The cheque may be referred as the bill of exchange on a designated banker and may not be expressed as payable other than on demand. An order for payment of an amount need to be unconditional, failing which, the cheque cannot be regarded as a negotiable instrument. This is because of the delay of payment of the sum or of any payment thereof, expressed as being on the expiration of a certain period of time after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to occur, although the timing of it may be uncertain.
The amount payable must be certain within the meaning of Section 4 of Negotiable Instruments Act, 1881, although it includes future interest or is payable at an exchange rate indicated according to the exchange rate, and well that the instrument provide that in the event of default on an installment, the unpaid balance becomes payable.
The person to whom payable must be a certain person within the meaning of Section 4 of Negotiable Instruments Act, 1881, although it is misnamed or referred to only by description.
Pursuant to section 13 of the Negotiable Instruments Act 1881, a cheque is a negotiable instrument payable to order or to bearer.
The cheque can be written preferably by hand using ink or a ballpoint pen, typed or even it can be printed. But the customer should not use a pencil to fill out the cheque form. Although other columns may be allowed to be handwritten, typed or printed, the signature should only be made using the ball pen or ink pen in a handwriting of the maker.
The cheque made out on the occurrence of a contingent itself is void ab initio.
The essential conditions of a cheque are: –
- The instrument must be written.
- The instrument must contain an unconditional prescription.
- The instrument must be drawn on a specified banker.
- The order must relate only to the payment of a certain sum of money.
- The name of the beneficiary must be clearly mentioned.
- The instrument must contain the date.
- The instrument must contain the signature of the drawer.