A cheque is a bill of exchange. A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at the fixed or determinable future time, a sum certain in money to a specified person or his order, or to bearer.

Simply put, a cheque is a written instruction to your banker to pay money to a third party.

Writing and accepting cheques is an everyday occurrence in business but very few people understand the legalities and the relationships of the parties when it comes to cheques.

What is a Cheque :

A cheque is a document instructing a banker to pay the amount mentioned on the cheque to the payee, his order or a bearer.

The markings and words on a cheque will determine whether the cheque is a bearer cheque, an order cheque or a non-transferable cheque.


Most cheques are printed with the words :

Pay _____________________________________________________ or Bearer


the sum of ___________________________________








If you complete the cheque, fill in an amount and affix your signature to the cheque without any markings or words with a limiting effect, the cheque will automatically be a bearer cheque and any person in possession of the cheque can present the cheque for payment as bearer thereof. For a cheque to be a bearer cheque it must contain the words “or Bearer” on the document and it must not contain words which prohibit transfer for eg. “Not Transferable”. Most cheques have the words “or Bearer” pre-printed.

A Bearer cheque can be cashed by anybody.

If the word “Bearer” does not appear on the document and the document does not contain words which prohibit transfer, the cheque is an order document. The holder of the cheque can endorse the cheque to make it payable to his order, in other words the holder of a cheque can use that cheque to pay another person by endorsing the cheque. A cheque is endorsed by signing it at the back. A signature only will have the effect that any person can be the order and cash the cheque. An endorsement like “pay Mr X” will have the effect that only Mr X can be the order and can cash the cheque. An order cheque can be cashed by the holder after it’s been endorsed by the original payee.

By writing the words “Not Transferable” and deleting the words “or Bearer” on the face of the cheque, the cheque will be a non-transferable cheque and will only be payable to a specific person.

If two parallel transverse lines are drawn on the face of the cheque, with or without the words “Not Negotiable” that addition constitutes a cross and if the name of a bank appear across the face of the cheque, the cheque is crossed specially and to that bank. The effect of crossing a cheque is that it is an instruction from one bank to pay another bank with the effect that the cheque can not be cashed but can only be paid into a banking account to be honoured by the drawer’s bank at a later stage after the payee’s bank presented the cheque for payment.

When paying by cheque it is advisable to cross the cheque then mark it as “non transferable” and to delete the words ” or bearer”. This will have the effect that only the payee can cash the cheque and he can only cash it by paying it into his bank account.

This is the safest way to deal with a cheque as stolen bearer or order checks can be cashed by thieves.

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