Page 182 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes 14.4.2 Requisites of a Cheque

The requisites of cheques are:

1. Written instrument. A cheque must be an instrument in writing. Regarding the writing
materials to be used, law does not lay down any restrictions and therefore cheque may be
written either with (a) pen (b) typewriter or may be (c) printed.
2. Unconditional order. A cheque must contain an unconditional order. It is, however, not
necessary that the word order or its equivalent must be used to make the document a
cheque., Generally, the order to bank is expressed by the word “pay”. If the word “please”
precedes “pay” the document will not be regarded as invalid merely on this account.
3. On a specified banker only. A cheque must be drawn on a specified banker. To avoid any

mistake, the name and address of the banker should be specifi ed.
4. A certain sum of money. The order must be only for the payment of money and that too
must be specified. Thus, orders asking the banker to deliver securities or certain other

things cannot be regarded as cheques. Similarly, an order asking the banker to pay a
specified amount with interest, the rate of interest not specified, is not a cheque as the sum

payable is not certain.
5. Payee to be certain. A cheque to be valid must be payable to a certain person. ‘Person’
should not be understood in a limited sense including only human beings. The term in fact
includes ‘legal persons’ also. Thus, instruments drawn in favour of a body corporate, local
authorities, clubs, institutions, etc., are valid instruments being payable to legal persons.

6. Payable on demand. A cheque to be valid must be payable on demand and not otherwise.
Use of the words ‘on demand’ or their equivalent is not necessary. When the drawer asks
the banker to pay and does not specify the time for its payment, the instrument is payable
on demand (Sec.19).
7. Dating of cheques. The drawer of a cheque is expected to date it before it leaves his hands.
A cheque without a date is considered incomplete and is returned unpaid by the banks.
The drawer can date a cheque with the date earlier or later than the date on which it is
drawn. A cheque bearing an earlier date is antedated and the one bearing the later date is
called post-dated. A post-dated cheque cannot be honoured, except at the personal risk of
the bank’s manager, till the date mentioned. A post-dated cheque is as much negotiable
as a cheque for which payment is due, i.e., the transferee of a post-dated cheque, like that
of the cheque on which payment is due, acquires a better title than its transferor, if he is a
holder in due course. A cheque that bears a date earlier than six months is a stale cheque
and cannot be claimed for.

Task Analyze the parties involved in bill of exchange.

14.5 Holder and Holder in due Course

According to Sec.8, a holder of negotiable instruments is “a person entitled in his own name to
the possession thereof and to receive or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time
of such loss or destruction.
A ‘holder in due course’, on the other hand, is “a person who for consideration became the
possessor of a promissory note, bill of exchange or cheque, if payable to bearer, or the payee or

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