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Cheque(Check) Chequeisawritteninstrumentbywhichapersoncalledthedrawerordersabankertopayondemandofasumofmoneyto,ortotheorderof,aperson,
calledthepayee
Drawer
Banker(Drawee)
Payee
Juristic
Relation
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DemandDeposit
Account
TwoMajorTypesof
Account
TimeDeposit
Account
Popularamongbusinessmen
TheSavermustoffertoopencurrentdepositaccountwith
conditiontogetherwithgivingsampleofhis/hersignaturetotheBanker. When the Banker accept such offer, the Banker gives
ChequesBooktotheSaver.
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What kind of Juristic Relation? A commercial banking like KrungSri Bank, TMB,
Kasikorn Thai has a propose of its business as a
saving bank and pay the money back to the drawer ondemand. This kind of Bank could use the saved
money for several businesses including Granting of
Credits to people.
There must be at least three types of Contract that theDrawer must have with the Banker:
Current Deposit Account Contract (offer to open +acceptance)
Deposit Contract Agent Contract
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Remarks Banker and Payee do not have any Juristic Relation. If
the Banker has not accept the Cheque, the Banker is
not liable to the payee (the holder).
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Characteristics of Cheque1. It is a written instrument. = it is a legal contract and it
is a negotiable instrument except when there is a
condition written by the drawer.
2. Order a Banker to pay (Order Cheque/ BearerCheque)
3. Order a banker to pay on demand a sum of money.
A/CPayeeOnly
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TopicsofCheque Issuing NegotiationsimilartotheprovisionsinB/E Rulesofcollecting Acceptance AvalsimilartotheprovisionsinB/E RighttorecoursesimilartotheprovisionsinB/E
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Pay to the order of
Sum of
or Bearer
Bank of ABAC PLC. LTD.
Hua Mak Campus Branch
Hua Mak, Bangkok Thailand16 Mar. 04
ABAC E22Mr. Sam
Ten Thousand Baht 10,000.00
BillyAccount No. xxx xxx 1234
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DifferencesbetweenB/EandCheque
BillofExchange(B/E)1. Anypersoncanbe
drawee
2. Abillispayableonamaturitydate
3. Protestisneeded
Cheque1. TheDreweeisBank2. Chequeispayableon
demand
3. ProtestisneededonlyForeignCheque
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Required items of ChequeSec. 988
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There is no Date ofMaturity required in
Cheque
because?
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Chequeispayable
ondemand! Thedateofissuemeansthedatehasbeenwrittenonthecheque.Thedatemaybethesamedateinwhichthechequeiswrittenor
thetimethefuture(apostdatedcheque).
Asachequeisaninstrumentpaidondemand,it,therefore,doesnothavethe
dateofpayment(maturitydate),butcontainedthedateofissue.
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Forexample On January, 2012 Miss Star bought a
diamond ring from Miss Moon, the same day
she wrote a cheque, dated on 10 April
2012, payable Miss Moon for the amount of100,000 Baht.
What is the date of Issue?10 April 2012 is the date of issue,
therefore Miss Moon may present thecheque for a payment from that date.
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PresentmentofchequeforpaymentSec.990
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Forexample:ThedrawerisdischargedBenwroteachequeatBangkoktoorderKBank,HuamarkbranchpayabletoAndreyintheamountof100,000BahtonJanuary10,2012.AndreyindorsedthechequetoKen.KenpresentedthechequeforpaymentonFeb20,2012.ThebankhasbecomebankruptonFebuary15,2012.
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Ifwithin1monthfromtheissuingdate(January10thFebruary10th,2012)Bensaccounthadmoneycoveredthe
amountinthecheque,Ben,thedrawerandAndrey,theindorseraredischarged
Ben
KBank
Audrey
100,000 Baht
January10,2012
Ken
Endorse and deliver to
Presentthecheque
forpaymentonFeb20,2012
Feb15th,2012
Bankrupt
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Today, Star buys computers from Moon for theprice of 100,000 Baht. Star does not have
enough cash. He wants to pay Moon by himself
within a month.
1. Star asks you what type of Bill should hedraw.
2. Star ask you to help him draw a legal Bill. 3. What if Star has a debtor, Venus who owes
him 100,000 Baht and Star wants to orderVenus to pay money to Moon on Thais Father
Day this year? Please draw a legal bill.
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ResultofdelaypresentmentSec.990Incaseofdelaypresentmentundersection990,theendorser
willbedischargedbysuchdelay.Thedrawerwillbedischarged
onlytotheextenttowhichhehassufferedactualdamageorloss
bythedelay.
*Ithasaneffecttotherightofrecourse!*
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Theendorserwillbedischargedbysuchdelay
Thedrawerwillbedischargedonlyto
theextentofanyinjurycausedtothe
drawerfailureofsuchpresentment
aneffecttotherightof
recourse
Resultofdelaypresentment
Sec.990
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Remarks 1. The Drawer in Cheque is in a different position
from the drawer in B/E
ThedelayinpresentmentofB/EDischargesthe
drawersandtheendorser(Section973)
TheDrawerinChequeisnotautomatically
discharhedbythedelayinpresentmentbutonly
whenhehassufferedactualdamageorlossby
thedelay
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Star
BBank
Moon Sun
Cheque
100,000BahtIssueinBKK
PayableinBKK
(inthesametown)
December1st,2012
Didnot
presentthe
chequeforpaymentw/IonemonthBbank goes into Bankruptcy --- the cheque cannot be paid.
If Sun presented the cheque without delay, the money wouldhave been paid to him.
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Suppose the Bank pays Sun 50,000 Baht, Star will bedischarged only 50,000 lost to the Bank.
Moon as an endorser is automatically discharged.
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RightsofBankertorefusepayment
Notenoughmoney
Chequeispresentforpaymentlaterthansixmonth
Receivedanoticeoflostorstolencheque
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Duty of a Banker Section 991 Rule: A Banker is bound to pay a cheque drawn on
him by his customers.
Exception: the following situations, 1. There is not enough money to the credit of the
account of the customer to meet the cheque.
Deposit Withdraw100,000Baht 50,000BahtBalance=50,000
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2. The cheque is presented for payment later than sixmonths after the date of issue.
If the holder presents this cheque on December 1st,2014, what is the effect?...
Cheque
100,000BahtIssueinBKK
PayableinBKK(inthesametown)
December1st,2012
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The Banker will have right to refuse to pay the holder. 1 month 3 months 6 months
Delayof
presentment
TheBankercannotusethis
excusefortherefusalof
payment
TheBankerhastwooptionsPayorRefusetopay.
ItistheBankersDiscretion.
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3. Notice is given that the cheque has been stolen. The holder might inform the Banker that the cheque
has been lost or stolen.
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Remember! The Banker has duty to pay his customers Cheque. Unless the situations mentioned before happen. A refusal to pay without lawful and adequate reasoncould cause the Banker to be liable to the customer
for damage to his credit.
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Revocation of a Bankers Authority Section 992 Rule: The duty and authority of a banker to pay
according to the cheque drawn on him comes to an
end on these following situations:
1. Countermand of Payment Stopping a cheque A banker requires the written and signed authority of his
customer ( the drawer) with a full description of thecheque.
What if the customer receives a requst of Countermandof Payment by telephone?
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The banker must request written authority and until itis arrrived, if the cheque is presented.
TheBankershouldpostponepaymentpendingconfirmation.
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If A cheque is received for payment
Through the the Bankers clearing By post Over the counter for the credit of another customers
Account
Thedrawercanstoppaymentatanytimeuptothe
closebusinesshourofthatday.
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The drawer cannot deprive the holder of his right tothe cheque.
If the holder is a lawful holder, the drawer himselfmust pay if the bank returns the cheque stopped
This means the cheque is still valid. If the drawer refuses to pay, the holder can sue him
and compel him to pay money directly to him or to
remove the stop and enable the bank to pay.
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The cheque is valid and is drawn with all requirementsby law --- if the Banker refuses to pay, .
What should the Drawer do?...
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Death of the drawer If the Banker receives a reliable notice of his
customers death, the Banker refuse to pay.
It is not because of the death that ends the duty to paybut the Law want the heirs of the deceased to managethe balance and his properties first.
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A bankers authority to pay is terminated also bynotice of publication of a interim receiving order or
bankruptcy order against the drawer.
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T/F 1. Cheques are Bill of Exchange. 2. All Bill of Exchanges are Cheques. 3. A drawee in Cheque must be a Bank. 4. The Drawer and the Banker must have juristic
relation.
5. The Banker and the payee must have at least threecontract with each other.
6. The Banker must refuse to pay if the cheque is indelay of presentment.
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Exam Questions Short Answers Drawing Bill + several questions to evaluate your
understanding about Law of Bills
T/F
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Death of the Drawer
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DutiesofBankertorefusepayment
Countermandofpayment
Noticeofdrawersdeath
Drawerbecomebankrupt
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BankersAcceptance
1. Iftheholderpresentsforacceptance; drawer&endorseraredischarged
2. Ifthedrawerpresentsforacceptance; Everybodyisstillliable
*Ithasaneffecttotherightofrecourse*!
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Crossedcheque
GeneralCrossedCheque/GeneralCrossing Paymentcanbemadeonlytoabankaccount
SpecialCrossedCheque/Specialcrossing Paymentcanbemadeonlytoaspecifiedbankaccount
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Uncrossed
cheque
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What kind of Crossed cheque is
this?
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What kind of Crossed cheque is this?
Pay to the order of
Sum ofor Bearer
Bank of ABAC PLC. LTD.
Hua Mak Campus Branch
Hua Mak, Bangkok Thailand16 Mar. 04ABAC E22
Mr. SamTen Thousand Baht 10,000.00
BillyAccount No. xxx xxx 1234
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Is this a bearer cheque or order cheque?What does it mean by writing not negotiable?
What kind of crossed cheque is this?
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Who can cross a cheque? 1. Drawer --- General crossing/ Special Crossing 2. Holder ---
If the holder receives an uncrossed cheque, the holdercan cross it generally or specially.
General Crossed Cheque --- Holder may cross itspecially.
Holder may add the word Not Negotiable to generalcrossed cheque and special crossed cheque.
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3. Banker --- if a cheque is crossed specially, the banker may again
cross it specially to another banker for collection
If a cheque is uncrossed or it is crossed generally, thebanker may cross it specially to himself
Kbank
Banker
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The law allows a holder and banker tocross a chequeAdd to a crossing in the way itmentions.
Add the word not negotiable/ payeeonly/ AC payee only to the crossing
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Remarks Crossing the cheque is a way to protect forgery. Other bills, other than cheque, cannot be effectively
crosse
A crossing authorized in Section 995 is a material partof the cheque. It shall not be lawful for any person to
obliterate or alter it.
The alteration of or obliteration of and the additions tocrossing on a cheque is considered as a materialalteration.
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Duties of Banker as to
crossed cheque Special crossed cheque to more than one Banker, the
banker on whom it is drawn shall refuse the payment.
If the banker pays a general crossed cheque than to abanker or in case of special crossed cheque the bankerpay to someone else rather than to whom it is crossed
for collection of money--- he is liable to the true owner of
the cheque (for any loss he may sustain owing to thecheque having been so paid.)
But if the cheque is not crossed when the holder presentit for payment, or have had an alteration, the banker
paying the cheque in good faith and without negligence
shall not responsible for any liability.
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A special crossing should mention one banker onlyand he is the banker who should collect the cheque
for the holder.
The drawee must pay a crossed cheque inaccordance with the crossing
Unless, the banker will be liable to the true owner. He might be compelled to make a second payment.
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E is not a true owner What is the result?
A
BBank
C
Crossedcheque
D
Esteals
fromDandaskfor
payment
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Section 997
Specialcrossedcheque
ThepayingBankermustnotpaytoanyotherBanker
exceptforthespecified
bankerandabankeracting
asanagent.
Generalcrossed
cheque
Payingbankermustpayto
anyaccountoftheholder.
Hecannotpaytheholderby
CASH.
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Special crossed cheque--- the paying banker mustpay to the specified banker and he must not pay by
cash to the holder.
The true owner of cheque = the holder / lawful holder
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Example Mary draws a general crossed cheque to order
KBANK, Hua Mark Branchto pay Billy. The amount of
money is 30,000 Baht.
Billy lost such cheque and Smith found the cheque.Smith demands KBANK to pay him. KBANK pays
30,000 Baht in cash to Smith.
What is the legal effect of such payment by KBANK?
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KBANK paid against the provision in Thai Civil andCommercial code. He paid by cash instead of paying
to the holder (Smith)s account. Therefore, KBANK isliable to the true owner of the cheque (Billy)
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Mary draws a general crossed cheque to orderKBANK, Hua Mark Branchto pay Billy. The amount of
money is 30,000 Baht.
Billy lost such cheque and Smith found the cheque.Smith transfers the cheque to Jane and Jane receives
the cheque with good faith and without negligence.
Then, Star, a theft, steals the cheque from Jane. Star
goes to KBANK and cashes money. KBANK pays Star
by cash.
What is the effect of such payment?
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Section 997
(last paragraph)
Where a cheque is presented for payment which doesnot at the time of presentment appear to be crossed
(see page 35)
This section protects paying banker who act in goodfaith and not negligence. There must not be appeared
at the time of payment that the cheque is a crossed
cheque or the crossing is erased or altered. If the
banker paid in good faith and not negligence--- the
paying banker is not liable. (He does not have to payto anyone else)
P i b k d
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Protectiontobankerand
drawerwherechequeiscrossed.
See page 36 In accordance with the crossing In good faith Without negligence Section 998
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This section protects the paying banker who lawfullypays according to the crossed cheque (in good faith
and without negligence)
1. Take a look at section 997 second paragraph General Crossing Special Crossing
2. in good faith and without negligence --- The paying Banker and the drawer of such crossed
cheque (if the cheque used to be in possession of the
payee) --- they both are in the similar status and have
same rights.
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1. The paying Banker had paid to the true owner ofthe cheque
2. the drawer of such crossed cheque is not liable tothe true ower. (The payee could not require thedrawer to be liable both in the original obligation or the
obligation in Cheque contract).
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Mary draws a general crossed cheque to orderKBANK, Hua Mark Branch to pay Billy. The amount of
money is 30,000 Baht.
Billy lost such cheque and Smith found the cheque.Smith transfers the cheque to Jane by forging Billyssignature to endorse and deliver. Jane receives the
cheque with good faith and without negligence. Then,
Jane goes to KBANK to demand for payment. KBANK
paid money to Jane by transfering 30,000 baht toJanes account. (in good faith and without negligence)
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KBANK had paid to the true owner of the cheque Mary as a drawer has the same right as the banker.
Mary is not liable to the original obligation and the
obligation in cheque contract.
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In good faith = the banker did not know the defect ofsuch cheque and the defect right of the holder.
Not negligence depends on fact.
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Protection of Banker collecting
payment of cheques
Section 1000 Where the banker in good faith and without
negligence receives a payment for a customer of
a cheque crossed generally or specially to himselfand the customer has no title or a defective title to
the cheque, the banker does not incur any liability
to the true owner of the cheque by the reason
only of having received payment.
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Banker Paying Demand Bill whereon
Endorsement is Forger
Section 1009 Where a bill payable to order on demand is drawn on
Banker, and the banker on whom it is drawn pays the
bill in good faith without negligence and in the ordinarycouse of business, it is not incumbent on the banker
to show that the endorsement of the payee or any
subsequent endorsement it purports to be, and
thebanker is deemed to have paid the bill in due
course, although such endorsement has been forgedor made without authority.
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Essential endorsement has been forged or madewithout authority
Relieve liability of the banker. He is deemed to have paid the cheque in due course
if
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Banker Paying Demand Bill
whereon Endorsement is Forger
1.Goodfaith:thebankermustpayachequewithoutfraudulentunderstanding(withgoodintention).
2.Withoutnegligence:thebankermusttakereasonablecareonpayment.Ifthebankerpayachequewherethedrawerssignatureisforged,heisdeemtohavepaidthechequenegligentlyandhemustbeliabletothetrueowner(drawer).
3.Ordinarycourseofbusiness:Paymentmustbemade
onworkinghoursofabank
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PRESCRIPTION Periods of prescription (in Civil Law system) Almost all lawsuits must be started within a legally
determined period. If they are presented after that
time, an institution called prescription applies, whichprevents them from filing the case.
Statute of limitations (in common law system) Limitations periods begin when a cause of action is
deemed to have arisen or when a plaintiff had reasonto know of the harm, rather than at the time of the
original event.
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PRESCRIPTION
Under the Law of Bill, Prescription refersto the period of which the creditor can
file a lawsuit against the debtor.
If the period was passed, the creditorswas unable to take any action against
them.
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Prescription in the Law of Bill
A period that a creditor capable to takean action to the Court.
With in this period the creditor or injuryperson can exercise a right to recourseor claim to the debtor.
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Bankerpayingdemandedbill
whereonindorsementisforged!
Sec.1009 Whenabillpayabletoorderondemandisdrawnonabanker,andthebankeronwhomitis
drawnpaysthebillingoodfaith,withoutnegligenceandintheordinarycourseofbusinessitisnotincumbentonthebankertoshowthattheindorsementofthepayeeoranysubsequentindorsementwasmadebyorundertheauthorityof
thepersonwhoseindorsementitpurportstobe,andthebankerisdeemedtohavepaidthebillinduecourse,althoughsuchindorsementhasbeenforgedormakewithoutauthority.
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Section 1001No action against the acceptor of a
bill of exchange or the maker of a
promissory note can be enteredlater than three years after the date
of maturity.
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Section 1002No action by the holder against the
endorsers and against the drawer of
a bill can be entered later than one
year after the date of the protest
drawn up in proper time or after the
date of maturity where there is a
stipulation "protest not necessary".
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Section 1003No action of recourse by the
endorsers against each other and
against the drawer of a bill can be
entered later than six months after
the day when the endorser took up
and paid the bill or from the day when
he himself was sued.
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Front side of the bill
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Anna
Tenhundredthousandbaht
December242012
Charlie
Cheque AbacBangna
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Back side of the bill
Endorsement/ special endorsement
and blank endorsement
To Charles
AnnaDecember 25
2012
Charles
December31,2012
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