Features or Characteristics of a Cheque
- A cheque is an order to pay
- It is an unconditional order
- The amount must be specified
- It must be in writing not oral
- The account number of the drawer is stated
- The name and branch of the bank appear on the cheque
- It is addressed by one person to another
- The name of the payee must be shown on the cheque
- Stamp duty is paid on a cheque
- The amount must be clearly written in words and figures.
Parties to a Cheque
Drawer: This is the person responsible for drawing a cheque. He is the owner of the account on which the cheque is drawn. The drawer is the debtor who signs the cheque and orders the bank to pay his creditor.
Drawee: This is the bank on which the cheque is drawn, i.e. the bank where the cheque will be presented for cash.
Payee: This is the person to whom the cheque is made payable, i.e. the person to whom payment is directed to be made. The payee is usually a creditor and must present the cheque to the drawee for settlement.
Types of Cheque
1. Order Cheque: Order cheque is made payable to a person or firm named on it, or an order which requires the endorsement of the payee unless he pays it into his own bank account.
2. Bearer Cheque: This is payable to the bearer, i.e. whoever presents it. The bearer cheque is payable without any endorsement. The cheque is payable over the counter to the bearer or the presenter of the cheque by the drawee bank
3. Open Cheque: This can be presented and cashed over the counter of the bank to which it is drawn. An open cheque is not crossed. It is used for drawing cash from the bank paying creditors who have no current account.
4. Crossed Cheque: A crossed cheque is one that has two parallel transverse lines drawn across its face with or without the word “Co and Ltd” or Not negotiable.