Paying and being paid by cheque: what the law says

Using a cheque to pay for a purchase or receive a payment seems to be part of everyday life. However, behind this apparent simplicity lie precise legal rules. Can you refuse payment by cheque? What does "handing over" a cheque really mean? What are your bank's obligations when a cheque is presented on your account? And what should you do if a cheque is stopped?

This article looks at the practical aspects of paying by cheque, clarifying the rights and obligations of each party: the payer, the recipient and the bank handling the transaction. A good understanding of these rules is essential if you are to navigate your transactions with peace of mind.

When can or should I pay by cheque?

As a general rule, you are free to choose the method of payment. A creditor (e.g. a retailer) is not obliged to accept payment by cheque and may require cash, which is legal tender (unless there is a specific contractual agreement or the creditor is a member of an approved management centre, in which case it must accept cheques).

However, the law requires the use of a non-cash means of payment (cheque, transfer, bank card) for certain transactions, mainly to combat fraud and money laundering. According to article L.112-6 of the French Monetary and Financial Code and decree D.112-3, you may not pay in cash:

• A debt of more than €1,000 if you are acting as a professional or if you are resident in France for tax purposes and pay a professional.
• A debt in excess of €15,000 if you are not domiciled in France for tax purposes and are not acting for professional purposes (the professional must then record your identity and address).
• Salaries in excess of €1,500 per month.
• The purchase of ferrous or non-ferrous metals (regardless of the amount, payment must be made by crossed cheque or bank transfer).

In these cases, a cheque (usually crossed) is one of the authorised means of payment.

Another important rule concerns identification. When you hand over a cheque for payment, the beneficiary is entitled (and indeed has an interest in doing so for his or her own security) to ask you to prove your identity by means of an official document bearing your photograph (identity card, passport, driving licence), as stipulated in article L.131-15 of the French Monetary and Financial Code. If they fail to do so and accept a cheque that turns out to be stolen, they could be held liable to the real account holder.

Handing in a cheque does not mean you have paid

This is a fundamental legal point that is often misunderstood: the mere handing over of a cheque, even if accepted by the creditor, does not constitute a payment in full discharge of obligations. Article L.131-67 of the French Monetary and Financial Code is very clear: this remission "does not entail novation", i.e. it does not replace the old debt with a new one.

What does this mean in practical terms for you?

• The initial debt remains: As long as the cheque has not actually been cashed by the beneficiary and credited to their account, your debt to them still exists. If the cheque is returned unpaid (for lack of funds, for example), the creditor can still claim payment of the original debt. This lack of funds may result in a a banking ban with serious consequences.
• Guarantees are maintained: All guarantees attached to the original debt (e.g. vendor's lien, guarantee, mortgage) remain in place until the cheque is cashed.
• Proof of payment : To prove that you have paid your debt, it is not enough to show the counterfoil of your chequebook. You need to be able to show that the cheque has been debited from your account and credited to the payee's account.

However, the delivery of the cheque is not without effect. It is considered as a commencement of payment. This nuance is important. For example, if you have to pay your rent by the 5th of the month or you risk triggering a resolutory clause, sending a cheque (with sufficient funds) before that date may be enough to paralyse the clause, even if the cheque is not cashed until a few days later. Case law considers that the debtor has demonstrated his intention to pay on time. The same applies to the payment of insurance premiums to avoid suspension of the guarantee.

When the cheque is used to pay another commercial instrument (such as a bill of exchange), specific rules apply (articles L.511-40 and L.511-41 of the French Commercial Code) to enable the holder of the initial instrument to retain his rights of recourse if the payment cheque is returned unpaid.

Presenting cheques for payment: deadlines to be aware of

A cheque is said to be "payable on demand", which means that it can be presented for collection as soon as it is issued. However, the law sets a time limit for presentation:

• Eight days for a cheque issued and payable in mainland France.
• Twenty or seventy days for cheques issued abroad and payable in France, depending on the geographical area of issue.

This period runs from the day after the date indicated on the cheque as the date of creation (article L.131-32 of the French Monetary and Financial Code).

What are the penalties for exceeding this deadline? In practice, the penalty is fairly limited. The cheque remains perfectly valid and the bank (the drawee) is obliged to pay it if there is sufficient funds, until the expiry of the limitation period for the action for payment (one year after the expiry of the presentation period). The drawer also remains obliged to maintain the provision. The main consequence of late presentation is that the bearer loses his or her so-called "cambiary" recourse against any endorsers (persons who may have passed on the cheque before the bearer). However, recourse against the drawer himself remains, especially if the provision was lacking at the outset.

Nowadays, the physical presentation of cheques has become rare. Banks use a dematerialised cheque image exchange system (CORE system), governed by interbank agreements, which speeds up processing but does not change the basic obligations of the parties.

Obligations of the bank (drawee) at the time of payment

When your bank receives a cheque drawn on your account, the basic principles of which are explained hereIt has a number of crucial obligations.

Checking the cheque

Before paying, the bank must check that the document appears to be in order:

• Check that all the compulsory information is included.
• Detect any visible anomalies (large erasures, suspicious overwriting, etc.).
• Above all, check that the signature on the cheque corresponds to the specimen you deposited when you opened the account. This is an essential obligation arising from the bank's duty to deposit funds (article 1937 of the Civil Code and L.131-38 of the Monetary and Financial Code implicitly). Even with the exchange of cheque images, the drawee bank remains responsible for this signature verification. If it pays a cheque with a clearly forged signature, it is liable to you and will, in principle, have to credit your account again (unless you are at fault for facilitating the fraud).
• If the cheque is presented to it directly (outside the interbank circuit), it must also check the quality and identity of the bearer.

Obligation to pay (if provision)

If the cheque is regular and the funds in your account are sufficient and available, the bank will must (article L.131-70 of the French Monetary and Financial Code). An unjustified refusal to pay would incur liability both to you (the drawer, for damage to your credit) and to the bearer of the cheque.

Partial provisions

What happens if the funds in your account only cover part of the amount of the cheque? The bank cannot simply reject the cheque. The bearer of the cheque has the right to demand partial payment, up to the amount of the available funds. Conversely, the bank is obliged to offer this partial payment to the bearer (article L.131-37 of the French Monetary and Financial Code). If it refuses this partial payment and rejects the cheque for insufficient funds without mentioning the available part, it commits a fault and incurs liability.

Payment of crossed cheques

Almost all chequebooks issued today contain "crossed" cheques. Striking consists of two parallel lines on the front of the cheque. Its purpose is security: it prevents the cheque from being paid in cash at the counter.

A crossed cheque can only be paid to :

• Another bank (or similar institution).
• A customer of the drawee bank itself.

In practical terms, this means that the beneficiary must deposit the cheque in his or her own bank account to obtain payment via the interbank circuit. This measure ensures the traceability of funds. A bank that pays for a crossed cheque in cash would incur considerable liability (article L.131-45 of the French Monetary and Financial Code).

There is also a rarer 'special bar', where the name of a specific bank is written between the bars. In this case, the cheque can only be paid to that designated bank (or its customer).

Special situations: stop payment

One of the most delicate situations is where the drawer lodges a stop payment order. As we have seen, the principle is that the order given by the cheque is irrevocable. To find out the For specific recourse in the event of a lost, stolen, forged or unpaid cheque, consult this additional article.. The opposition is therefore a very strictly regulated exception.

The only valid reasons

Article L.131-35 of the French Monetary and Financial Code authorises stop payments only in the following cases:

• Loss of the cheque.
• Flight of the cheque.
• Fraudulent use of the cheque (for example, forgery after it has been given voluntarily, use by an agent without authority, etc.).
• Initiation of bankruptcy, receivership or compulsory liquidation against the carrier of the cheque (to avoid the funds being paid out to him at the expense of his creditors).

Please note: Any other reason is illegal. In particular, a commercial dispute (non-conforming goods, poorly performed service, etc.), a disagreement over the price, or regret at having written the cheque, etc., are not grounds for cancellation. are absolutely not valid grounds for objection.

The opposition procedure

To be valid, the objection must be confirmed immediately in writing to the bank, by whatever means (letter, fax, secure electronic message, etc.). A simple telephone objection is not sufficient to oblige the bank to refuse payment.

The delicate role of the bank

In the event of a written objection, the bank has a supervisory role:

• It must check whether the reason given by the opponent is one of the legal cases listed above.
• She does not have to verify the veracity of the alleged facts (it is not its role to judge whether the cheque has actually stolen, for example).
• It must inform in writing the opponent of the criminal penalties incurred if the opposition is made for an illegal reason.
• If the reason given is not legal, or if the objection is not confirmed in writing, the bank will must pay the cheque (if funds are available). Refusing payment in this case would constitute a fault and would incur liability. If the reason is legal, it must refuse payment.

Consequences and release

A lawful stop payment blocks the payment and the corresponding funds. If the stop payment is unlawful (for a reason not provided for by law, or for a legal reason given falsely), the beneficiary of the cheque may apply to the summary proceedings judge to obtain the cancellation of the cheque. release of the opposition. This is a rapid procedure that allows the judge to order the bank to pay if the stop payment is clearly not based on one of the legal grounds.

Payment by cheque therefore involves a set of precise rules for everyone involved. Knowing them can help you avoid a lot of inconvenience.

For a personalised analysis of your case, our team specialising in banking law is at your disposal.

Sources

• Monetary and Financial Code (in particular Book I, Title I, Chapter II; Book I, Title III, Chapter I; Book III, Title I, Chapter III)
• Commercial Code (articles on commercial paper)
• Labour code (payment of wages)
• Code of civil enforcement procedure (seizures)
• Civil Code (bank deposits)