Lost, stolen, forged or unpaid cheques: what can you do?

Whilst cheques remain a practical means of payment, they are not without risk. In addition to the well-known problem of bounced cheques, other incidents can occur: loss, theft, forgery, etc. What should you do if you find yourself in one of these situations? And if, quite simply, the cheque you have been given goes unpaid, what steps can you take to try and recover what is owed to you?

This article explores the various difficulties that can arise once a cheque has been issued, the responsibilities involved in the event of fraud, and the remedies available in the event of non-payment.

How do cheques circulate?

A cheque, whose emission bases are essential to understandIt is not always intended to be cashed directly by its first beneficiary. It can circulate, i.e. be passed on to other people. The main method of transfer is theendorsement.

Translative endorsement: transferring ownership

This is the most common form of endorsement for "to order" cheques (the word "to order" is implicit, unless the cheque is "not to order"). The endorser (the person holding the cheque) signs the back (often accompanied by the words "pay to the order of..." followed by the name of the new beneficiary, the endorsee). This act, governed by articles L.131-17 et seq. of the French Monetary and Financial Code, has three major effects:

1. Transfer of rights : It transfers ownership of the cheque and, above all, the right to the corresponding funds to the endorser.
2. Payment guarantee : Unless otherwise stipulated ("without guarantee"), the endorser is jointly and severally liable for payment of the cheque vis-à-vis subsequent bearers (articles L.131-21 and L.131-51). If the cheque is not paid, the endorser may be held liable.
3. Unenforceability of exceptions : This is a key principle of the law governing bills of exchange (article L.131-25). An endorsee acting in good faith is protected against defences that the drawer or a previous endorser may have against their own creditor. For example, if A issues a cheque to B for defective goods, and B endorses the cheque to C (who is unaware of the defect), A cannot refuse to pay C on the grounds that the goods are defective. It must pay C, even if it then has to take action against B.

Endorsement of power of attorney: authorising collection

Provided for in article L.131-26 of the French Monetary and Financial Code, this endorsement (with wording such as "valeur en recouvrement" or "pour encaissement") does not transfer ownership of the cheque. It simply authorises the endorser (often a bank) to cash the cheque on behalf of the endorser. The banker must then act diligently in carrying out this mandate.

Other modes of transmission

• Tradition: In the case of bearer cheques (without a named beneficiary), physical delivery is sufficient to transfer rights.
• Assignment of receivables : For cheques marked "not to order", ownership can only be transferred by means of the more cumbersome formalities of assignment of debt (article 1690 of the Civil Code), which does not offer the same protection as endorsement.

Lost or stolen cheques: what should you do?

The loss or theft of a cheque (or an entire chequebook) is a stressful situation that requires a rapid response.

Opposition: the first reflex

Whether you are the drawer who notices the disappearance of blank forms, or the beneficiary who has lost a cheque received, the first imperative action is to object from the drawee bank. As explained in the previous article, loss and theft are legitimate grounds for a stop payment (article L.131-35 of the French Monetary and Financial Code). Don't forget to confirm your stop payment in writing immediately. The bank will inform the Banque de France so that it can be registered with the FNCI. For a full understanding of payment obligations and valid grounds for stop payment.

The rights of the dispossessed owner

If you have lost a cheque that was owed to you, the law offers you a number of options for getting paid in spite of everything (articles L.131-40 to L.131-43). You can ask the interim relief judge to authorise the drawee bank to pay you, by proving your right and providing a surety (a financial guarantee). You can also ask the drawer to issue a duplicate, but payment will also often require an order from the judge. In practice, as these procedures are complex, the most common solution is to ask the drawer to issue a new cheque out of court, after stopping payment on the first cheque and taking precautions.

The rights of a holder acting in good faith

What happens if a lost or stolen cheque is found and presented for payment by someone who received it without knowing it was lost or stolen? Bankruptcy law protects the bearer of good faith (article L.131-24). If the person presenting the cheque has acquired it legitimately (by a series of regular endorsements if it is a promissory cheque, or by simple possession if it is a bearer cheque), without knowing of its fraudulent origin and without having committed a "gross fault" (i.e. without having ignored obvious indications of the irregularity), he or she will generally be preferred to the original dispossessed owner. It can then apply to the courts (in summary proceedings) for the opposition to be lifted so that it can be paid.

Forged or falsified cheques: who is liable?

Fraud can take two main forms:

• Le wrong from the start The drawer's signature is forged on a form (often stolen). The cheque has never been validly issued.
• La falsification An initially valid cheque is subsequently modified (change of amount, name of beneficiary, etc.).

The crucial question is who should bear the loss if the bank pays such a cheque. The answer largely depends on the faults committed by the various parties.

The principle: the bank's liability in the event of a false signature

Case law, based on the obligations of the depositary banker (article 1937 of the Civil Code), considers that the bank (the drawee) is not, in principle, discharged if it pays a cheque whose drawer's signature is wrong from the start. It has paid on a non-existent order and must therefore re-credit its customer's account, except if the latter has himself committed a fault that allowed or facilitated the fraud.

In the event of falsification of an initially regular cheque, the risk lies primarily with the drawer. He will only be able to take action against his bank if he can prove that it was negligent in failing to detect a forgery. apparent.

Possible mistakes by actors

Final liability will often depend on a combination of clues and an assessment of the faults of each party:

• Bank faults (drawee) :
  • Not detecting an imitation gross the signature (the bank is not a handwriting expert, but it must spot obvious anomalies).
  • Paying despite an alteration visible (scratching, overloading, etc.).
  • Do not check the regularity of the chain of endorsements if it is apparent.
  • Paying despite a valid objection.
• Faults by the account holder (drawer) :
  • Serious negligence in safekeeping the chequebook (leaving it lying around in an accessible place, for example).
  • Signing blank cheques.
  • Make sure you check your bank statements regularlyThis allows fraud to continue over several cheques. Regular checks are essential.
  • Delay making a stop payment after a loss or theft has been discovered.
  • Failure to supervise an employee who has access to means of payment (although the mere fact that an employee is acting outside the scope of his or her duties no longer automatically renders the employer liable for the forgery itself).
• Fault of the beneficiary : Neglecting to keep the cheque after receiving it, involvement in fraud...

Frequent sharing of responsibilities

Very often, the courts find fault on both sides (bank and customer). In this case, they proceed to a shared responsibilityThe bank will only have to re-credit part of the account, depending on the seriousness of the respective faults.

Cheque not paid: remedies

If a cheque is returned to you unpaid (due to insufficient funds, wrongful stop payment, etc.), there are several ways you can try to recover your debt. These unpaid cheques, especially if they are linked to a uncovered chequeIn some cases, the offence may result in a specific banking ban.

Make an official declaration of non-payment

Before legal action can be taken, proof of non-payment is required:

1. Certificate of rejection : A simple document issued free of charge by the drawee bank (or via your bank) when payment is refused for lack of funds (article R.131-46). It enables certain actions to be taken, but does not have the force of an official document.
2. Certificate of non-payment (CNP) : More powerful, it is issued by the drawee bank, either automatically after a second unsuccessful presentation and a period of 30 days, or at the request of the bearer (article L.131-73). Once this document has been served on the drawer by a bailiff, it enables the latter to draw up a "bill of exchange". enforcement order without the need for a court order. It's a fast and effective way of recovering debts. shooter. For cheques issued by companies or professionals, the CNP is subject to legal publicity.
3. The protest : This is a deed drawn up by a bailiff or notary recording the refusal to pay (articles L.131-47 et seq.). It is essential if you want to preserve your recourse against potential endorsers or other guarantors (endorsers). It must be drawn up within strict deadlines (before the expiry of the presentation period). A "no charge" or "no protest" clause on the cheque dispenses with this formality.

Legal proceedings

Several types of action can be envisaged:

• Cambodian" remedies: They are based directly on the cheque. The bearer may take action against the drawer and, if he or she has had a protest drawn up in time (or if there is a "no cost" clause), against the endorsers and guarantors, who are jointly and severally liable (article L.131-51). Note that these actions lapse very quickly: six months from the expiry of the presentation period (article L.131-59). However, the action against the drawer who has not made a provision remains valid beyond this six-month period.
• Fundamental" action : Since the original debt was not extinguished by the handing over of the cheque, you can still take legal action on the basis of that debt (the unpaid invoice, the unfulfilled contract, etc.). This action is subject to its own statute of limitations (generally 5 years in commercial or civil matters, but this can vary).
• The subsidiary action for "unjust enrichment" : Against an endorser who has "unjustly enriched himself" at your expense, even if the action is time-barred (article L.131-59, para. 3).

Navigating the maze of payment incidents and remedies can be complex. In the event of a dispute concerning a lost, stolen, forged or unpaid cheque, our team will specialising in banking and financial law can help you assert your rights.

Sources

• Monetary and Financial Code (in particular Book I, Title III, Chapter I)
• Civil Code (articles on liability, assignment of claims, deposit)
• Code of civil enforcement procedure (precautionary and enforcement measures)