Cheque - Meaning & Definition, Features and Specimen

Negotiable Instruments Act' 1881 Notes
Business Laws Notes B.Com 1st & 2nd Sem CBCS Pattern 

Cheque Meaning & Definition

Cheque is a very common form of negotiable instrument. If you have a savings bank account or current account in a bank, you can issue a cheque in your own name or in favor of others, thereby directing the bank to pay the specified amount to the person named in the cheque. A cheque is an instrument drawn on a specified banker and not expressed to be payable otherwise than on demand Therefore, a cheque may be regarded as a bill of exchange; the only difference is that the bank is always the drawee in case of a cheque.

The maker of a cheque is called the ‘drawer’, and the person directed to pay is the ‘drawee’. The person named in the instrument, to whom or to whose order the money is, by the instrument directed, to be paid, is called the ‘payee’

The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

From the above definition it appears that a cheque is an instrument in writing, containing an unconditional order, signed by the maker, directing a specified banker to pay, on demand, a certain sum of money only to, to the order of, a certain person or to the bearer of the instrument. Actually, a cheque is an order by the account holder of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer.

The essentials or features of a Cheque are:

1. An Instrument in Writing: A cheque must be in writing. It can be written in ink pen, ball point pen, typed or even printed. Oral orders are not considered as cheques.

2. Cheque Contains an Unconditional Order: Every cheque contains an unconditional order issued by the customer to his bank. It does not contain a request for payment. A cheque containing conditional orders is dishonoured by the bank.

3. Cheque is Drawn by a Customer on His Bank: A cheque is always drawn on a specific bank mentioned therein. Cheque drawn by stranger is of no meaning. Cheque book facility is made available only to account holder who are supposed to maintain certain minimum balance in the account.

4. Cheque Must be Signed By Customer: A cheque must be signed by customer (Account holder). Unsigned cheques or signed by persons other than customers are not regarded as cheque.

5. Cheque Must be Payable on Demand: A cheque when presented for payment must be paid on demand. If cheque is made payable after the expiry of certain period of times then it will not be a cheque.

6. Cheque Must Mention Exact Amount to Be Paid: Cheque must be for money only. The amount to be paid by the banker must be certain. It must be written in words and figures.

7. Payee Must be Certain to Whom Payment is Made: The payee of the cheque should be certain whom the payment of a cheque is to be made i.e. either real person or artificial person like joint stock company. The name of the payee must be written on the cheque or it can be made payable to bearer.

8. Cheque Must be Duly Dated By Customer of Bank: A cheque must be duly dated by the customer of bank. The cheque must indicate clearly the date, month and the year. A cheque is valid for a period of six months from the date of issue.

9. Cheque has 3 Parties: Drawer, Drawee & Payee:

Ø  Drawer: A drawer is a person, who draws a cheque.

Ø  Drawee: A drawee is a bank on whom a cheque is drawn.

Ø  Payee : A payee is a person in whose favour a cheque is drawn

10. Deliveries: Delivery of the Cheque is Essential

Specimen of a Blank Cheque