Do you want to know what is cheque and what are the different types of cheque? Also what are the features of cheque? You are on the right spot to know the answer of this question.
“A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand” Sec. 6.
See Also: What is Dishonour of Cheque
A cheque can also be defined as an unconditional order in writing addressed and signed by the customer of the bank requiring the later to pay on demand a certain sum of money out of his deposits to a specific person to his order or the bearer. Definition of cheque is discussed as under:
What is Cheque
A cheque is an instrument used for drawing money from the bank. By a cheque, the customer of the bank orders his bank to pay on demand, some of the money written on the cheque or to his order or the holder of the instrument.
Major Types of Cheque
The following are the three major kinds of the cheque:
- Bearer cheque
- Order cheque
- Crossed cheque
BEARER CHEQUE
It is very common and most usable kind of cheque. If the word “Bearer” is written with the name of the payee, the cheque becomes a bearer cheque.
Any person who presents this cheque for payment can get the payment of the cheque on the counter.
ORDER CHEQUE
If the drawer of the cheque writes the word order with the name of the payee or the word hearer already written on the cheque is crossed, the cheque becomes an order cheque.
See Also: What is Endorsement of Negotiable Instrument
The banker can make payment only to the payee whose name has been written on the cheque after his identification. It can be endorsed by the person whose name is written as payee.
CROSSED CHEQUE
If the drawer of the cheque draws two parallel lines on the face of the cheque, the cheque becomes a crossed cheque.
These lines can be drawn with words or without words. The payment of such cheque cannot be made in cash.
It can only be deposited in payees account and after that payment can be received by issuing an open cheque.
Types of Crossing
There are two main types of crossing which are as follows:
- General Crossing
- Special Crossing
GENERAL CROSSING
When the drawer of a cheque draws two parallel lines on the face of a cheque without any special message, this crossing is known as general crossing it can be deposited in the account of any person.
SPECIAL CROSSING
When the drawer of a cheque draws two parallel lines on the face of the cheque and also writes some special message in between these two lines such like name of the payee bank, etc this crossing is known as special crossing.
It can be deposited only in the account of the person whose name is written on the cheque as payee.
Essential Features of a Cheque
The essential features of a cheque are as under:
IN WRITING
A cheque is always issued in writing. It cannot be verbal. It is written in such a way which cannot be easily removed or changed. A cheque can also be typed.
UNCONDITIONAL ORDER
A cheque contains an unconditional order by the drawer to his banker. It cannot be a promise or request.
ACCEPTANCE IN ONE’S OWN BANK
A cheque can be issued only to that branch of the bank in which the drawer has his account. It cannot be accepted and paid by the bank where he has not his account.
DRAWERS SIGNATURE
When the account is opened in the bank, the bank receives the specimen signature from the customer.
See Also: Features & Types of Bill of Exchange
A cheque must be signed by the customer himself and his signature must tally with the specimen already given to the bank.
If the signature does not tally with the specimen, the banker will not make the payment of the cheque.
CASH PAYMENT
A cheque can only be paid in cash. It cannot be paid in goods or something else. No one can demand any other thing from the banks accept cash.
PAYMENT TO CERTAIN PERSON
The payment of the cheque can be made to the drawer or to the person whose name has been written on the cheque or to the bearer (holder of the cheque).
ACCOUNT HOLDER
The drawer of the cheque must be the account holder of the bank. A person who has not opened the account in the bank cannot issue the cheque.
DATE
The date must be written on the cheque, if the date is not written on the cheque, the banker will not make the payment of the cheque.
If any date is written on the cheque, the banker will not make payment before that date. A cheque is valid for six months.
FIXED AMOUNT
The amount written on the cheque is fixed and certain. The sum money on the cheque is written in words as well as in figures. If the amount in words and figures does not tally the banker will not make payment.
NATURE OF THE CHEQUE
The nature of the cheque whether it is bearer, order or crossed cheque is also given on the cheque. As already stated that bearer is paid to the holder of the cheque at the counter of the bank.
See Also: Features of Promissory Note
If the cheque is an order cheque, it can only be paid to the person whose name is written on the cheque offer identification and crossed cheque can only be deposited into the Bank Account.
PAYMENT ON DEMAND
A cheque is always payable on demand. When the holder of the cheque presents the cheque for payment, the banker will make the payment if it fulfils all the other requirements.
PARTIES TO THE CHEQUE
There are three parties involved in a cheque, the drawer, the drawee and payee. The person who issues cheque is known as the drawer.
The bank at which cheque is drawn is known as drawee and the person who receives the payment is known as payee.
