abolition of the rule in relation to cheques, the problem which section 75A addressed ceases to arise.
574.Subsection (5) repeals section 11 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. See also paragraph 520 above.
575.In accordance with section 263 in Part 8, this section will come into force automatically two months after the Banking Act receives Royal Assent.