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Minimize fraud by thoroughly the payment

DEFINITION OF CHEQUE must made only bank or otherwise
instruction for manner of payment
1- SECTION 73 of the BEA 1949
2- Bill exchange drawn on a banker payable
on demand.

CHARACTERISTICS OF CHEQUE Drawing two line parallel line across the face of the
cheque. Sometimes there are words written between
1- It must be an unconditional order in the lines.
2- The cheque must be signed 2 TYPES OF CROSSING
3- It is drawn in a banker
4- It order to the banker to pay a sum of
money on demand
5- The cheque is drawn for a specified
person or in favour of a bearer a. Two parallel transverse lines only
b. Two parallel lines with the words not
TYPES OF CHEQUES c. The words and company with the words
between two
1- UNDATED CHEQUE d. The words & Co
e. The parallel transverse lines
Must fill the date within reasonable time f. The words and company with the words
Cheque not date is a valid cheque s.3 (4)(a) not negotiable
Holder of an undated cheque in the true date g. The words and co with the words not
of issue s.12 & s.20 negotiable


S.36(3) it has been circulation for reasonable Paying banker can only is paying the amount
length of time after 6 month or more of the cheque to a collecting banker
Unreasonable depends on facts of case Avoid unauthorized person to get payment
When person try avoid liability on it across the bank counter.
It can only be cashed using account.
3- ANTE-DATED & POST-DATED CHEQUE Lost might has been discovered
Payment stopped
S.13(2)When dated is ante-dated, post-
dated or Sunday dated
date before date issue SECTION 76 (2) that crossing is special when
POST-DATED CHEQUE when cheque the name of the banker is written between the
bear dated in the future, strictly speaking parallel transverse lines or it is written across the
Not cheque, it is not payable on demand face of the cheque without lines.
Paying banker can only pay the amount of
Purpose protection and security when the cheque to a collecting banker named in the
delivered by post crossing.
Not fall in the hands of unauthorized persons Avoid unauthorized person to get payment
such as thieves across the bank counter.
Cannot cash across bank counter It can only be cashed using an account.
The person who produced crossing cheque Lost might has been discovered
must be have bank account for payment
Payment stopped
here because the respondent did not act in a bona
fide manner.
3- Not negotiable CROSSINGs

When the cheque written the words between PROTECTION OF THE PAYING BANKER
the crossings on the face of the cheque, the
cheque loses the full character of 1. PAYING BANKER / DRAWER BANKER
negotiability but remains transferable. -When customer draws a cheque on his
Person who hold the cheque a thief transfers banker
the cheque to A who accept the cheque
honestly and for value, A cannot obtain a 2. DUTY - To pay right person according to the
better than the thief the transferor of the person drawers mandate
cheque section 81
3. IF PAY WRONG PERSON - Bank must bear
CASE WILSON and Maeson v Pickering the lost

W draw a cheque in blank crossed Not 4. Must ensure not be liable for non
Negotiable. His clerk, who was supposed to fill complier with the mandate and the
in the amount and the name of the payee, customer and conversion as regards true
inserted a sum in excess of her authority and owner of the cheque.
delivered it to P in payment of her own debt. It
was held that since the clerk had no title to the PROTECTION OF THE PAYING BANKER
cheque, P had no better title and W was
therefore, not liable on it.
(a) A banker is not liable if he pays a cheque in
due course - s.59
4- Account Payee Only CROSSINGs
Payment in due course means payment made at
The words account payee or a/c payee has
or after maturity of the bill to the holder in good
been used in the transaction.
faith ana without notice that his title to the
cheque is defective.
CASE Yap Moi v Hong Leong Bank Bhd (2002)

For example, M draws a cheque on Bank ABC

The appellant maintained a share account with JB Sdn Bhd. payable to G. On receiving the
Securities Sdn Bhd. In respect of some share trading
cheque, G indorses the cheque in blank, thereby
payments, JB Securities Sdn Bhd issued eight
cheques in favour of the appellant as the named making it payable to bearer. G misplaces the
payee. However, the appellant's remisier, one Ng cheque which is then found by R. R presents it
Hong Chai ('Ng') came into possession of the said for payment at Bank ABC which pays the sum
cheques and subsequently banked it in his favour in stated in the cheque. Bank ABC will not be liable
purported settlement of a debt due to him in his even if G sues the bank for conversion because
dealings. it has made payment to the holder in good faith
and without notice of the defect in title. The Bank
The respondent bank nevertheless converted the has discharged the cheque by payment in due
cheques in favour of Ng. The appellant consequently course according to s.59. It can therefore debit
applied for summary judgment against the respondent M's account.
bank, claiming the sum of money had and received by
the respondent for the appellant's use or alternatively
for conversion. After her application was rejected by (b) If the banker pays in good faith and in the
the judicial commissioner, this appeal was made. ordinary course of business, a cheque drawn on
him which bears a forged or unauthorized
The Court of Appeal allowed the appeal by the indorsement, he is not prejudiced by the forgery
appellant saying that respondent Bank was negligent - s.60
in recklessly disregarding the a/c payee's crossing on
all the cheques that had the appellant's name on For example, D draws a cheque on Bank Y in
them. Also, the protection under s.85 did not apply favour of T, and it is stolen by L who forges T's
signature and negotiates it to M who in turn
negotiates it to N who obtains payment from the bank could not therefore rely on the protection
Bank. If Bank Y has paid in good faith in the given in the BEA.
ordinary course of business, the bank would not
be prejudiced by the forgery. The Bank can debit
D's account for the amount of cheque under
s.60; the Bank is not liable to D who is the true
(c) The paying banker is protected if he pays a
cheque which is not indorsed or is inrequiartv
indorsed in good faith and in the ordinary course The banker to whom a holder of a cheque
of business - s.82 presents the cheque for the credit of his account
is called the collecting banker.
(d) If the paying banker pays a crossed cheque
in good faith without negligence and in The duty of such banker is to collect the amount
accordance with the crossing, he is not liable - stated in the cheque from the drawer's bank (the
s.80 paying banker).

(Note: s.79 sets out the duties of bankers with A collecting banker may become liable to his
regard to the payment of crossed cheques, i.e. customer for breach of contract; example when
the payment must be in accordance with the he fails to collect when instructed to do so.
He may also be liable to the true owner for
For example, Amy draws a cheque on Bank X in wrongful interference or conversion where he
favour of Betty in order to repay a friendly loan. collects improperly on behalf of a customer who
On receiving the cheque, Betty crosses it is not entitled to the money.
generally. The cheque is stolen by Cathy who
goes into Bank Z and pretending to be Betty, However, the BEA does provide some protection
opens an account in Betty's name. Bank Z to the collecting banker
presents the cheque to Bank X who pays in
good faith and without negligence. Bank X is not Under s.85, where a banker, in good faith and
liable by virtue of s.80. without negligence, receives payment of a
cheque for a customer with no title or a defective
The banker would lose protection of s.80 if he title, he is not liable to the true owner provided
pays the cheque otherwise than in accordance some elements are proven:
with the customer's mandate, or if he has acted
negligently. a. That the banker acted for a customer.

Slingsby v District Bank (1932) Oriental Bank of Malaya v Rubber Industry

(Replanting) Board (1957)
The plaintiffs requested their solicitor,
Cumberbirch, a partner in M/S Cumberbirch & b. That the banker acted in good faith
Potts, to draw a cheque on their account on the
defendant's bank payable to M/S John Prust &
section 95 : "A thing is deemed to be done in
Co. The cheque was drawn with a gap between
good faith, within the meaning of this Act, where
the payee's name and the word "or order". After
it is in fact done honestly whether it is done
it was signed by the plaintiffs, Cumberbirch
negligently or not."
inserted the words "per Cumberbirch & Potts".
Cumberbirch indorsed the cheque and obtained
payment. It was held that the indorsed was not c. That the banker acted without
in accordance with the customer's mandate (the negligence.
proper indorsement should have been "John
Prust & Co. per Cumberbirch & Potts") and the
Thus, even if the banker had acted in good 1. Duty to give notice of the 2nd Schedule
faith, if he has been negligent, the banker would before entering the HP agreement
not be protected under this section.
Affin Credit (M) Sdn. Bhd. V Yap Yuen Fui
The Rubber Industry (Replanting Board) v
Hongkong and Shanghai Banking Corporation In this case it was held by the court that pre-
(1957) MLJ 103 contractual disclosure is required even if the
offer to enter a hire-purchase agreement
The National City Bank of New York v Ho Hong emanated from the Hirer
Bank Ltd (1932) MLJ 54
Section 4(5) states that the owner and/or the
DEFINITION AND NATURE OF HIRE- dealer who fail to serve a 2 nd schedule notice
PURCHASE AGREEMENT before an agreement is signed shall also be
guilty of an offence under the Act. The penalty
Based on section 2(1) above there are two for the said offence is as follow:
definitions of HP agreement:
a. If such person is a body corporate, it is liable
1. HP agreement is a letting of goods with an to a fine not exceed RM 100,000, and for a
option to purchase. This is similar to that in second or subsequent offence, to a fine
common law. exceeding RM250, 000

2. The second definition is an agreement for the b. If such person is not a body corporate, he is
purchase of goods installments. However, it liable to a fine not exceed RM25.000 or to
does not include agreements where ownership imprisonment for a term not exceeding RM25,
passes at the time of the agreement or upon 000 or to imprisonment for a term not exceeding
delivery of goo in such an agreement, if the 3 years or to both and for a second or a
ownership passes at the time of the contract it is subsequent offence, to a fine not exceeding,
not called Hp agreement but a credit sale. The RM50 000 or to imprisonment for a term not
definition also does include agreement where exceeding 5 years or both as provided under the
the hirer is a dealer in the same goods. new amended section 46.

In a contract of hire purchase, unlike the 2. The HP agreement must be in writing

contract of sale of goods, property goods or
ownership of the goods is not transferred to the
3. The HP agreement must be signed
hirer at the time the HP agreement or upon
delivery of the goods. Throughout the period of
HP, the hirer only obtains possession and use of 4. The HP agreement must contain certain
the goods but not ownership. The property in
goods or the ownership remains with the owner the details
until the hirer has fully settled the price agreed
upon in the HP agreement. 5. Separate agreement for every item of
6. No alterations or additions can be made to
The HP Act 1967 provides for the procedures
that must be complied with for a valid formation the agreement
of a hire-purchase agreement. Failure to comply
with the requirements of the Act would render 7. Motor Vehicles registration certificate
the agreement void or in some circumstances,
the commission of an offence. The followings
are the procedure: 8. Altered or modified motor vehicles
9. Declaration on second hand motor vehicle

10. Copies of the agreement must be served

on the hirer and guarantor

11. Booking Fee

12. Deposit to be paid by the hirer

Main duty of a hirer under HP agreement to
make the payment of monthly installment
1. Right to a copy of statement relating to his without fail
When fail the owner can repossess the HP
financial position (section 9) goods
HP Act 1967 lay down the procedure
2. Right to appropriation of payment (section 10)

3. Right to apply for an order for goods to be


4. Right to assign (section 12) 1. Default in payment

2. Service of 4th schedule notice

5. Right by operation of law (section 13)

3. Repossession
6. Right to early completion of agreement (section

14) 4. Service of 5th schedule notice and

procedures after repossession

7. Right to terminate agreement (section 15)

5. Selling off repossessed goods

8. Right after repossession (section 18, 19)