BEARER CHEQUES, ODER CHEQUES - ANY SIGNIFICANCE? - LECTURE TWO

Until I fell victim to this practice, I had always boasted that this will never happen to me.  I went to a bank to cash a cheque. The cheque was a bearer cheque drawn payable to cash or bearer, signed by the drawer and endorsed in blank by the same drawer. The teller asked me to write my name at the back which I reluctantly did. Then he asked me to produce I D card. I was not having the card with me and that was when the problem begun. "Without he ID card, I cannot pay you", said the teller. I protested and drew his attention to the fact that the cheque was just a bearer cheque and that the endorsement at the back by the drawer is enough for me to cash it, and that there was no need for any identification from any holder. The customer was called for confirmation, which he did. The teller still insisted that I brought the ID card and so refused to pay me.In an angry mood, I left the bank and threatened that "we shall test this issue at the courts of law".
A lot of people holding bearer cheques have fallen victim to non-payment at the banks' counter because of the absence of ID cards. What does the law regarding to these issues stipulate? For how long shall this bad practice continue to worry and embarrass people?

What is a bearer cheque, an order cheque and endorsements on a cheque? What does the word "or Order, or Bearer at the end of the sentence "PAY............................OR ORDER/ BEARER stand for?


BEARER CHEQUES AND ORDER CHEQUES

According to section 7 of Bill of Exchange  Act 1882, a bearer cheque is a cheque that is payable to any holder, and can be negotiated by simple delivery. There must be the intention of the transfer or to transfer the instrument. This intention is done by signing in blank at the back of the cheque. Simple delivery means one can hand over the cheque to the cashier without any endorsement or to another person for value. The drawer's intention to make a cheque bearer is already done by signing at the back. If a cheque is written "Pay Cash" or Pay Bearer, this creates a fictitious payee and therefore the mere signing at he back by the drawer is enough to make it payable to any bearer, without endorsement. A cheque is payable to bearer when it explicitly says 'PAY BEARER' or when the last endorsement is an  endorsement in blank, or when the payee is a fictitious or non-existent person. When the drawer thus gives such command, the paying bank will have to check the signature and if all other things are complete and regular on the face of it, go ahead and pay. In simple terms, if the drawer says 'pay bearer, any holder is a bearer, and must be paid accordingly. Payment must not pass the test of identity, but rather the test of 'complete and regular on the face of it'

ORDER CHEQUES

An order cheque arises where the drawer specifically write the payee's name followed by the words or Order. This simply means the bank should pay the named beneficiary or whoever the named beneficiary orders to be paid. This is done by endorsement on the back of the cheque. Section 34 & 35 of Bill of Exchange Act 1882 deal with such endorsements.
An order cheque is negotiated by endorsement and delivery, by the named payee or endorsee. When an order cheque is endorsed in blank, the cheque changes to bearer cheque, and any subsequent holder may negotiate without any endorsement.

What the bank tellers and sometimes their officers should be doing is to educate their customers on priciples of negotiability instead of worrying holders with ID cards on bearer cheques. Production of ID cards on bearer cheques should be coercive or persuasive and not by force. After all, the drawer who says pay 'bearer' may not even know the last holder who present the cheque. Why should banks worry people with ID cards on bearer cheques.