CHEQUES

CHEQUESAHMAD AMIRDIYAUDDIN1DEFINITION On section 73 of the Bills of Exchange Act 1949, cheque is defined as a bill of exchange drawn on a banker payable on demand

2

A cheque necessarily comprises the following characteristics:It is an unconditional order in writingIt is signed by the drawerIt is drawn on a banker( drawee)It orders the banker to pay a sum certain in money on demand.It is drawn in favour of a specified person(payee) or to his order or in favour of a bearer.The drawer of the cheque is BMMB.. The person on whose favour the cheque is drawn is called the payee(YAMCS).

4CATEGORIES OF CHEQUESUndated chequesOverdue or Stale chequePost-dated chequesUNDATED CHEQUESUndated check is a cheque that has no date written on it. Bankers need not honour undated cheque but it is still valid. Under section 12 & 20 of the Bills and Exchange Act 1949, a holder of such cheque can fill up with the correct date within a reasonable time and the cheque can be honoured.Section 3 (4)(a) S3: Bill of exchange defined: (4) A bill is not invalid by reason (a) that it is not datedThe date that is written will be treated as the correct date Section 12 (b)6OVERDUE OR STALE CHEQUEOverdue cheque is a cheque that have been circulated for an unreasonable length of time according to Section 36(3) of the Bills of Exchange Act 1949. Stale cheque is a cheque that have been circulated for a long time, usually after its expiry. For Malaysias banking practice, a stale cheque is a cheque that is half-years old or more. 1.unreasonable length of time depends on the facts of each case2. Banks normally wont honor cheques which are more than 6mo but the period may be varied by prior agreement between customer-banker7POST-DATEDCheques which bears a date in the futureIt is a valid cheque although it is not payable on demand. It is considered as a valid cheque according to section 13(2), A bill is not invalid by reason only that it is ante-dated or post-dated, that it bears date on a Sunday.1.The cheque can only be cashed on or after the date stated on the cheque2.Bank cnt pay the cheque before its due date bcs: 1.the drawer may cancel 3.Ante-dated: cheques bearing a date earlier than the date of actual issue4.Sunday(bank closed) but the cheque is still valid8CROSSING OF CHEQUESThe crossing of cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed.The purpose of crossing cheque is to instruct that payment can only be made through a bank or that it must be paid in a certain manner for example through an account. Types of CrossingGeneral crossingSpecial crossingLimited crossing1.The cheque cant be cashed but to be credited into account2.Reduce risks, unauthorized/unentitled person cant obtain payment, payee can be traced/checked3.The crossed cheque cant be altered by anyone, in any way Section 78 of Bills of Exchange Act 1949, except authorized to do so by the Act9GENERAL CROSSINGAs stated on the section 76(1) of Bills and Exchange Act 1949, it is where a cheque bears across its face two parallel transverse lines simply, or added in between those lines withi) The word not negotiable orii) Theword and company/& Co. either with or without the words not negotiableIf only lines: can endorse/countersign: sign (a check or bill of exchange) on the back to make it payable to someone other than the stated payee.10

11EFFECTS OF GENERAL CROSSINGThe paying banker can only pay the amount of the cheque to a collecting banker The paying banker cannot pay cash the cheque across the counterIt is a hindrance for someone who has obtained the cheque wrongfully to obtain paymentGives customer of the paying bank, some time to request the paying bank to stop the paymentSPECIAL CROSSINGIn section 76(2) Where a cheque bears across its face an addition of the name of a banker, either with or without the words not negotiable', that addition constitutes a crossing, and the cheque is crossed specially and to that banker.

EFFECT OF SPECIAL CROSSINGIt is safer than the general crossingThe paying banker must pay the amount of the cheque only to the collecting banker named in the crossing

LIMITED CHEQUE2 categories which is Not Negotiable, and Account payee onlyOn section 81, not negotiable is where a person takes a crossed cheque which bears on it the words not negotiable he shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had

Wilson and Meeson v Pickering W drew a cheque in blank crossed not negotiable. His clerk, who was supposed to fill the amount and the name of payee, inserted a sum in access of her authority and delivered it to P in payment of her own debt. It was held that since the clerk had no title to the cheque, P had no better title to the cheque therefore not liable to it.

Account payee on the other hand is called Non-Transferable cheque in the Bills of Exchange 1949. Stated on the act, where a cheque is crossed and bears across its face the words account payee or a/c payee, either with or without the word only, the cheque shall not be transferable, but shall only be valid as between the parties thereto.

If theres already crossed cheque with a/c payee, no need to put not negotiable bcs the cheque is only payable to the payee stated and cannot be transferred/endorsed to another person (eventhough or bearer is stated next to the pay field)18ALTERATION ON CHEQUESAn alteration on cheque is a change in which the name, amount or other information. If the cheque has been materially altered without the drawers authority, the drawer will be discharged from liabilities.

EFFECTS OF ALTERATIONSThere 2 effects of alterations which is Apparent and Non-Apparent.Apparent effect consist of the liable parties on the cheque before and the time of such alteration will be discharged from liability upon the chequeHowever, the person who made the alteration and all the subsequent parties will be bound by the cheque as it is altered as stated on section 64(1)except as against a party who has himself made, authorized or assented to the alteration, and subsequent endorses

Non-Apparent alteration effect gives the holder of cheque to enforce the cheque according to its original tenor Section 64(1) Provided that wherethe alteration is not apparent holdermay enforce payment of it according to its original tenorHowever, if the alteration is made by the drawer himself or by someone acting under his instruction, he cannot make use section 64(1) to avoid liabilityBarbour Ltd. V Ho Hong Bank Ltd. [1926] SSLR 116

Facts: The manager of Barbour Ltd drew a cheque for $2,520 but the word two was written in such a way that it could be changed to twelve. Moreover, in filling in the figures he left a space between the $ sign and the figure 2 so that an additional figure, 1 could be inserted, thereby changing the sum of $2,520 into $12,520. The figure was altered. The bank paid out $12,520. Barbour Ltd., sued the bank. The banks defence was that since the cheque was negligently drawn by the manager of Barbour Ltd., it must bear the loss.Held: The appeal should be allowed as the manager was negligent in drawing the cheque. The respondents had to bear the loss.London Joint Stock Bank v Macmillan and Arthur [1918] AC 777Facts: A partner in a firm drew a cheque for two Sterling pounds payable to bearer. The sum was stated in figures but not in words. A clerk of the firm misappropriated the cheque and altered the figures to read one hundred and twenty Sterling pounds and wrote in the appropriate words before cashing the cheque at the bank.Held: The bank could debit the firms account with the one hundred and twenty pounds. The partner had neglected to take all precautions. By leaving blank the space where the amount should have been stated, and also by leaving blank spaces on either side of the figure 2 there was a clear breach of duty which the customer owed to the banker.Common QuestionsHow to uncross a cheque?Can changes be made to a cheque?How long does it take for a cheque to clear?Why might a cheque be dishonoured?

If your cheque/s have a pre-printed crossing and you wish to write a cheque to pay cash, you will need to cross out the pre-printed crossings and sign next to this or on it with a full signature of an authorised signatory for that account, service charge of RM2 per cheque will be charged to the Drawer. Any changes made to a cheque need to be accompanied by full signatures of an authorised signatory(ies) for that account.Generally it would take 2 working days to clear, for same-day or sooner than 2 days clearing, Special Clearance service may be offered, service fees apply.Include but not limited to: insufficient funds, amount in words and figures differs, cheque is stale or post-dated, signature is unlike specimen held, and alterations have been made without sufficient signature authority.

26