Dealing With Bad Cheques
In business it is a frequent occurence for businesses to receive a cheque from a customer that bounces once paid in. By law, as soon as they've written a cheque to you, their bank must honour the payment. This law has also been applied to direct debits. However, if there are insufficient funds for the bank to honour the cheque or direct debit, it will bounce or go unpaid. If this happens (or your customer stops a cheque because they are not happy with the work), you can immediately sue the customer who will have no defence.
As well as claiming for the amount of the cheque, you are also able to claim interest and payment towards costs you've incurred in chasing the payment.
The only course of action the customer can take when sued is either an early settlement whereby they must pay the amount owed, or, if they can prove that received nothing at all from you in exchange for their payment, they won't be liable to pay. If the goods they received were faulty they still have to pay. They can also take action against you suing them if you obtained payment fraudulently or had an illegal contract in place with them.
Sometimes the cheque won't be honoured as it is instead 'referred to drawer' by the bank. If the debit is for £750 or more and this had occured, you are entitled to write to the company demanding immediate payment. If they fail to pay, you can commence winding up proceedings against them. (See 'ending the company' for more information)
If a cheque guarantee card was provided with the cheque, the bank must honour the cheque regardless of whether sufficient funds are in your account. They are obliged to do this unless payment exceeded the maximum limit guaranteed on the card, took place after the expiry date had expired or if details of the card have been omitted from the back of the cheque.
Remember, all of these rules apply to you when you write a cheque or pay a direct debit. So be wary of cancelling these and ensure you have sufficient funds in your account to pay cheques.
Dealing With Debt
Dealing With Debt: How to deal with late payers
Dealing With Debt: How to deal with bad cheques
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