The Cheque

THE CHEQUE

The cheque: definition

A cheque represents an unconditional order in writing addressed by one person to another who must be a banker, signed by the person giving the order, requiring the banker on whom it is drawn to pay on demand a certain sum in money to or to the order of a specified person or to the bearer.

More clarifications:

- the person who draws the cheque is called the drawer;

- the bank through the cheque is drawn, is the drawn bank (paying bank);

- the person to whom the cheque is drawn payable is called the payee or beneficiary;

- when the drawer draws a cheque payable to himself, both the drawer and the payee are the same person.

The following items need to be verified by the cashier:

- If the date is correct: Is the cheque post-dated or stale?

Post-dated: it means the cheque has been presented before the cheque date.

Stale: it means the cheque has been presented after six months of its date.

In both situations the cheque should not be cashed.

- Payee (beneficiary):

When the cheque is crossed “A/C payee” or closed to a particular account, such instructions must be implemented.

- Content of the instrument:

When there are differences between the amount written in words and the amount written in figures, the amount payable is the one mentioned in words. Anyway, the bank is entitled to return the unpaid cheque marked “words and figures differ”. The paying bank has the right to ask its clients that their cheques are filled in clean and unambiguous terms.

- Signature of the drawer

The signature should be verified to ensure that it is complying with the copy of the signature card which is kept in the banker is safe. The signature is a genuine one.

- Endorsement:

The endorsement of an instrument is the placing of a signature thereon by a person who thereby becomes a party to the instrument.

There are 2 types of endorsement:

1. Blank endorsement: no endorsee is indicated. Such blank endorsement converts the order cheque into a bearer cheque;

2. Special endorsement: the endorser specifies the person to whom the cheque is endorsed.

Usually, endorsements are written on the backside of the order cheque. Endorsement of part of the sum indicated on the cheque is irregular and invalid. An endorser can endorse the cheque payable to the order of more than one person.