Question

Louise had planned a new business venture, and Thelma was interested in participating in it. Thelma felt that it would take her four weeks to determine whether she could fully devote her time to the business. As the success of the venture depended on an immediate start, Louise was reluctant to include Thelma. However, Thelma thought that the new business venture was a great idea and did not want to miss the opportunity. To convince Louise of her sincerity, Thelma offered to provide Louise with a cheque for $5,000, which Louise could cash if Thelma decided to back out of the project within four weeks. Louise agreed, and Thelma gave Louise the cheque fully completed and with the current date marked: "to be cashed only if deal cancelled." As matters turned out, Thelma decided only a day later that she could not devote the time to participate in the venture. She told Louise that she was backing out, and attended at the bank and placed a stop payment on the cheque. The cheque was duly dishonoured when Louise tried to cash it. Following which, Louise sued Thelma pursuant to the Bills of Exchange Act for the $5,000. Louise’s claim was also for a further $1,000 that Louise was forced to pay as a fee to a broker for finding another investor on short notice. Discuss whether Louise’s claim can be successful?

Answer 1

As per the bills of exchange act, The cheque issue by Thema to Louise with a written clause to withdraw money if she backs out from the contract within the agreed time period which is duly signed by her is a kind of agreement between the two and Thelma has no right to cancel the cheque or stop the funds. Louise can win the claim in this regard. But the cheque is given to him for satisfying the condition of Thelma backing out from investment and hence she has already paid for his loss and hence Louise cannot claim any more money from Thelma. Hence he would not win the claim for second claim.