CHEQUE or CHECK. A cheque, in the simple definition of the English law, "is a bill of exchange drawn on a banker payable on demand." It has proved in practice to be a credit instrument of astonishing usefulness. No one could have foreseen that the cheque would become the chief currency of domestic commerce in Great Britain and the United States. What is perhaps equally surprising is that the British and American example has not been more largely followed in other countries. Over 90 per cent of the internal financial and wholesale trading transactions of Great Britain and the United States are settled by cheque. On the continent of Europe the cheque system is comparatively un developed, but it is everywhere making headway, especially in France and Germany. That the cheque will eventually come into universal use cannot be doubted.
The word "cheque," of which "check" is a variant, originally signified the counterfoil or indent of an exchequer bill, or any draft form of payment, on which was registered the details of the principal part, as a "check" to alteration or forgery. The check or counterfoil parts remained in the hands of the banker, the portion given to the customer being termed a "drawn note" or "draft." From the beginning of the nineteenth century the word "cheque" gradually became synonymous with "draft" as meaning a written order on a banker by a person having money in the banker's hands, to pay some amount to bearer or to a person named. Ultimately, the word "cheque" entirely superseded the word "draft." The law relating to cheques, which is generally one with that of bills of exchange, but has some different and supplemental points, is dealt with elsewhere (see BILLS OF EXCHANGE). Here we note some of the chief precautions which should be used in drawing cheques.
In drawing cheque for eight pounds, for example, the words should be carefully written close to the printed words "the sum of," and also close to each other, to prevent the insertion of forged figures, while the space not needed for words is filled in with a thick wavy line. The "t" of "eight" and the "p" of pounds, are written closely together co prevent the insertion of a "y" to turn "eight" into "eighty." For the same reason, the figures are carefully written and the spaces between them filled with lines. As a further precaution, the words "under nine pounds" are writ ten in the top left hand corner. A cheque thus drawn with care and intelligence can hardly be misused, but business firms often take the further precaution of using a machine which perforates the figures as it prints them. A cheque may legally be drawn upon a plain piece of paper, but this, fortunately for the bankers, is rarely done ; it is only too likely to lead to mistake and loss. The adoption of an inimitable form of signature by those who draw many cheques should be carefully considered. It is a curious fact that wholly or partly illegible signatures are much safer than those carefully or very legibly written, for a well or beautifully written name is easily imitated by the forger.
Bankers issue to their customers on request cheque-forms either to "bearer" or to "order," and printed either crossed or left un crossed. It is far the best way to use cheque forms printed "or order" and crossed. If it is desired to make the cheque payable to "bearer" this can be done by crossing out the word order and signing the alteration. Again, if it is desired to cancel the printed cross lines this can be done by writing across them "Pay cash" and signing the alteration.
The usual form of an American cheque carries at the top the date of issuance, the name of the bank on which it is drawn and a number for convenient identification. This is followed by the printed words "Pay to the order of" and a space in which is written the name of the payee. On the next line the amount in dollars is written out and the tents usually shown in figures. There is also provided a place for writing the whole amount of the cheque in figures. At the bottom appears the signature of the maker. To collect the cheque the payee must endorse it exactly as his name is written. When so endorsed the cheque is good in the hands of anyone, as is the case with a cheque made payable to cash. The signature of the person cashing it is usually required. The precautions stated above should be used in drawing the cheque.
The Cheque as Receipt.—The cheque form has come into common sense use as a means of giving a receipt conveniently and expeditiously. It is not surprising that it occurred to business men that as a cheque has to be endorsed on the back by the payee, it would make short work of detail by turning that endorsement into a definite receipt for the money paid. Accordingly, in an increasing number of cases, business firms print on the back of the cheques they use a form of a receipt for the payee to sign. As cheques are always sent back to the drawers when cleared by their bankers, the drawers have only to paste the returned cheques in their cheque book to have a complete and combined record of payments and receipts. A further development of the cheque form has naturally followed. The custom of endorsing a cheque on the back is a strange one. To find such an endorsement one has to turn the cheque over, and it is never well in matters of record to write or print on both sides of the paper. The endorse ment on the back of a cheque, useful as it is, is thus seen as a combination of usefulness and inconvenience. Realising this, some business houses have boldly brought the endorsement on to the front of the cheque and at the same time made it a receipt form. This somewhat enlarges the size of the cheque form, but the complete record can be contrived within a space of 7 or 8 in. by 5 or 6 in. It is probable that so simple and convenient a method of combining payment, endorsement and receipt will come into wide use (see BILL OF EXCHANGE; BANKING AND CREDIT; MONEY MARKET: BANK).