In rarer cases, the phrase " account payee " may also be written on the check, as an alternative method of conveying the aforementioned cashing instructions. Once a check is crossed, it's impossible for the payee to uncross it. Furthermore, such crossed checks are considered non-transferable, meaning they cannot be signed over to a third party.
The only action permitted is for the payee to deposit the check in an account that the payee holds in their own name.
Although the payee cannot uncross checks, the payer can do so, by writing "Crossing Canceled" across the front of the check, but this activity is generally discouraged because it eliminates the protection the payer originally set in place. Crossed checks are rarely used in the United States, and anyone attempting to deposit one is likely to encounter problems.
Should a receiving bank fail to comply with the crossing, it can be deemed as a breach of contract between the institution and the customer who wrote the check. If the payee did not truly have the funds available to cover cashing the check, the bank may be held responsible for any associated losses.
An open check, which is also referred to as a bearer check, describes any check that is not crossed. Such checks may be cashed at the teller counter, with the funds being provided directly to the payee. Checking Accounts. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
I Accept Show Purposes. Your Money. Personal Finance. The crossing of a cheque is intended to ensure that its payment is made to the right payee. Section to of the Negotiable Instrument Act contain provisions relating to crossing. According to section A, these sections are also applicable in case of drafts. Thus not only cheques but bank drafts also may be crossed.
For our discussion we may differentiate crossing into following two types:. General Crossing. Special Crossing. From the above section we find that a cheque is said to be crossed generally when it bears across its face any of the following:. The cheque crossed generally does not ceases to be negotiable further. The collecting banker can collect the proceeds of the cheque in the account of that person mentioned on the cheque.
The effect of general crossing is that it gives a direction to the paying banker. The direction is that, the paying banker should not pay the cheque at the counter. It should be paid only to a fellow banker. In other words, payment is made through an account and not at the counter. If a crossed cheque is paid at the counter in contravention of the crossing:. So, the paying banker will lose his statutory protection;.
As a general rule, a banker is answerable only to his customer. The main intention of crossing a cheque is to give protection to it. When a cheque is crossed generally, a person who is not entitled to receive its payment, is prevented from getting that cheque cashed at the counter of the paying banker. But, it gives only a limited protection, in the sense, that if the thief is not the customer of the paying banker, he can encash that cheque through his banker, by forging the signature of the payee.
However, it can be detected. To avoid this danger, special crossing was introduced. Act reads. Drawing of two transverse and parallel lines is not necessary in case of a special crossing. When a cheque has been specially crossed, the banker upon whom it has been drawn will make the payment only to that banker in whose favour it has been crossed. It is also a direction to the paying banker. The direction, is the, that paying banker should pay the cheque only to the banker, whose name appears in the crossing or to his agent.
If a cheque specially crossed to a bank is presented by another bank, not in the capacity of its agent, the paying banker is justified in returning the cheque. A special crossing gives more protection to the cheque than a general crossing. It makes a cheque still safer because a person, who does not have a real claim for it, would find it difficult to obtain payment. Hence, the banker, in whose favour the cheque has been crossed, knows the payee and his specimen signature well.
So, he will not collect if for any person other than the payee. If there is any forgery, it can be easily detected by the banker. But, we can not say that, it gives full protection in the sense, that, an unscrupulous person, who has an account in the same bank but at a different branch, can encash it by forging the signature of the payee. It can also be detected. Difference between General and Special Crossing.
General Crossing Special Crossing 1. Drawing of two parallel transverse lines is a must. Drawing of two parallel transverse lines is not essential. Inclusion of the name of a banker is not essential. Inclusion of the name of a banker is essential. In Special Crossing paying banker to honor the cheque only when it is presented through the bank mentioned in the crossing and no other bank. General Crossing can be converted into a Special Crossing. Special Crossing can never be converted to General Crossing.
Double Crossing. When a cheque bears two separate special crossing, it is said to have been doubly crossed. Thus a paying banker shall pay a cheque doubly crossed only when the second banker is acting only as the agent of the first collecting banker and this has been made clear on the instrument. Such crossing may be done in those cases where that banker in whose favour the cheque is to be paid.
Who can cross a cheque? The above contention is substantiated by section of NI Act If the crossing on a cheque is cancelled, it is called opening of the crossing. The cheque thereafter becomes an open cheque. His initials are not sufficient for this purpose. The banker is under an obligation to pay the cheque according to the direction of the drawer conveyed through the crossing on the cheque. Definition of Negotiable Instrument. Negotiable Instrument means a promissory note, bill of exchange or cheque payable either to order or bearer Section Cheque: A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand Section 6 of NI Act.
A cheque is a bill of exchange which is always i Drawn on a banker specified therein and ii Payable on demand. A negotiable instrument may be transferred by negotiation. An order instrument means instrument payable to a specified person or to the order of that specified person. If an instrument payable to order is transferred without endorsement, it is merely assigned and the holder thereof is not entitled to the rights of a holder in due course.
Meaning of Endorsement:. An endorsement is the mode of negotiating a negotiable instrument. A negotiable instrument payable otherwise than to a bearer can be negotiated only by endorsement and delivery. An endorsement, according to sec. For the purpose of negotiation on the back or face thereof or on a slip of paper annexed thereto, he is said to endorse the same and is called the endorser.
The person to whom the instrument is endorsed is called the endorsee. Crossing a cheque, not negotiable or account payee only If you cross a cheque, it is a direction to us to pay the cheque into an account at a bank or other financial institution. Deleting 'or bearer' on the Cheque Your pre-printed cheque forms have the words 'or bearer' after the space where you write the name of the person to whom you are paying the cheque.
You can stop payment on a cheque by: ringing us with sufficient particulars to identify the cheque; we may insist on written confirmation; or writing to us, again, with sufficient particulars to identify the cheque. We can dishonour your cheque or not pay on it if: you have insufficient funds or available credit in your account to cover the cheque; you have not drawn up the cheque clearly so we are unsure what you want to do; the cheque is 'stale', that is, the date of the cheque is more than 15 months ago; we have notice of your death or mental incapacity; or the signature differs from that registered.
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