LEGAL PERSPECTIVE: Cheques As Negotiable Instruments by Dr AbdelGadir Warsama, Legal Counsel


During seventeenth century, trade was active and the law accepts and recognizes the concept of negotiable instruments to facilitate different commercial transactions in a legal smooth way. The negotiable instruments cover many instruments, however, the most prominent in use, apart from cash money, are the bills of exchange, promissory notes and cheques. However, for each of the mentioned three instruments, there are certain features and characteristic to be followed and there are specific rules to regulate negotiability process of such instruments.

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As per the law, bills of exchange and promissory notes are instruments of credit for future payment on certain date. You write an undertaking to pay certain amount of money at certain date in future. Whereas, cheques are instruments of payment for immediate payment.  Payment of consideration used to be by cash and by developing negotiable instruments concept, payment can take place by cheques which are treated as cash money.

So cheques are only to be given when you are very sure that there is enough money in your account to cover the cheque and payment to take place and be honored on presentation. If the parties, have no ready cash in hand nor cheques and they are intending to deal on-credit and future payment on certain date, they should opt for bills of exchange or promissory notes, not cheques. This concept makes cheques of unique nature of instrument of payment.

Non-payment of the cheque on presentation constitutes a crime, a fraud crime, of bounced cheque. When the bank returns the cheque to drawer and stamp it as (RD), the crime is complete without any doubt, and this gives strength and credibility to cheques. This is the philosophy behind the concept of negotiable instruments, that covers both, immediate payment or on credit future payment.

We have to stick to this and to differentiate between the three instruments and keep cheques as instrument of payment, otherwise, the concept of cheques will no longer be there. Manipulating with cheques and looking for new options allowing non-payment of cheques on presentation, will drastically defeat the purpose and this will directly harm future business transactions as the trust vested on cheques will be diluted and diminished. Let’s keep cheques as they are supposed to be as instrument of payment. The law maintains a room to accommodate payment on credit through both bills of exchange and promissory notes. Let’s keep each one for its genuine purpose.

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