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Has a cheque been cancelled? What are your rights

With the financial strain of the lockdown continuing many are encountering issues with dishonoured cheques. In this post, we explore what you can do if this happens.

The Law

A cheque is a bill of exchange. As such, it is governed by the Bills of Exchange Act 1882 (“BOEA”), together with the Cheques Act 1957.

Bills of exchange are intended to be equivalent to cash. Like cash, they are not to be readily susceptible to cancellation. Courts are protective of this principle, expressing reluctance to:

“…whittle it away...by introducing unnecessary exceptions to it under the influence of sympathy-evoking stories” (Cebora v SIP 1976)

Unfortunately, the terminology used for bills of exchange is far from intuitive. The drawer of a cheque (the person who makes it out) undertakes that the drawee (usually the bank) will honour it. Initially, the payee’s remedy lies against the drawer if the cheque is thereafter dishonoured. When the bank accepts the cheque, the remedy is against the bank. However, the drawer can countermand the cheque: BOEA at s.75. This revokes the bank’s authority to pay. It also moves liability from the bank back to the drawer.

The Court

Summary diligence is, perhaps surprisingly, not available to enforce a dishonoured Cheque (Glickman v. Linda 1950 SC 18). So, if you have had a cheque that has been dishonoured, then you will need to raise a court action to recovery your money from the bank or drawer.

At MBM, we are one of the leading firms in Scotland who specialise in financial disputes. If you or your client have lost money as a result of a bad debt or dishonoured cheque, then contact the MBM commercial dispute resolution team at disputeresolution@mbmcommercial.co.uk or on 0131 226 8200 to speak to one of our team today. We will be more than happy to have an initial no-cost chat to discuss your case and see if we can help.

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