Writing Cheques

A cheque is a written instruction by a person (the drawer) to their bank (or other financial institution) (the drawee) to pay cash to another person (the payee). It must not be subject to any conditions. While cheques are not commonly used these days, many drawers still enjoy the delay in its clearance if they consider the payee suspicious.

There are several markings made on a cheque, which essentially answer the following questions:

1. Should the cheque be cashable by any bearer of the cheque, or only by the payee named on it?
2. Should the cheque be able to be redeemable in cash at the bank counter, or should it be credited to a bank account?
3. Does the payee want to make the cheque payable to another person?
4. Should 3. be allowed to happen?

1. Bearer and Order cheques

• If a cheque is payable to bearer, the person who presents it to the bank counter can cash it for themself, regardless of who is named payee on it. A bearer cheque will have the words "or bearer" or no such additional words printed on it, such that, if the payee is named A.B., the instruction reads "Pay A.B. or bearer", "Pay cash or bearer" or "Pay cash".
• If a cheque is payable to order, only the payee has rights to cash the cheque. An order cheque will have the words "or order" or "to the order of" printed on it, such that the instruction reads "Pay A.B. or order" or "Pay to the order of A.B.".
• A bearer cheque can be made payable to order by crossing out the words "or bearer", such that it reads "Pay A.B.". An order cheque can be made payable to bearer by not stating a name or making it payable to either "cash" or a fictitious person (e.g. "I love you"). The instruction for the 2nd case would read "Pay cash or order".

2. Cheque crossings
A cheque is crossed when two parallel lines are drawn along the cheque's face. Doing this means that the cheque cannot be redeemed in cash at the bank counter, and so must be credited to a bank account. If the cheque is not crossed, it becomes redeemable in cash.

3. Indorsements
For a cheque payable to order, the payee (acting as transferor) indorses the cheque when they write instructions on the cheque to make it payable to another person (the transferee). If the transferee is named X.Y., it would read "Pay X.Y. {signed} A.B.". Since a cheque payable to bearer can be cashed by anyone, there is no need for any indorsement for them.

4. /NOT NEGOTIABLE/
A bearer cheque is crossed 'not negotiable' when the words "NOT NEGOTIABLE" are written between the parallel lines. Most importantly, this means that the payee will not be able to indorse the cheque. However, this also means that, if the bearer stole the cheque from another person, they do not have ownership rights to the cash. Both of these cases mean that:

• The bank is not obliged to cash the cheque for the bearer.
• If the bank cashes the cheque, the drawer suffers a loss and they can sue the bank for related damages.

Also...
"Cash" is not a true entity, but rather it signifies that the cheque should be payable to bearer. It may be baffling, but solace can be taken in the instruction's making grammatical sense.

It is interesting to note that any marking made reduces the rights of other persons to cash the cheque. For example, if "or bearer" is crossed out in a bearer cheque, it becomes payable only to the named payee, while a similar marking over "or order" in an order cheque keeps it an order cheque payable only to the named payee. When a marking is made (presumably in pen), the only way to void it is for the drawer to cross it out and sign it off. These schemes support the nemo dat rule:

Latin: nemo dat quod non habet
English: no person can pass a better title than they possess