What is a Cheque?
The financial instrument used to pay a party is referred to as a cheque or check. It is drawn on a specific banker and isn’t specifically stated to be due in any other way than on demand. The payee or holder of the instrument must give it to the bank for payment. It only lasts for three months.
Always keep in mind that a cheque does not always indicate cash because it does not imply payment assurance. Proceeds cannot be realized should the cheque is not brought before the bank within a reasonable amount of time. Furthermore, the payment of the check is contingent upon there being cheque in the account. The cheque will not be honored if there are insufficient funds in the account.
Essential characteristics of a cheque
If one carefully examines the definition of a cheque, it is evident that a cheque possesses the ten following crucial features or characteristics.
- It must be in writing. A cheque must be written down. An oral request for cheque does not qualify as a check.
- It should be drawn on banker. Always, it is derived from a particular banker. A cheque can be drawn on any bank, saving or current account, where the drawer has an account.
- It contains a mandate to pay in full. A cheque cannot be drawn to be conditionally payable. The instruction of the drawer to the drawee bank shall be unconditional and shall not subject the payment of the cheque to any condition. A conditional cheque must be discarded.
- The check must have a payment order for a certain amount. A request to only pay a specific amount of money should be included on the cheque. A cheque cannot be considered a cheque if it is drawn for a purpose other than paying money. For instance, a cheque that reads, “Pay USD 500 and a TV worth USD 500 to A,” is not a cheque.
- It must be dated and have the drawer’s signature. Without the original drawer’s signature, a cheque is invalid. It ought to have a date as well.
- It is payable on demand. Always payable upon demand, a cheque.
- Validity. Normally, a cheque is good for six months from the date printed on it. After that, it is known as a stale cheque. A cheque that has been dated in the future or in the past is valid. In all situations, the cheque’s validity is assumed to begin on the date that is written there.
- It may be payable to the drawer himself. Cheques may be made out to the drawer personally. In contrast to a bill or a pro-note, it can be drawn payable to the bearer on demand.
- Banker is liable only to the drawer. Only the drawer will be held accountable by the banker on whom the cheque is drawn. If a cheque is returned unpaid, the holder or bearer has no recourse against the banker.