CHEQUES

AHMAD AMIR
DIYAUDDIN

DEFINITION
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

A cheque necessarily comprises the following characteristics:

1.
It is an unconditional order in writing
2.
It is signed by the drawer
3.
It is drawn on a banker( drawee)
4.
It orders the banker to pay a sum certain in money on demand.
5.
It is drawn in favour of a specified person(payee) or to his order or in favour
of a bearer.

CATEGORIES OF CHEQUES
Undated cheques
Overdue or Stale cheque
Post-dated cheques

UNDATED CHEQUES
Undated 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.

OVERDUE OR STALE CHEQUE

Overdue 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.

POST-DATED
Cheques which bears a date in the future
It 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 postdated, that it bears date on a Sunday.

CROSSING OF CHEQUES
The 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 Crossing

General crossing
Special crossing
Limited crossing

GENERAL CROSSING
As 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 with
i) The word not negotiable or
ii) The word and company/& Co. either
with or without the words not
negotiable

EFFECTS OF GENERAL CROSSING

The paying banker can only pay the amount of
the cheque to a collecting banker
The paying banker cannot pay cash the cheque
across the counter
It is a hindrance for someone who has obtained
the cheque wrongfully to obtain payment
Gives customer of the paying bank, some time
to request the paying bank to stop the
payment

SPECIAL CROSSING
In 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 CROSSING

It is safer than the general crossing
The paying banker must pay the amount of the
cheque only to the collecting banker named in
the crossing

LIMITED CHEQUE
2 categories which is Not Negotiable, and
Account payee only
On 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.

ALTERATION ON CHEQUES
An 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 ALTERATIONS
There 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 cheque
However, 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 tenor
However, 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 liability

Barbour 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 777
Facts: 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 Questions

How 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?