Cheque and Prescription

7/30/2019 Cheque and Prescription

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Cheque(Check) Chequeisawritteninstrumentbywhichapersoncalledthedrawerordersabankertopayondemandofasumofmoneyto,ortotheorderof,aperson,

calledthepayee

Drawer

Banker(Drawee)

Payee

Juristic

Relation


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DemandDeposit

Account

TwoMajorTypesof

Account

TimeDeposit

Account

Popularamongbusinessmen

TheSavermustoffertoopencurrentdepositaccountwith

conditiontogetherwithgivingsampleofhis/hersignaturetotheBanker. When the Banker accept such offer, the Banker gives

ChequesBooktotheSaver.


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What kind of Juristic Relation? A commercial banking like KrungSri Bank, TMB,

Kasikorn Thai has a propose of its business as a

saving bank and pay the money back to the drawer ondemand. This kind of Bank could use the saved

money for several businesses including Granting of

Credits to people.

There must be at least three types of Contract that theDrawer must have with the Banker:

Current Deposit Account Contract (offer to open +acceptance)

Deposit Contract Agent Contract


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Remarks Banker and Payee do not have any Juristic Relation. If

the Banker has not accept the Cheque, the Banker is

not liable to the payee (the holder).


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Characteristics of Cheque1. It is a written instrument. = it is a legal contract and it

is a negotiable instrument except when there is a

condition written by the drawer.

2. Order a Banker to pay (Order Cheque/ BearerCheque)

3. Order a banker to pay on demand a sum of money.

A/CPayeeOnly


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TopicsofCheque Issuing NegotiationsimilartotheprovisionsinB/E Rulesofcollecting Acceptance AvalsimilartotheprovisionsinB/E RighttorecoursesimilartotheprovisionsinB/E


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Pay to the order of

Sum of

or Bearer

Bank of ABAC PLC. LTD.

Hua Mak Campus Branch

Hua Mak, Bangkok Thailand16 Mar. 04

ABAC E22Mr. Sam

Ten Thousand Baht 10,000.00

BillyAccount No. xxx xxx 1234


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DifferencesbetweenB/EandCheque

BillofExchange(B/E)1. Anypersoncanbe

drawee

2. Abillispayableonamaturitydate

3. Protestisneeded

Cheque1. TheDreweeisBank2. Chequeispayableon

demand

3. ProtestisneededonlyForeignCheque


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Required items of ChequeSec. 988


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There is no Date ofMaturity required in

Cheque

because?


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Chequeispayable

ondemand! Thedateofissuemeansthedatehasbeenwrittenonthecheque.Thedatemaybethesamedateinwhichthechequeiswrittenor

thetimethefuture(apostdatedcheque).

Asachequeisaninstrumentpaidondemand,it,therefore,doesnothavethe

dateofpayment(maturitydate),butcontainedthedateofissue.


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Forexample On January, 2012 Miss Star bought a

diamond ring from Miss Moon, the same day

she wrote a cheque, dated on 10 April

2012, payable Miss Moon for the amount of100,000 Baht.

What is the date of Issue?10 April 2012 is the date of issue,

therefore Miss Moon may present thecheque for a payment from that date.


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PresentmentofchequeforpaymentSec.990


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Forexample:ThedrawerisdischargedBenwroteachequeatBangkoktoorderKBank,HuamarkbranchpayabletoAndreyintheamountof100,000BahtonJanuary10,2012.AndreyindorsedthechequetoKen.KenpresentedthechequeforpaymentonFeb20,2012.ThebankhasbecomebankruptonFebuary15,2012.


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Ifwithin1monthfromtheissuingdate(January10thFebruary10th,2012)Bensaccounthadmoneycoveredthe

amountinthecheque,Ben,thedrawerandAndrey,theindorseraredischarged

Ben

KBank

Audrey

100,000 Baht

January10,2012

Ken

Endorse and deliver to

Presentthecheque

forpaymentonFeb20,2012

Feb15th,2012

Bankrupt


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Today, Star buys computers from Moon for theprice of 100,000 Baht. Star does not have

enough cash. He wants to pay Moon by himself

within a month.

1. Star asks you what type of Bill should hedraw.

2. Star ask you to help him draw a legal Bill. 3. What if Star has a debtor, Venus who owes

him 100,000 Baht and Star wants to orderVenus to pay money to Moon on Thais Father

Day this year? Please draw a legal bill.


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ResultofdelaypresentmentSec.990Incaseofdelaypresentmentundersection990,theendorser

willbedischargedbysuchdelay.Thedrawerwillbedischarged

onlytotheextenttowhichhehassufferedactualdamageorloss

bythedelay.

*Ithasaneffecttotherightofrecourse!*


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Theendorserwillbedischargedbysuchdelay

Thedrawerwillbedischargedonlyto

theextentofanyinjurycausedtothe

drawerfailureofsuchpresentment

aneffecttotherightof

recourse

Resultofdelaypresentment

Sec.990


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Remarks 1. The Drawer in Cheque is in a different position

from the drawer in B/E

ThedelayinpresentmentofB/EDischargesthe

drawersandtheendorser(Section973)

TheDrawerinChequeisnotautomatically

discharhedbythedelayinpresentmentbutonly

whenhehassufferedactualdamageorlossby

thedelay


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Star

BBank

Moon Sun

Cheque

100,000BahtIssueinBKK

PayableinBKK

(inthesametown)

December1st,2012

Didnot

presentthe

chequeforpaymentw/IonemonthBbank goes into Bankruptcy --- the cheque cannot be paid.

If Sun presented the cheque without delay, the money wouldhave been paid to him.


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Suppose the Bank pays Sun 50,000 Baht, Star will bedischarged only 50,000 lost to the Bank.

Moon as an endorser is automatically discharged.


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RightsofBankertorefusepayment

Notenoughmoney

Chequeispresentforpaymentlaterthansixmonth

Receivedanoticeoflostorstolencheque


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Duty of a Banker Section 991 Rule: A Banker is bound to pay a cheque drawn on

him by his customers.

Exception: the following situations, 1. There is not enough money to the credit of the

account of the customer to meet the cheque.

Deposit Withdraw100,000Baht 50,000BahtBalance=50,000


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2. The cheque is presented for payment later than sixmonths after the date of issue.

If the holder presents this cheque on December 1st,2014, what is the effect?...

Cheque

100,000BahtIssueinBKK

PayableinBKK(inthesametown)

December1st,2012


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The Banker will have right to refuse to pay the holder. 1 month 3 months 6 months

Delayof

presentment

TheBankercannotusethis

excusefortherefusalof

payment

TheBankerhastwooptionsPayorRefusetopay.

ItistheBankersDiscretion.


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3. Notice is given that the cheque has been stolen. The holder might inform the Banker that the cheque

has been lost or stolen.


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Remember! The Banker has duty to pay his customers Cheque. Unless the situations mentioned before happen. A refusal to pay without lawful and adequate reasoncould cause the Banker to be liable to the customer

for damage to his credit.


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Revocation of a Bankers Authority Section 992 Rule: The duty and authority of a banker to pay

according to the cheque drawn on him comes to an

end on these following situations:

1. Countermand of Payment Stopping a cheque A banker requires the written and signed authority of his

customer ( the drawer) with a full description of thecheque.

What if the customer receives a requst of Countermandof Payment by telephone?


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The banker must request written authority and until itis arrrived, if the cheque is presented.

TheBankershouldpostponepaymentpendingconfirmation.


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If A cheque is received for payment

Through the the Bankers clearing By post Over the counter for the credit of another customers

Account

Thedrawercanstoppaymentatanytimeuptothe

closebusinesshourofthatday.


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The drawer cannot deprive the holder of his right tothe cheque.

If the holder is a lawful holder, the drawer himselfmust pay if the bank returns the cheque stopped

This means the cheque is still valid. If the drawer refuses to pay, the holder can sue him

and compel him to pay money directly to him or to

remove the stop and enable the bank to pay.


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The cheque is valid and is drawn with all requirementsby law --- if the Banker refuses to pay, .

What should the Drawer do?...


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Death of the drawer If the Banker receives a reliable notice of his

customers death, the Banker refuse to pay.

It is not because of the death that ends the duty to paybut the Law want the heirs of the deceased to managethe balance and his properties first.


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A bankers authority to pay is terminated also bynotice of publication of a interim receiving order or

bankruptcy order against the drawer.


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T/F 1. Cheques are Bill of Exchange. 2. All Bill of Exchanges are Cheques. 3. A drawee in Cheque must be a Bank. 4. The Drawer and the Banker must have juristic

relation.

5. The Banker and the payee must have at least threecontract with each other.

6. The Banker must refuse to pay if the cheque is indelay of presentment.


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Exam Questions Short Answers Drawing Bill + several questions to evaluate your

understanding about Law of Bills

T/F


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Death of the Drawer


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DutiesofBankertorefusepayment

Countermandofpayment

Noticeofdrawersdeath

Drawerbecomebankrupt


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BankersAcceptance

1. Iftheholderpresentsforacceptance; drawer&endorseraredischarged

2. Ifthedrawerpresentsforacceptance; Everybodyisstillliable

*Ithasaneffecttotherightofrecourse*!


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Crossedcheque

GeneralCrossedCheque/GeneralCrossing Paymentcanbemadeonlytoabankaccount

SpecialCrossedCheque/Specialcrossing Paymentcanbemadeonlytoaspecifiedbankaccount


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Uncrossed

cheque


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What kind of Crossed cheque is

this?


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What kind of Crossed cheque is this?

Pay to the order of

Sum ofor Bearer

Bank of ABAC PLC. LTD.

Hua Mak Campus Branch

Hua Mak, Bangkok Thailand16 Mar. 04ABAC E22

Mr. SamTen Thousand Baht 10,000.00

BillyAccount No. xxx xxx 1234


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Is this a bearer cheque or order cheque?What does it mean by writing not negotiable?

What kind of crossed cheque is this?


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Who can cross a cheque? 1. Drawer --- General crossing/ Special Crossing 2. Holder ---

If the holder receives an uncrossed cheque, the holdercan cross it generally or specially.

General Crossed Cheque --- Holder may cross itspecially.

Holder may add the word Not Negotiable to generalcrossed cheque and special crossed cheque.


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3. Banker --- if a cheque is crossed specially, the banker may again

cross it specially to another banker for collection

If a cheque is uncrossed or it is crossed generally, thebanker may cross it specially to himself

Kbank

Banker


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The law allows a holder and banker tocross a chequeAdd to a crossing in the way itmentions.

Add the word not negotiable/ payeeonly/ AC payee only to the crossing


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Remarks Crossing the cheque is a way to protect forgery. Other bills, other than cheque, cannot be effectively

crosse

A crossing authorized in Section 995 is a material partof the cheque. It shall not be lawful for any person to

obliterate or alter it.

The alteration of or obliteration of and the additions tocrossing on a cheque is considered as a materialalteration.


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Duties of Banker as to

crossed cheque Special crossed cheque to more than one Banker, the

banker on whom it is drawn shall refuse the payment.

If the banker pays a general crossed cheque than to abanker or in case of special crossed cheque the bankerpay to someone else rather than to whom it is crossed

for collection of money--- he is liable to the true owner of

the cheque (for any loss he may sustain owing to thecheque having been so paid.)

But if the cheque is not crossed when the holder presentit for payment, or have had an alteration, the banker

paying the cheque in good faith and without negligence

shall not responsible for any liability.


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A special crossing should mention one banker onlyand he is the banker who should collect the cheque

for the holder.

The drawee must pay a crossed cheque inaccordance with the crossing

Unless, the banker will be liable to the true owner. He might be compelled to make a second payment.


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E is not a true owner What is the result?

A

BBank

C

Crossedcheque

D

Esteals

fromDandaskfor

payment


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Section 997

Specialcrossedcheque

ThepayingBankermustnotpaytoanyotherBanker

exceptforthespecified

bankerandabankeracting

asanagent.

Generalcrossed

cheque

Payingbankermustpayto

anyaccountoftheholder.

Hecannotpaytheholderby

CASH.


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Special crossed cheque--- the paying banker mustpay to the specified banker and he must not pay by

cash to the holder.

The true owner of cheque = the holder / lawful holder


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Example Mary draws a general crossed cheque to order

KBANK, Hua Mark Branchto pay Billy. The amount of

money is 30,000 Baht.

Billy lost such cheque and Smith found the cheque.Smith demands KBANK to pay him. KBANK pays

30,000 Baht in cash to Smith.

What is the legal effect of such payment by KBANK?


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KBANK paid against the provision in Thai Civil andCommercial code. He paid by cash instead of paying

to the holder (Smith)s account. Therefore, KBANK isliable to the true owner of the cheque (Billy)


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Mary draws a general crossed cheque to orderKBANK, Hua Mark Branchto pay Billy. The amount of


Billy lost such cheque and Smith found the cheque.Smith transfers the cheque to Jane and Jane receives

the cheque with good faith and without negligence.

Then, Star, a theft, steals the cheque from Jane. Star

goes to KBANK and cashes money. KBANK pays Star

by cash.

What is the effect of such payment?


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Section 997

(last paragraph)

Where a cheque is presented for payment which doesnot at the time of presentment appear to be crossed

(see page 35)

This section protects paying banker who act in goodfaith and not negligence. There must not be appeared

at the time of payment that the cheque is a crossed

cheque or the crossing is erased or altered. If the

banker paid in good faith and not negligence--- the

paying banker is not liable. (He does not have to payto anyone else)

P i b k d


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Protectiontobankerand

drawerwherechequeiscrossed.

See page 36 In accordance with the crossing In good faith Without negligence Section 998


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This section protects the paying banker who lawfullypays according to the crossed cheque (in good faith

and without negligence)

1. Take a look at section 997 second paragraph General Crossing Special Crossing

2. in good faith and without negligence --- The paying Banker and the drawer of such crossed

cheque (if the cheque used to be in possession of the

payee) --- they both are in the similar status and have

same rights.


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1. The paying Banker had paid to the true owner ofthe cheque

2. the drawer of such crossed cheque is not liable tothe true ower. (The payee could not require thedrawer to be liable both in the original obligation or the

obligation in Cheque contract).


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Mary draws a general crossed cheque to orderKBANK, Hua Mark Branch to pay Billy. The amount of


Billy lost such cheque and Smith found the cheque.Smith transfers the cheque to Jane by forging Billyssignature to endorse and deliver. Jane receives the

cheque with good faith and without negligence. Then,

Jane goes to KBANK to demand for payment. KBANK

paid money to Jane by transfering 30,000 baht toJanes account. (in good faith and without negligence)


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KBANK had paid to the true owner of the cheque Mary as a drawer has the same right as the banker.

Mary is not liable to the original obligation and the

obligation in cheque contract.


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In good faith = the banker did not know the defect ofsuch cheque and the defect right of the holder.

Not negligence depends on fact.


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Protection of Banker collecting

payment of cheques

Section 1000 Where the banker in good faith and without

negligence receives a payment for a customer of

a cheque crossed generally or specially to himselfand the customer has no title or a defective title to

the cheque, the banker does not incur any liability

to the true owner of the cheque by the reason

only of having received payment.


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Banker Paying Demand Bill whereon

Endorsement is Forger

Section 1009 Where a bill payable to order on demand is drawn on

Banker, and the banker on whom it is drawn pays the

bill in good faith without negligence and in the ordinarycouse of business, it is not incumbent on the banker

to show that the endorsement of the payee or any

subsequent endorsement it purports to be, and

thebanker is deemed to have paid the bill in due

course, although such endorsement has been forgedor made without authority.


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Essential endorsement has been forged or madewithout authority

Relieve liability of the banker. He is deemed to have paid the cheque in due course

if


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Banker Paying Demand Bill

whereon Endorsement is Forger

1.Goodfaith:thebankermustpayachequewithoutfraudulentunderstanding(withgoodintention).

2.Withoutnegligence:thebankermusttakereasonablecareonpayment.Ifthebankerpayachequewherethedrawerssignatureisforged,heisdeemtohavepaidthechequenegligentlyandhemustbeliabletothetrueowner(drawer).

3.Ordinarycourseofbusiness:Paymentmustbemade

onworkinghoursofabank


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PRESCRIPTION Periods of prescription (in Civil Law system) Almost all lawsuits must be started within a legally

determined period. If they are presented after that

time, an institution called prescription applies, whichprevents them from filing the case.

Statute of limitations (in common law system) Limitations periods begin when a cause of action is

deemed to have arisen or when a plaintiff had reasonto know of the harm, rather than at the time of the

original event.


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PRESCRIPTION

Under the Law of Bill, Prescription refersto the period of which the creditor can

file a lawsuit against the debtor.

If the period was passed, the creditorswas unable to take any action against

them.


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Prescription in the Law of Bill

A period that a creditor capable to takean action to the Court.

With in this period the creditor or injuryperson can exercise a right to recourseor claim to the debtor.


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Bankerpayingdemandedbill

whereonindorsementisforged!

Sec.1009 Whenabillpayabletoorderondemandisdrawnonabanker,andthebankeronwhomitis

drawnpaysthebillingoodfaith,withoutnegligenceandintheordinarycourseofbusinessitisnotincumbentonthebankertoshowthattheindorsementofthepayeeoranysubsequentindorsementwasmadebyorundertheauthorityof

thepersonwhoseindorsementitpurportstobe,andthebankerisdeemedtohavepaidthebillinduecourse,althoughsuchindorsementhasbeenforgedormakewithoutauthority.


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Section 1001No action against the acceptor of a

bill of exchange or the maker of a

promissory note can be enteredlater than three years after the date

of maturity.


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Section 1002No action by the holder against the

endorsers and against the drawer of

a bill can be entered later than one

year after the date of the protest

drawn up in proper time or after the

date of maturity where there is a

stipulation "protest not necessary".


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Section 1003No action of recourse by the

endorsers against each other and

against the drawer of a bill can be

entered later than six months after

the day when the endorser took up

and paid the bill or from the day when

he himself was sued.


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Front side of the bill


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Anna

Tenhundredthousandbaht

December242012

Charlie

Cheque AbacBangna


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Back side of the bill

Endorsement/ special endorsement

and blank endorsement

To Charles

AnnaDecember 25

2012

Charles

December31,2012


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Cheque and Prescription

Documents

Transcript of Cheque and Prescription