"BOUNCED CHEQUE AND ITS LEGAL IMPLICATIONS"
ONYEKACHI UMAH, ESQ., LL.M, ACIArb(UK)
Convener, Sabi Law Lecture Series
DELIVERED ON SUNDAY, 6TH NOVEMBER, 2016 (9:00AM)
AT THE CHURCH AUDITORIUM OF LIVING FAITH CHURCH, KUBWA, ABUJA
3RD SABI LAW LECTURE SERIES.
DAILY LAW TIPS
by Onyekachi Umah,Esq.
“How to Save An About To Be Bounced Cheque in Nigeria”
An about to be bounced/dud bank Cheque can be remedied. The issuer of the Cheque should send a countermand order (counter instruction) to his bank ordering it not to place value on such Cheque. He can also send notice to the Payee not to present the Cheque to any bank.
See, Dishonoured Cheques Offences Act, 1977.
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Issuance of a bounced/dud bank Cheque is a criminal offence. Where the issuer of such Cheque is an individual, it is punishable with 2 years imprisonment without fine. Where the issuer is a corporate body, it is punishable with fine of not less than #5,000.00.
See, section 1 of DISHONOURED CHEQUES (OFFENCES) ACT, 1977.
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In our traditional Nigerian banking system, cheque books are only offered to current account owners who are in turn charged on transaction. The present advancement in banking has invoked the offering of savings account with cheque books and quasi-cheque books with limited features and acceptability. As one of the most common negotiable instruments in Nigeria, a cheque is a bill of exchange drawn on a banker payable on demand as defined in SECTIONS 73 of the BILL OF EXCHANGE ACT, CAP; B3 LFN 2004, VOL.2. The use of cheques invokes lots of rights and duties on banks/banks, account-holder/owners and payee (persons whose favour cheques are written) which is actionable in both civil and criminal law. This writing will broaden your mind to your rights and duties either as an accountholder, payee or a bank/banker.
A cheque by use and convention is an unconditional order in writing addressed by an accountholder (an owner and user of an account, also known as the DRAWER) to a bank (the bank that created, manages and administers the account and issued the cheque booklet also known as the DRAWEE) signed by the “drawer”, requiring the banker (the DRAWEE) to pay on demand a sum certain in money or to the order of a specified person or bearer (also known as the PAYEE). This bill of exchange is mostly used in Nigeria as either an OPEN CHEQUE also known as uncrossed cheque or a CROSSED CHEQUE. The open cheque can easily be paid to the bearer over the bank counter while crossed cheques are limited.
The relationship between a bank and an accountholder is that of a “debtor and creditor” and at times it is also that of a “principal and agent”. When an account holder deposits money with his bank, a “debtor and creditor relationship” has been created. The account-holder is the creditor while the bank is the debtor. The bank is under a duty to pay back what the account-holder has given to it under their existing terms and conditions. Where an accountholder issues a cheque to his bank instructing his bank to pay the bearer/payee, then the relationship between the bank and the accountholder is that of agency “principal and agent”. The accountholder is the principal on whose instructions the agent (bank) would pay whom the accountholder so desires. In every relationship there are rights and duties; which one of them in the prevailing banker-customer relationship is to safeguard deposited money and pay same out on instructions of the owner. One of the major means of payment is by cheques and other bank notes. Bank cheques invoke a web of rights and duties; from the bank to the accountholder and from the accountholder to the payee (person in whose favour cheque has been issued).
PAYMENT OF CHEQUE AND RIGHTFUL DISHONOUR OF CHEQUES
A cheque is not money until it is presented to a bank and paid to the payee by the bank. When a properly issued cheque is presented before a bank, the bank is obliged to pay the payee according to the mandate of the customer (drawer). But the bank’s obligation can only exist when and where the customer (drawer) has sufficient amount in his account to cover the proposed sum. Where the drawer has no sufficient money in his account but has an understanding with the bank and has been granted credits or over-draft by the bank, his cheque offering more than he has in his account will be accepted and honoured by the bank. Therefore with sufficient funds in a customer’s account the bank is under an “obligato civilic” (obligation to serve) to honour his cheque and pay the payee so far as there is no legal impediments. Albeit, the said cheque must be regular; it must satisfy all necessary requirements as to date, amount, drawers signature, payees name and timely presented to the concerned bank. A fundamental error in the above required information may cause a dishonour and return of cheque; such is a rightful dishonour of cheque.
A bank’s obligation to honour and pay a validly drawn cheque can be legally revoked by a “Notice of Debt”, “Bankruptcy” or “Mental Incapacitation” of the customer and irregularity in a customer’s mandate and authorities relating to his account. Where there is a regularly and validly drawn cheque with sufficient fund, the banks will still refuse the honour of the cheque on the COUNTERMAND ORDER OF PAYMENT of the drawer of the cheque. Note that the countermand order must come before the presentment and payment of a concerned cheque else it would be useless and not binding on the bank. Where a countermand order comes on time the bank is precluded from paying the cheque, if it acts otherwise, the liability of such payment lies wholly on her. The courts will not hesitate to give justice to the customer, since the bank acted contrary to its principal/master’s instructions. With our technological advancement, banks often confirm through phones or emails before paying cheques and countermands orders can equally be sent to banks through same means.
Note that a customer must draw his cheques with reasonable care and in a way not facilitate forgery since a banker can reject the cheque on the grounds of forgery. A bank that accepts and pays out forged cheque is liable to the last coin of the payment; let bank workers be guided.
WRONGFUL DISHONOUR OF CHEQUES
Where there is sufficient fund in an account and all requirements to a cheque are present without a countermand order but a bank goes on to dishonour a cheque; such is a wrongful dishonour. Most often the bankers’ inexperience, negligence or laziness often cause their wrongful dishonour of cheques and a resultant breach of their obligation to honour and pay a customer’s cheque. It’s a breach of agreement between a bank and accountholder, to honour accountholder’s cheque at all times when all requirements are met.
On opening of account with a bank, an accountholder enters into a legally enforceable contract with a bank; creating a duty on the bank to honour valid and regular cheques when there is sufficient fund, inter alia. Note, that all bankers, bank workers and bank staff (by whatever title or appellation) in the bank are also bound by the contract you have with their employer (the bank) and their actions and inactions are considered to be that of the bank. Whatever a bank worker does in discharge of his bank work is deemed to have been done by the bank itself for the workers and staff of a bank is hands and legs of a bank (an incorporated and legal person); because “quic facit per aleum facit per se” (he who acts through another acts through himself). Consequently, when bank staff breaches a bank-customer relationship by the wrongful dishonour of a cheque, the accountholder can seek for remedy in court for it raises contractual and criminal implications.
The wrongful dishonour of cheque by a bank prompts a lot of legal remedies to an account owner (cheque drawer), since he can sue and claim damages for the negligence, breach of contract and for libel in civil. With libel as a criminal offence too, negligence, and criminal breach of trust, banks should be careful and diligent since all available legal options can be assessed by affected customers. Claims for damages for wrongful dishonour of cheque, are liquidated damages and that consists of the amount of money on the cheque, the interest thereon from the time of presentment for payment and expenses of noting and protest. With the above granted, that the accountholder would have been restore to his position before the wrongful dishonour; restitutio integram.
The dishonour of cheque is the dishonour of trust and a defamation by conduct which communicates to the payee and the drawer’s other business associates, colleagues and partners that the drawer is a liar, bankrupt, fraudster, cheat, common thief and no mean person that reaps where he didn’t sow and should not be associated with. Such a defamatory conduct goes a long way to affect the business and trade of the customer (drawer). Normally in law, defamation is not actionable per se in prove of special damages; meaning that any one that sues for defamation must prove actual and special damages occasioned by such defamation. But it is now well established in plethora of recent Supreme Court judgements; that an action for a breach of contract against a bank, for wrongful dishonour of a Trader’s cheque, is actionable per se and as such he is entitled to recover substantial and reasonable damages for injury to his commercial credit, without the necessity of alleging and proving actual damage. The term “Trader” has also been held to include a lot of unimaginable professionals, skilled and unskilled labourers, so that this line of damage is a protection and blessing to all banks’ customers and accountholders.
CRIME IN “BOUNCED”/ “DUD” CHEQUES.
A DUD (worthless) CHEQUE popularly known in Nigeria as “bounced cheque” is a cheque issued by a bank customer whose account is in debit or whose credit balance is lower than the amount indicated on the cheque. It is an empty cheque that has no monetary value as no money can pass through it. Therefore a dud cheque paid into a bank account is not only an embarrassment to the payee and bank but also a crime. A bank that is not vigilant can get itself involved in serious accounting and financial problems where it honours dud cheques.
The law cannot be partial, so it has spread protection nets over banks and payee against fraudulent customers (drawers) that offer dud (worthless) cheques. Just the way a bank is obliged to honour valid and regular cheque, so is a drawer duty bound to reasonably draw his cheque with care to avoid aiding forgery. Even an affected payee has a lot of remedies to avoid losing his money and goods for which such dud cheque had been drawn.
DISHONOURED CHEQUES (OFFENCES) ACT, 1977 has remedied the ugly situation, which even Section 149 of the CRIMINAL CODE couldn’t efficiently cripple, due to the limiting diction of the draftsman contrary to the futuristic nature of cheques. Section 1(a) (b) of Dishonoured Cheques Offences Act, 1977 defines the act of offering dud cheques for credit, goods and services as an offence. The definition in the law seems limiting and too narrow. By the definition it is arguable that it is not an offence under Dishonoured Cheques Offences Act, 1977 to issue dud cheque as gift, charity or for goods and services that are yet to be delivered.
On conviction under Dishonoured Cheques Offences Act, 1977; an individual shall be sentenced to imprisonment for 2 years without an option of fine while in the case of a body corporate (Companies, Business and Non-Government Organisations, etc) it shall be sentenced to a fine of not less than N5, 000. A company involved in issuance of dud cheque is liable as a corporate body while its owners and staff by whatever title or description that consented, connived or was negligent in duty is punishable and liable individually.
To successfully prove a dishonoured cheque, there must be a delivery of credit, goods or/and services in favour of a drawer (accountholder) or his agents, a presentation to bank, a communication/marking made by bank on the cheque or on any means showing that there is insufficient fund in accountholder’s account and often times, bank may be summoned to show account statement to establish account deficit on the date of presentation of cheque. In practise, I have noticed that most bank refuse to write on cheques, stamp cheques or even communicate in writing their reason for dishonouring cheques. Often banks may make marks on cheques interpreted as “Drawer’s Attention Is Required” instead of expressly stating that drawer does not have sufficient fund.
Issuance of a dishonoured cheque will not be an offence where the drawer (accountholder) sends a letter/Countermand Order of payment to bank instructing bank not to honour and pay a given cheque before such cheque is presented to the bank. It is also safer to also send a copy of such letter to the beneficiary of the cheque to avoid presentation of such cheque.
An accountholder who issued a dishonoured cheque may not be liable if he can prove to the satisfaction of court that at the time of issuance of the dishonoured cheque that he had reasonable ground to believe and that he did believe that the cheque will be honoured. See, Section 1(3), Dishonoured Cheques Offences Act, 1977. Such reasonable ground may be a reliable expectation of money to cover the value of cheque he issued at the time of issuance of such cheque. The expectation of money must be established for it to clear a criminal likelihood that the accountholder intentionally issued a dud cheque.
Offence of issuance of dishonoured cheque is triable summarily by Sate High Courts across the 36 States of Nigeria and the High Court of Federal Capital Territory. State High Courts have exclusive jurisdiction. See section 3, Dishonoured Cheques Offences Act, 1977. This means that Magistrate Courts and Federal High Courts cannot entertain cases of dishonoured cheque not minding the amount of money involved and status of parties (company or individual).
Now you can make good of your wrongfully dishonoured cheques; relate better with your bankers and deal severely with cheats that offered you dud cheques.