Revise Lecture 24

Cheques

• Cheques generally contain;1. Place of issue2. Cheque number3. Date of issue4. Payee5. Amount of currency

Cheques

6. Signature of the drawer7. Routing / account number8. Fractional routing numberA cheque is generally valid indefinitely or for six

months after the date of issue unless otherwise indicated, this varies depending on where the cheque is drawn.

Cheques

•Features of a Cheque

Cheques

Features of a Cheque• Some important features of a cheque are

given below;1. A cheque must be in writing and duly signed

by the drawer.2. It contains an unconditional order.3. It is issued on a specified banker only.

• Types of Cheques

Cheques

Types of cheques• A cheque used to pay wages due is referref to as

a payroll cheque.

• A traveller’s cheque is designed to allow the person signing it to make an unconditional payment to someone else as a result of paying the account holder for that privilege. These cheques can usually be replaced if lost or stolen.

Cheques

Types of a Cheque• A cheque issued by a bank on its own account

for a customer for payment to a third party is called a Cashier’s cheque. A Treasure’s cheque, a Bank cheque, or a Bank draft.

• A cheque issued by a bank, but drawn on an account with another bank, is a teller’s cheque. In addition banks often sell money orders.

Cheques

• Broadly speaking, cheques are of four types;1. Open cheque2. Crossed cheque3. Bearer cheque4. Order cheque

Cheques

Open Cheque:• A cheque is called ‘open’ when it is possible to

get cash over the counter at the bank. The holder of an open cheque can do the following;

• Receive its payment over the counter at the bank.

• Deposit the cheque in the bearer’s account.• Pass it to someone else by signing on the back

of a cheque

Cheques

Crossed Cheque:• The risk from an open cheque can be avoided

by issuing a crossed cheque. • The payment of such a cheque is not made

over the counter at the bank. It is only credited to the bank account of the payee.

• Cheques are usually crossed as a measure of safety.

Cheques

Crossed Cheque:Crossing is made by drawing two parallel

transverse lines across the face of the cheque with or without writing ‘Account payee’ or

Cheques

• Bearer Cheque

Cheques

Bearer Cheque• A bearer cheque is payable to any person who

presents it for payment at the bank counter. It can be transferred by mere delivery and requires no endorsement.

• A cash cheque or a bearer cheque or a self cheque does not bear the name of the payee.

• It simply states that payable to ‘bearer’ or to ‘self’ or to ‘cash’.

Cheques

• Order Cheque

Cheques

Order cheque• An order cheque is a cheque that is payable to

a particular person.• In such a cheque, the word ‘bearer’ may be cut

out or cancelled and the word ‘order’ may be written.

• The payee can transfer an order cheque to someone else by signing his or her name on the back of it.

• Anted – dated Cheque

Cheques

Ante – dated Cheque• This is a cheque in which the drawer mentions

the date earlier to the date of presenting it for payment.

• For example, a cheque issued on May 20, 2007 may bear a date May 5, 2007.

Cheques

• Stale Cheque

Cheques

Stale Cheque• A cheque which is issued today must be

presented at bank for payment within a stipulated period.

• After expiry of that period, no payment will be made and it is then called a stale cheque.

• Find out from your nearest bank the validity period of a cheque.

Cheques

•Mutilated Cheque

Cheques

Mutilated Cheque• In case a cheque is torn into two or more pieces

and presented for payment, such a cheque is called mutilated cheque.

• The bank will not make payment against such a cheque without getting confirmation of the drawer.

• The bank may make payment against such a cheque if its is torn at the corners and no material fact is erased or cancelled.

Cheques

• Post-dated Cheque

Cheques

Post-dated cheque• This is a cheque on which the drawer mentions

a date which is subsequent to the date on which it is presented.

• For example, if a cheque presented on May 8, 2007 bears a date of May 25, 2007, it is a post-dated cheque.

• The bank will make payment only on or after May 25, 2007

• Parties to a Negotiable Instruments

Negotiable Instrument

• The important parties to negotiable instruments are;

Promissory note: 1. Maker2. Payee3. Endorser4. Endorsee

Negotiable Instrument

Bill of Exchange:1. Drawer2. Drawee or acceptor3. Endorser4. Endorsee

Negotiable Instrument

Valid Acceptance:• The essential requirements of a valid

acceptance are that it;1. Must be written2. Must be signed3. Must be completed by delivery

Negotiable Instrument

• Holder in Due Course

Negotiable Instrument

Holder in Due CourseHolder in due course means any person who for

consideration becomes the possessor of a promissory note, bill of exchange or cheque payable to bearer or the payee or endorser thereof if payable to order, before the amount mentioned therein becomes payable and without sufficient cause to believe that any defect existed in the title of the person from whom he received the title.

Negotiable Instrument

Holder in Due CourseThe definition specifies that:1. The holder has to possess the instrument in

due course and before the date of maturity.2. The consideration must be legal and adequate.3. There should be sufficient cause to believe

that he possessed the instrument in good faith and with reasonable care.

Negotiable Instrument

Holder in Due Course4. The holder should not become the holder in

due course even if he received the instrument without any suspicion or knowledge about such defects.

5. Notice of any defect in the title subsequent to the date of acquisition should not affect the rights of the holder in due course.

Lecture 25

•Banker and Customer

Banker and Customer

The Banker• The role of a banker is one filled with multiple

duties and responsibilities.• There are different types of bankers and each

one is unique in his own way. • Some of these individuals work for large

corporate conglomerates while others work for small town financial institutions.

Banker and Customer

The Banker• Each banker has his own set agenda in his role

as a banker. • A banker is an individual (or an institution) who

advises his clients with regard to financial matter.

• The duties concerning saving, loans, taxes, investment and securities are all within the job realm of a banker.

Banker and Customer

• The BankerHe will provide financial assistance to the client

in accordance with their needs.

Banker and Customer

• The Customer

Banker and Customer

The Customer• In banking, a customer is someone who makes

use of or receive the services of the bank.• The word customer historically derives

‘custom’ meaning habbit, so a customer was someone who frequented a particular shop, who made it a habbit to purchase goods there

Banker and Customer

Duties of a CustomerAll banks carry out the customer’s instructions in

a business-like manner.In return, the customer has special duties of

cooperation and other duties of care.

A customer is bound to the following;

Banker and Customer

Duties of a Customer

1. Communication of important information and changes.

2. Unambiguous information in orders and instructions

3. Care in transmission of particular orders

Banker and Customer

• Duties of a Customer4. Use of forms5. Express notification of any special instruction6. Notification of time limits and dates7. Complaints to be made immediately8. Checking of confirmation of the bank9. Liability arising from neglect of duty