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Understanding Checks

Updated on May 14, 2010

Check, money order on a banker drawn out by a person who has money in the bank, and payable on presentation by the person to whom the check is written out or by the bearer. The rules with regard to a bill of exchange, defined in the Bill of Exchange Act 1882, are also applicable to checks. A check must be signed by the drawer, and presented within a reasonable time. A banker who pays a forged check cannot debit his customer with the amount. When the amount is fraudulently altered, the banker who pays it can recover from his customer only the amount originally placed on the check. Negligence on the part of the customer causing or giving facilities for fraud may excuse the banker, if it is gross; but merely leaving one's check-book in an unlocked drawer will not per se be sufficient for this. The banker is bound to pay the check on demand, except in cases when the drawer has previously given notice to him not to pay on his account, or when the drawer has died or committed an act of bankruptcy.

In England checks may be crossed in order to lessen the risk of loss by theft or fraud. A crossed check has two parallel lines drawn across it, in which may be written a particular banker's name, or merely the words '& 'Co', the former case it is said to be specially crossed, and will only be paid through the banker mentioned. When it is generally crossed, it is payable only through a bank. If the words 'not negotiable' are added, the person taking the check does not have and cannot give a better title to it than that of the person from whom he took it. Since 1957 the endorsement of checks by payees has been unnecessary. By the Checks Act 1957, an unendorsed check which appears to have been paid by the drawer's banker is evidence of receipt by the payee of the sum payable by the check. Since 1971 checks have been exempt from stamp duty.

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