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CHEQUES


How relevant are cheques considering the inroads that have been made technology wise?  Now there are credit cards, ATM Machines, Debit Cards

There are more ways of accessing the funds in the bank than merely the use of the cheque.  In future a cheque might not be as important as it is today.

WHAT IS A CHEQUE?

It is defined under Section 73 of the Bills of Exchange Cap 27 as a Bill of Exchange drawn on a banker payable on demand.  Which in turn raises the question what is a Bill of Exchange?  Defined under Section 3 of the same Act as an unconditional order in writing addressed by one person to another signed by the person giving it requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money or to the order of a specified person or to bearer.

When you link section 3 and 17 the definition of a cheque becomes a cheque is an unconditional order in writing addressed by a person to a banker.  Signed by such person and requiring the banker to pay on demand a sum of money to the order of a specified person or bearer.  When you break down that definition, it gives one certain prerequisites as to what must constitute a cheque

1.            It is not a requirement that the cheque must be drawn by a customer;
2.            The order must be drawn on a Banker – meaning that the bank must be the drawee.

London City & Midland Bank Ltd V. Gordon [1903] A.C. 240

Relationship between Branch and Head Office

3.            The cheque must be an order; imperative in its terms
4.            The order must be unconditional; i.e. the person making the order must not impose conditions on the drawee;

Thairlwall v Great Northern Railway Co. [1910] Vol. 2 K.B. 509

What is conditional?

5.            The cheque must be payable on demand;

CROSSED CHEQUES

Section 76 to Section 83 of the Bills of Exchange Act:
Crossing of Cheques and the statutory provisions with regard to crossed cheques essentially afford the public a safer method of drawing cheques.  The object of crossing a cheque is to hamper or prevent its negotiation by a person who may have wrongly or wrongfully obtained that cheque.  That object is attained by placing certain matters across the face of the cheque, transversely to the matter of the cheque itself or overriding the matter of the cheque itself.  It is that added matter that is referred to as the crossing.

Crossing may be such as to merely force a person to obtain payment of the cheque through the medium of a bank.  So that that payee must have an account at a Bank or in the days when negotiation was permitted, he must know someone with an account.  The crossing may go further and specify the Bank so that the payee must have an account at that particular bank or when negotiations was permitted, he must negotiate the cheque to someone with an account at that bank.  The crossing may also be such as to completely destroy the element of negotiability which in Kairu’s view is what has happened with the account of payee crossing and the statutory protection that has come with it.

Under Section 76 two crossing are essentially recognised
(i)            General Crossing;
(ii)          Special Crossing.
The general crossing is where the crossing assures payment through a bank without specifying a bank.  But where the bank is specified that is special crossing or the cheque is said to be crossed specially.  Section 76 (1) (a ) provides that where a cheque bears across its face an additional of the words and company or an abbreviation of those words between two parallel transverse lines with or without the words not negotiable, that addition constitutes a crossing and the cheque is crossed generally.

Section 76 (1) (b) of the Bills of Exchange Act provides that where a cheque bears across its face an addition of simply two parallel transverse lines either with or without the words “not negotiable” the additions also constitute a crossing and it is a general crossing.

Section 76 (2)

Special crossing:   It stipulates that 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 specially crossed.

 
 
 

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