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ZIMSEC O Level Commerce Notes: Money and Banking: Dishonoured cheques and the reason for their being dishonoured

  • A cheque is said to be dishonoured if the bank refuses to pay the amount of cheque.
  • Thus dishonoring of a cheque means the refusal by the bank to pay the amount of cheque to the payee.
  • It is a condition in which the bank does not pay the amount of the cheque to the payee.

Reasons for dishonouring cheques

  • Cheques may be dishonoured for any of the following reasons:
  • The stated amount in words is different from the amount in figures.
  • The cheque is stale i.e it is presented 6 months from the date it was issued.
  • There are no funds in the drawer’s account.
  • The cheque itself is torn, mutilated or dirty.
  • The signature on the cheque does not match the specimen on the bank’s files.
  • There are unsigned alterations on the cheque.
  • The drawer is legally incompetent or dead.
  • The cheque has incomplete details e.g missing data.
  • The account upon which it was written is closed.
  • The drawer is declared insolvent, bankrupt or specified.
  • The drawer has requested that the payment not be honoured.
  • The cheque is post dated.
  • If the court of law orders the bank to stop payment of the cheque.
  • If the account number is not mentioned or if it is not clear or if it is not mentioned clearly.
  • If the ordered or crossed cheques are transferred without proper endorsement and delivery.
  • If the cheque is missing any other essential details or they are written unclearly.

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