The cheque is a convenient and common method of making payments. It is unusual for there to be any written contract between the bank and the customer when a cheque account is opened, although some banks, particularly where the account is an overdraft account operated by cheque, send the customer a letter requesting confirmation of ertain terms of the account. Where the terms of the contract are not in wriing, then the obligations of the bank and the customer are implied by law.
The major contractual obligation of the bank is to pay the customer's cheque, provided it is properly written and there are adequate funds available in the account. The major contractual obligations of the customer is to write the cheque so that it does not facilitate fraud and to notify the bank of any known forgeries. The customer does not have a legal obligation to take special care of the chequebook, or to examine the periodic statement of account. Prudent customers will, however, do both.
Cheques are governed by the Cheques Act 1986 (Cth) and all references in this part are to that Act. Since the bank is only obliged to pay 'cheques', the definition of 'cheque' [s 10] is important. A cheque is an unconditional order in indelible writing that:
- is addressed by a customer to a bank
- is signed by the customer (known as the drawer) giving it
- requires the bank to pay, on presentation the sum (written in words and figures) specified.
For certain purposes, it is necessary to distinguish between 'order cheques' and 'bearer cheques'. An order cheque is one that requires the sum to be paid to a specific person or organisation (the payee) or to their order, rather than to the bearer (or holder) of the cheque.
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