(1) Where any note is tendered as legal tender to any person who suspects such note to be diminished, otherwise than by reasonable wear and tear or to be counterfeit, it is lawful for the person to cut or deface such note.
(2) If any note so cut or defaced appears to be diminished, otherwise than by reasonable wear and tear or to be counterfeit, the person tendering the note shall bear the loss thereof; but if the note is of due weight and appears to be a lawful note, the person cutting or defacing it is required to receive it at the rate for which it was noted.
(3) If any dispute arises whether the note so cut or defaced is diminished in the manner stated in subsection (1) or is counterfeit, the dispute shall be heard and finally determined in a summary manner by any magistrate who shall examine on oath the parties to the dispute as well as any other person.