Key Post Crossing a cheque and related problems

From the excellent site


Crossing a cheque
Crossing a cheque reduces negotiability. Legally, it's a bit complex. If an uncrossed cheque issued by you is payable to Mr A, and he endorses it and gives it to Mr B, and the cheque later bounces, then Mr B can seek payment from either Mr A or from yourself. If the cheque was crossed, Mr B's rights here would be reduced or eliminated, depending upon the precise nature of the crossing. In simpler terms, the effect is that a bank, seeing a crossed cheque is immediately on guard, and will not cash it. As mentioned above, the negotiability of a cheque has been progressively reduced in recent years, and banks, pubs, supermarkets, etc. are unlikely to cash a cheque nowadays in any case, and so the relevance of crossings is less than in the past. Nevertheless, our advice is:-

• Don't cash a crossed cheque; and definitely don't cash a cheque with a further limiting crossing e.g. a cheque crossed with the words "account payee only".

• If you get a cheque from a credit union, it will likely not be crossed - keep it safe, treat it as cash

• If you are issuing a cheque to a limited company, then crossing is irrelevant - the cheque must be lodged to the account of that company and cannot be negotiated.

• If you know that the payee does not have an account with a bank or credit union, then you may wish to make it possible for him to cash it; leave it uncrossed, but recognise the risk you are taking. If the cheque falls into the hands of an unscrupulous person then he/she may be able to negotiate it in certain circumstances, and it may be difficult or impossible to recover the amount

• If you are issuing a cheque to an individual who has a bank account, and there is a risk that the cheque might fall into wrong hands, then you should cross it. You should cross it by putting two clear diagonal lines on the face of the cheque, with or without any of the following - usually also written diagonally:-

"& Co" or "Not Negotiable - generally interpreted as requiring that the cheque should be lodged to an account
"Account Payee Only" -requires that the cheque should be lodged to an account in the name of the payee
"Account payee only - XXX Bank, YYYY Branch - requires that the cheque be lodged to an account in the name of the payee in the specified branch

Case study 1

A cheque made payable to us was cashed by someone else.

PTSB sent me out a cheque on June 19th. It was crossed and made out in joint names. We did not receive it, and upon doing a little digging last week, we discovered that it had been cashed at a local Credit Union on July 31st.

There were two schools of thought on askaboutmoney.
PTSB was at fault, because they owed Simp money and he did not get it.
PTSB insisted that it was not their fault as they had discharged their duty by sending out the cheque.
Others argued that the Credit Union was at fault for cashing the cheque and they should refund Simp
However, Simp has no relationship with the Credit Union.
The Financial Regulator advised Simp that PTSB was not at fault as they had discharged their duty...
But, the someone else rang back from the FR to say that this advice was wrong and that the PTSB were at fault.
In the end, PTSB accepted liability and have refunded the money to Simp.

Case study 2 - similar but not result not reported on askaboutmoney

Bank wouldn't let me lodge a sole payee cheque to a joint account

Not about crossing a cheque as such, but very interesting anyway.

From user nigbbbblth

No source is quoted

Four types of crossing

1 / /
2 & Co
3 Account payee only
4 Not negotiable

Crossings 1, 2, 3 have no legal standing and therefore a cheque with any of these crossings is capable of being endorsed to a third party. Bank will have full protection under Cheques Act 1959 if they negotiate a cheque in this way.

4 means what it says. Cheque cannot be negotiated by anybody else other than the payee. Bank is negligent if misused.

Unfortunately - the vast majority of cashiers are trained to take a cautious line and will interpret crossings 1, 2 and 3 at face value i.e. will not permit endorsement to a third party.

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My specific question

John made out an AIB cheque payable to Patrick Murphy
It was crossed "& Co. "
John gave it to Mary to give to Patrick Murphy.
Mary signed the cheque "Patrick Murphy" on the back on it and cashed it in Bank of Ireland.
Mary has disappeared.

I am not sure if Bank of Ireland gave cash to Mary or if he lodged it to his account in Bank of Ireland.

From the How Banking Works website quoted above

"& Co" or "Not Negotiable - generally interpreted as requiring that the cheque should be lodged to an account

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Is this a law or is it banking practice?

As far as I am aware none of the Irish Banks now cash cheques (crossed or uncrossed).
One of the first lessons I learned as a junior cashier in the Bank many years ago was not to cash crossed cheques. "& Co", "A/C Payee" etc were not distinguished. If the cheque was crossed we were told that it could not be cashed.

The law on crossing cheques is set down in the Bills of Exchange Act, 1882. Crossings are effectively an instruction to the banker to whom the cheque is presented. The core message is that the cheque should be accepted for lodgement to an account, and not cashed.

Crossings fall into two classes
1. General. Two parallel lines with or without some added words. Such a cheque must be lodged to a bank account, but not necessarily an account in the name of the payee.
2. Special. A bank is named on the crossing, and perhaps a particular account-holder. The cheque can be accepted only by that bank, and only for lodgement to the payee's benefit. [A minor point: a special crossing does not actually need the parallel lines, as it is the naming of the bank that is significant.]

The use of "a/c payee only" amounts to a general crossing, and does not limit a cheque's negotiability under Irish law. UK law is more restrictive, and many Irish banks follow the British pattern even though it has no legal basis here.

The relevant legislation is the Bills of Exchange Act (1882), the Bills of Exchange (crossed cheques) Act 1906, and the Cheques Act 1957, all of which are very technical legislation.

Technically, the act of crossing a cheque does not in itself prevent a bank from cashing it. The effect is that it limits the banks right of recourse in the event of there being a defect in the ownership of the cheque. Mary was not the rightful owner.

I do not understand the sentence "I am not sure if Bank of Ireland gave cash to Patrick Murphy or if he lodged it to his account in Bank of Ireland", since the cheque had alread been cashed by Mary.

The question of how banks deal with crossed cheques is a matter of banking practice. Virtually all of them now insist that cheques, whether crossed or otherwise, be lodged to an account, and most insist that they be lodged to the account named as the payee. Cashing of cheques in the cirumstances in your post, Brendan, is unheard of today. Additionally, most business cheques have a printed crossing, and these represent the majority of cheques issued today.

And so the question of crossing a cheque becomes largely irrelevant.

A possible exception is cheques issued by credit unions, which are often uncrossed. The credit union may have a arrangement with the bank such that these are treated as exceptions.

So if I go into my bank with a cheque

• made payable to Patrick Murphy
• crossed & Co
• signed on the back "Patrick Murphy"

the bank is fully entitled to lodge it to my account, i.e. the account with the name Brendan Burgess on it.



If it transpires that I simply wrote "Patrick Murphy" on the back of it myself, that will be between the issuer of the cheque and me. The bank has done nothing wrong?

Cheques fall into a special class: they are "negotiable instruments". That means that anybody accepting a cheque in good faith, even if it has been dishonestly acquired by an earlier holder, has good title.

So, strictly speaking, Brendan, the bank is entitled to collect on the cheque. The legal dispute would be between you and the person from who you filched the cheque.

In practice, I imagine the bank might try to deal with the problem by debiting your account and treating it as a dishonoured cheque.

44brendan said:

As far as I am aware none of the Irish Banks now cash cheques (crossed or uncrossed).
One of the first lessons I learned as a junior cashier in the Bank many years ago was not to cash crossed cheques. "& Co", "A/C Payee" etc were not distinguished. If the cheque was crossed we were told that it could not be cashed.

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That is not true. AIB recently cashed one of my cheques. I had paid a deposit on an item, changed my mind overnight , rang the seller who I made the uncrossed cheque out to, left a message as the item was not what I wanted. I then went to cancel cheque after not hearing back from seller and he had driven 30 or so miles to my branch to cash the cheque which Aib did with no question and so I couldn't do anything about it. So now I can't recoup the money!

The bank on which an uncrossed cheque is drawn can not refuse to cash it without good cause (causes might include insufficient funds, defect in the cheque, drawer having died, written instruction from the drawer to refuse the cheque).

I just tried to cashed a cheque payable to my daughter which was written by her ex. she signed the back, it was uncrossed and I present to his Ulster Bank branch for cash, and was refused. I had to put it through my own account in the PTSB.
I thought by cashing it I would cut out all of the paperwork and 5 days clearance period, not so.

Interesting, roker. Did they give you a reason for the refusal?

roker said:

I just cashed a cheque payable to my daughter which was written by her ex. she signed the back, it was uncrossed and I present to his Ulster Bank branch for cash, and was refused. I had to put it through my own account in the PTSB.
I thought by cashing it I would cut out all of the paperwork and 5 days clearance period, not so.

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I wish aib did that in my case. €500 I will never see again

Hi Gulliver,

Sorry, I missed this response yesterday. I must have been composing my own response to the two earlier posts.

I do not understand the sentence "I am not sure if Bank of Ireland gave cash to Patrick Murphy or if he lodged it to his account in Bank of Ireland", since the cheque had alread been cashed by Mary.

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Typo on my part. Corrected now. It should have been Mary instead of Patrick Murphy.

Gulliver said:

Technically, the act of crossing a cheque does not in itself prevent a bank from cashing it. The effect is that it limits the banks right of recourse in the event of there being a defect in the ownership of the cheque. Mary was not the rightful owner.

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So if the cheque had bounced, Bank of Ireland would have been stung for cashing the cheque and would have had to seek the money back from Mary.

Should AIB have looked at the cheque when it came back and said - "we are bouncing this as it should not have been paid into any other account other than the account of Patrick Murphy"?

Brendan - Yes the Bank of Ireland is stuck in this case, unless it can contact Mary

The Payers bank (AIB?) has no obligation to invistigate the circumstances in which the cheque was negotiated, whether it was cashed or lodged to an account, or to whose account it was lodged. It cannot bounce as described.

There is a specific list of responses which a paying bank can give when bouncing such as "Refer to drawer", "Drawer deceased", "Payment stopped" etc. None of these relate to the circumstances in which the cheque was presented at the bank of entry.

Padraigb said:

Interesting, roker. Did they give you a reason for the refusal?

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They said that it was their normal practice, even though they cashed a similar cheque a week earlier from the same person

See my previous post re Bank standard practise. There will still be branches where cheques will be cashed as some bank officials will on occasion not comply with a general directive. However, the majority of Banks have imposed this practise & in most branches this will be reflected in signage indicating that cheques must be lodged.
Eg. BoI will not even cash own cheques for clients.

The essential nature of a cheque is that it orders the banker to pay money to a person. A bank may refuse to honour a cheque drawn on itself only for good reason (the good reasons are set out in the law, and examples have been mentioned in this thread). Neither can it require that the cheque be lodged if that cheque is not crossed. A vague reference to "normal practice" is not good reason.