Best Practices - Cheques

Applicable law

A cheque should be regarded as a means of payment based on mutual trust.

The payee of a cheque has the right to pass it on to a new payee by endorsing it, i.e. signing, and writing the name of the new payee on, the back of the cheque.

If a cheque has been misplaced and presented for payment by someone who has forged an endorsement on his/her behalf (by copying the payee's signature or stamp), the bank where the cheque has been deposited is only legally bound to check whether the first endorsement corresponds to the first payee. It is not obliged to verify the endorsers' signatures, as such validation is technically impossible. Therefore, if the first endorsement has no apparent flaw (e.g. if the payee is John Smith and the signature at the back reads 'John Smith'), the bank will accept it for payment.

Best Practices

Drawer

• There are more efficient and secure means of payment other than cheques to make remote payments, such as bank transfers, direct debits and credit or debit cards.
  
  
• If you do not have access to electronic payment services, we advise you to deliver your cheques in person to the payee and to always write them out to the person or entity that you wish to pay.
  
  
• To ensure that the cheques will only be paid out to the payee, they should be drawn as not-to-order cheques, thus not allowing any further endorsements.
  
  A not-to-order cheque can be drawn in two ways:
  
  
  • by crossing out the expression "à ordem" ('to order') printed on the cheque and replacing it with "não à ordem" ('not-to-order), in writing, after the payee's name
    
    or
    
    
  • by crossing out the expression "à ordem" ('to order') printed on the cheque and replacing it with "não à ordem" ('not-to-order) in the space above the crossed-out expression, as shown in the following examples:
    
    

• You should store your cheques in a safe place and only keep the number of cheques you believe you will need in the near future.
  

Payee

• If you decide to accept cheques for payment, then ask for and write down the drawer's id and contact details. Then ask the drawer to write out the cheques 'not-to-order' (see examples), so that they cannot be paid out to someone else if they are robbed or stolen.
  
  
• If you do not deem the drawer trustworthy, prefer electronic means of payment such as bank cards, transfers, or direct debits.
  
  
• Keep the cheques you have received in a safe place and avoid handing them to people you do not wholly trust.
  
  
• Whenever possible, present the cheque for payment within 8 days (including weekends and holidays) as of the day following the issue date on the cheque (e.g. if the issue date on the cheque is 09-07-2007, you should count 8 days as of the 10th, i.e. the cheque should be presented by 17-07-2007).
  
  
• If you receive a cheque for payment of goods you have to deliver to the drawer, do not deliver the goods before the cheque has been cleared.
  
  

Current Situation

There have been cases of stop payments orders within the legal period for presentation. The drawer writes out the cheque and, before 8 days have elapsed (the legal period for presenting payable cheques in the countries where they have been drawn), the drawer goes to his/her bank to issue a stop payment on the cheque.
Even though the reasons the drawer claims for having stopped payment may be false, the money is not paid out to the payee even if the drawer has the amount in his/her account.

Applicable law

A cheque should be regarded as a means of payment based on mutual trust.
The drawer may issue a stop payment on the cheque before the legal period for presentation, for any one of the following reasons: theft, misplacement, moral coercion, incapacity due to accident or any situation where there is a defect in the formation of will (to draw the cheque). In these situations, the drawee may return it to the payee. Meanwhile, if the payee feels there has been an unjustified stopped payment, the payee can bring suit against the drawer since the drawer's conduct may constitute a crime of issuing a cheque with no funds or of fraud.

Best Practice

Drawer

• Undue stopping of payment on a cheque within the legal period for presenting payment may constitute a crime of issuing a cheque without funds or of fraud.
  
  
• Payment should only be stopped on a cheque within the legal period for presentation if it has been stolen, robbed, misplaced or if you have drawn it under coercion or another defect in the formation of will considered by law.
  
  
• A cheque is a means of payment that presupposes a generalised spirit of trust. If you use cheques in a fraudulent way, your bank may stop issuing you cheques and those you hire and do business with might cease to accept cheques from you.

Payee

• If you do not think the drawer is trustworthy, prefer electronic means of payment such as bank cards, transfers, and direct debits (for regular bills).
  
  
• If you decide to accept cheques for payment, ask for and write down the drawer's id and contact details.
  
  
• Check the expiry date printed on the cheque and do not accept it if the issue date has passed the expiry date.
  
  
• Present the cheque for payment within 8 days (including weekends and holidays), counting from the day following the issue date on the cheque (e.g.: if the date of issue on the cheque is 09-07-2007, you should count 8 days as of the 10th, i.e. the cheque should be presented until 17-07-2007).
  
  
  
• If you receive a cheque for payment of goods you have to deliver to the drawer, do not deliver the goods before the cheque has been cleared.
  
  
  
• If payment has been unduly stopped on a cheque you are going to present for payment, you can bring suit against the drawer since issuing unjustified stop payment on a cheque can constitute a crime of issuing a cheque without funds or fraud.