Agents and “Per Pro” Indorsements.
A signature by procuration indicates that the agent’s power to bind his principal may be, and probably is, limited. For instance, the agent may only have authority to indorse cheques and bills, and if he sign as either drawer or acceptor, he cannot bind his principal. Moreover, as a procuration signature operates as notice of his limitations, a holder has no claim upon his principal, as he should have protected himself by demanding to see the agent’s letter of authority.
A customer, when he wishes another person to draw cheques on his behalf, gives a letter of authority to his banker, and states therein exactly what his nominee or agent may do. The authority may only allow a certain person to sign cheques on his behalf up to, say, £100, and the banker would, of course, refuse any cheque drawn in excess of that sum. Most bankers keep printed forms of this description, and the customer, if he obtain one, can, by crossing out what the agent may not do, limit his power to any extent he thinks necessary. These letters need not be stamped, and, unless previously revoked, they continue in force until the bankruptcy, insanity, or death of the principal.
We can now see that dealing with an agent is not unattended by certain risks. The banker always protects himself by ascertaining that an agent really has authority when he signs the name of a client in the capacity of either drawer or indorser, but as he (the paying banker) is not liable upon either a forged or an unauthorized indorsement, per pro indorsements are universally accepted by the banks in the ordinary course of business. They are not, however, legally obliged to pass them, and a banker may demand to see an agent’s authority or insist upon having a confirmation of the indorsement.
An agent usually signs:—
“per pro (or p.p.) John Brown,
Robert Smith.”
It has been held that “p.p. Mr. John Brown, Robert Smith,” is a good discharge, but the foregoing method is the more general. There have also been decisions in favour of the prefixes “pro” and “for,” though most bankers refuse to pay cheques so indorsed. Procuration indorsements are not accepted on dividend-warrants.
A cheque payable to Brown’s Drapery Stores may be indorsed:—
“p.p. Brown’s Drapery Stores,
Thomas Brown, Proprietor.”
Again, should Thomas Brown receive a cheque, which, he knows, is intended for him, though made payable to Thomas Bright, he might sign upon the back: “p.p. T. Bright, Thomas Brown.” He can explain the reason for this to his own banker, but the paying banker will not question the indorsement. Cheques which are drawn in favour of an establishment one owns, or of a commodity one sells, can always be backed “per pro.”
A cheque to the order of a limited or unlimited company is generally indorsed per pro the company, and the signer should then state the position he occupies, whether director, secretary, manager or cashier, as in the following illustration:—
“p.p. The Hull Shipping Company, Limited,
Walter Wilson,
Manager.”
It is always advisable to sign for or on behalf of a company, and to state in what capacity one signs, so as to avoid a personal liability.
An agent who signs under a power of attorney, usually indorses: “Thomas Brown by his attorney William Smith.” It is as well to remember that a power of attorney often confines the agent’s power, as in the case of a letter of authority, within very narrow limits, and that the principal is only bound by its provisions.