Top 10 essential elements, characteristics of cheque
Essential characteristics of a cheque
If one takes a close look at the definition of a cheque, it becomes clear that a cheque has the following 10 essential elements or characteristics.
1. It must be in writing: A cheque must be in writing. An oral order to pay does not constitute a cheque.
2. It should be drawn on banker: It is always drawn on a specified banker. A cheque can be drawn on a bank where the drawer has an account, saving bank, or current.
3. It contains an unconditional order to pay: A cheque cannot be drawn so as to be payable conditionally. The drawer’s order to the drawee bank must be unconditional and should not make the cheque payable dependent on a contingency. A conditional cheque shall be invalid.
4. The check must have an order to pay a certain sum: The cheque should contain an order to pay a certain sum of money only. If a cheque is drawn to do something in addition to, or other than to pay money, it cannot be a cheque. For example, if a cheque contains ‘Pay USD 500 and a TV worth USD 500 to A‘ it is not a cheque.
5. It should be signed by the drawer and should be dated: A cheque does not carry any validity unless signed by the original drawer. It should be dated as well.
6. It is payable on demand: A cheque is always payable on demand.
7. Validity: A cheque is normally valid for six months from the date it bears. Thereafter it is termed as stale cheque. A post-dated or antedated cheque will not be invalid. In both cases, the validity of the cheque is presumed to commence from the date mentioned on it.
8. It may be payable to the drawer himself: Cheques may be payable to the drawer himself/herself. It may be drawn payable to bearer on demand unlike a bill or a pro-note.
9. Banker is liable only to the drawer: The banker on whom the cheque is drawn shall be liable only to the drawer. A holder or bearer has no remedy against the banker if a cheque is dishonored.
10. It does not require acceptance and stamp: Unlike a bill of exchange, a cheque does not require acceptance on part of the drawee. There is, however, a custom among banks to mark cheques as ‘good’ for the purpose of clearance. But this marking is not an acceptance. Similarly, no revenue stamp is required to be affixed on cheques.
The image of the cheque above contains, “Order” only.
1. Does it fulfill the criteria of being a Bearer Cheque and will be paid the bearer on demand the specified money mentioned on the cheque without insisting on identity of the bearer?
2. Does the specimen of the cheque fulfill the criteria of the Cheque as a Bill of Exchange as defined in the NI Act?
Like Bearer Cheque, an order cheque is paid to named payee across bank’s account when presented. Banks normally insist upon identification of the presenter while encashing the order check. Signature and ID number of the presenter will be asked for on the rear of the cheque.
Please does cheque satisfy the desired qualities of money?