Crossing of cheques

A crossed cheque – the oblique or vertical lines in the centre form the crossing.

A crossed cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed. A common instruction is to specify that it must be deposited directly into an account with a bank and not immediately cashed by a bank over the counter. The format and wording varies between countries, but generally two parallel lines may be placed either vertically across the cheque or in the top left hand corner. By using crossed cheques, cheque writers can effectively protect the cheques they write from being stolen and cashed.[1]

Cheques can be open (uncrossed) or crossed.

Open cheque

An open [cheque] is a cheque that is not crossed on the left corner and payable at the counter of the drawee [bank] on presentation of the cheque.

Crossed cheque

A crossed cheque is a cheque that is payable only through a collecting banker and not directly at the counter of the bank.

When two parallel transverse lines, with or without any words, are drawn generally, on the left hand top corner of the cheque.

Types of crossing

General crossing

A crossed cheque generally is a cheque that only bears two parallel transverse lines, optionally with the words 'and company' (or any abbreviation of them) between the lines.[2] In the UK, the crossing is across e cheque by the person who originally wrote the cheque (the drawer), or it can legitimately be added by the person the cheque is payable to (the payee), or even by the bank that the cheque is being paid in to.[3]

Generally-crossed cheques can only be paid into a bank account,[4] so that the beneficiary can be traced.

A crossed cheque on its own does not affect the negotiability of the instrument.

Restrictive or special crossings

Account-payee

a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

Specific bank

A crossing may have the name of a specific banker added between the lines. A cheque with a such a crossing can only be paid into an account at that bank.

The beneficiary bank can add an additional crossing to allow another bank, who are acting as their agent in collecting payment on cheques, to be paid the cheque on their behalf.

Not-negotiable

The words 'not negotiable' can be added to a crossing.

The effect of such a crossing is that it removes the most important characteristic of a negotiable instrument: the transferee of such a crossed cheque cannot get a better title than that of the transferor (cannot become a holder in due course) and cannot convey a better title to his own transferee, but the instrument remains transferable.

Consequence of a bank not complying with the crossing

A bank's failure to comply with the crossings amounts to a breach of contract with its customer. The bank may not be able to debit the drawer's account and may be liable to the true owner for his loss.

External links

References

  1. ↑ http://www.investopedia.com/terms/c/crossedcheck.asp
  2. ↑ Bills of Exchange Act 1882 section 76
  3. ↑ Bills of Exchange Act 1882 section 77
  4. ↑ Bills of Exchange Act 1882 section 79(2)
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