CHEQUES

• DEFINITION AND CHARACTERISTICS,

• CROSSING OF CHEQUES,
• ALTERATION ON A CHEQUE AND
• PROTECTION OF COLLECTING AND PAYING BANKER.
• The Act governing CHEQUES is the BILL OF EXCHANGE
ACT 1949 (revised 1978)
• S 73 of the Act defines cheques as “bill of exchange
drawn on a banker and payable on demand”.
• The combination of S3 & 72 of the Act provides the
following CHARACTERISTICS:-
1. Its an unconditional order in writing
2. Signed by the drawer
3. Drawn on a banker
4. Orders bank to pay sum certain in money(drawee)
5. Drawn in favour of a specified person(payee)
 Crossing of Cheques
• A drawer crosses a cheque to make it difficult for a thief
to obtain payment across a counter.
• The OBJECTIVE is to minimise fraud by giving instructions
as to the manner of payment. These instructions are to
the PAYING BANKER but a crossing a crossing ‘Account
Payee’ or A/c payee is an instruction to the collecting
banker.
• The PAYING BANKER is the bank on whom the cheque is
drawn. The COLLECTING BANKER is the bank which
collects payment for its customer who pays in the cheque
for the credit of his account. He could be the payee or a
holder in due course.
• S 78 provides crossing is a material part of the cheque
and cannot be altered by anyone except under s77.
 TYPES OF CROSSING
• S76 - GENERAL CROSSING consists of two
parallel transverse lines drawn across the face of
the cheque.
The EFFECT a paying banker can only pay the
amount of the cheque to a collecting banker.
Cannot pay cash across the counter. Consequently it
acts as a “hindrance” for anyone who obtain it
wrongfully.
S76(2)- SPECIAL CROSSING IS when a name of
the banker is written between the parallel
transverse lines or it is written across the face of the
cheque without the lines.
The EFFECT is that a paying banker must pay the
amount of the cheque only to the collecting banker
named in the crossing. Negotiability is restricted .
 “ Not Negotiable crossing”
• The word “not negotiable” may be added to a
crossing of a cheque. The EFFECT IS under S 81.It
means the cheque loses the character of
negotiability but remains transferable. In other
words it can be transferred but the person taking it
however honest and for value cannot get a better
title. (He will not get more or less on what is written
on the cheque).
Case: Wilson and Meeson v Pickering (P357)
• “ACCOUNT Payee only” – the object of such an
addition is to minimise the chances of fraud as these
words operate as notice to the collecting that only
the account of the payee is to be credited.
 ALTERATIONS ON A CHEQUE
• S 64 (1) &(2)
• Apparent & Non Apparent Alterations

PROTECTION OF THE PAYING BANKER

• Payment in due Course – S59 & S90
• Forged or Unauthorised Indorsement – S 60 &
95.
• No Indorsement or Irregular Indorsement- S82
• Crossed cheques – S 79 & 80
 PROTECTION OF COLLECTING BANKER
• A COLLECTING BANKER may be liable
a) to his customer for breach of contract
b) To the true owner for wrongful conversion
Protection is in S 85.
• Collecting Banker may be negligent…….P368
TERMINATION OF BANKERS AUTHORITY TO PAY
A BANKER is under a duty to honour his customer’s
cheques up to the amount of his credit balance or any
agreed overdraft.