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The cheque as a negotiable instrument

Cheques are not merely orders to a bank to make a payment, they are transferable orders and, if not marked 'not negotiable', they are negotiable instruments. The Cheques Act 1986 (Cth) regulates the transfer of cheques from person to person and defines their liabilities to each other. The terminology is slightly confusing; the Act provides for 'transfer by negotiation' even when the cheque is 'not negotiable'. It is not possible to restrict the ransfer of a cheque.

The 'holder' of a bearer cheque is the person in possession of it. The 'holder' of an order cheque is either the original payee of the cheque who is also in possession of it, or a person to whom the cheque has been transferred by negotiation. For definitions of bearer and order cheques, see: cheques.

The requirements of a valid transfer by negotiation depend upon the form of a cheque. A bearer cheque is transferred simply by delivery of the cheque by the holder to the new holder. An order cheque is transferred by being endorsed (signed) by the holder and then delivered to the endorsee.

The cheque as a negotiable instrument  :  Last Revised: Tue Mar 5th 2002
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