Suppliers going bust and paying by cheque

[Graham Murray]

The normal advise when paying and ordering goods is to pay by credit
card as the CC company is jointly liable if the supplier ceases
trading and does not supply the goods ordered.

However recent threads have shown that cheques paid into an account
may be reversed at any future date. So would paying by cheque be just
as safe as using a credit card? As, if the goods were not received you
could reclaim the monies paid on the grounds of nullifying the
contract to supply and therefore restoring both parties to the state
as though the contract had never been made.

 

[john boyle]

The normal advise when paying and ordering goods is to pay by credit
card as the CC company is jointly liable if the supplier ceases
trading and does not supply the goods ordered.

However recent threads have shown that cheques paid into an account
may be reversed at any future date.

I think this is a spurious view in the group. =in the normal course of
business cheques arent bounced after the normal time limits. The case
referred to appears to have involved fraud by all parties to the cheque.

So would paying by cheque be just
as safe as using a credit card?

No. Issuing a cheque is outside the scope of the Consumer Credit Act
which is what protects credit card purchases.

As, if the goods were not received you
could reclaim the monies paid on the grounds of nullifying the
contract to supply and therefore restoring both parties to the state
as though the contract had never been made.

No. The best you can do is stop the cheque before it is presented for
payment at your bank. Once your bank has paid the cheque there is no
going back.

 

[Colin Wilson]

However recent threads have shown that cheques paid into an account

may be reversed at any future date. So would paying by cheque be just
as safe as using a credit card? As, if the goods were not received you
could reclaim the monies paid on the grounds of nullifying the
contract to supply and therefore restoring both parties to the state
as though the contract had never been made.

Wouldn`t this require the vendors account to have enough money to
complete the "reversal" ?

 

[Ronald Raygun]

The normal advise
advice

when paying and ordering goods is to pay by credit
card as the CC company is jointly liable if the supplier ceases
trading and does not supply the goods ordered.

However recent threads have shown that cheques paid into an account
may be reversed at any future date.

No they haven't.

So would paying by cheque be just
as safe as using a credit card?
No.

As, if the goods were not received you
could reclaim the monies paid on the grounds of nullifying the
contract to supply and therefore restoring both parties to the state
as though the contract had never been made.

If you want your money back, the last thing you want to do is
nullify the contract, since the contract is the basis on which
you could sue for a refund due to the supplier breaching the contract.

None of this helps if the supplier is bust. If worried at the time
of ordering that they might *go* bust, you could try insisting that
your cheque be paid into a customer account, and not their own, so
you would modify the terms of the contract to the effect that the
funds remain your property until the goods are received. This is a
reasonable clause, mirroring the usual clause that goods remain the
property of the supplier until they're paid for. Nevertheless you'd
probably be told where to go.

 

[Tumbleweed]

The normal advise when paying and ordering goods is to pay by credit
card as the CC company is jointly liable if the supplier ceases
trading and does not supply the goods ordered.

However recent threads have shown that cheques paid into an account
may be reversed at any future date.

'may' in the sense of 'might be if that cheque was discovered to be a
forgery', not in the sense of 'the original payee (if thats the right term)
can arbitrarily reverse the cheque' because that isnt possible.

 

[Ronald Raygun]

'may' in the sense of 'might be if that cheque was discovered to be a
forgery', not in the sense of 'the original payee (if thats the right
term)

No, I think you mean drawer.

can arbitrarily reverse the cheque' because that isnt possible.

And even in the former sense it isn't really possible unless the payee
is in on the scam, or at least this is what JB seems to be saying.

 

[Tumbleweed]

No, I think you mean drawer.


And even in the former sense it isn't really possible unless the payee
is in on the scam, or at least this is what JB seems to be saying.

not sure JB has ever answered what happens if X forges a cheque on Y's
account and pays it to A, and it isnt noticed by Y for some time, lets say a
month or two, but enough for the cheque to have cleared. When it is
discovered to be a forgery (this might takea long court case I suppose) ,
then either the money is 'recalled' from A, and A is out of pocket, or it
isnt and B, or B's bank, is. (lets assume at this point that X is long gone)

Given that if you unwittingly buy a stolen car (or anything else) and the
theft is later discovered, the car is taken from you and you are left 'high
and dry',, I'd be inclined to go with the money being recalled from A as its
a parallel situation AFAICS.

 

[Tim]

not sure JB has ever answered what happens if X forges a
cheque on Y's account and pays it to A, and it isnt noticed by Y
for some time, lets say a month or two, but enough for the cheque
to have cleared. When it is discovered to be a forgery (this
might takea long court case I suppose) , then either the money
is 'recalled' from A, and A is out of pocket, or it isnt and B,
or B's bank, is. (lets assume at this point that X is long gone)

Who is B?

X = forger
Y = accountholder
A = payee
B = ?

 

[Ronald Raygun]

not sure JB has ever answered what happens if X forges a cheque on Y's
account and pays it to A, and it isnt noticed by Y for some time, lets say
a month or two, but enough for the cheque to have cleared.

I think he has, if not explicitly then by implication. I believe he
said that the funds cannot be recalled unless it is shown that A was
part of the fraud. The victim of the fraud in such cases would have
been the banks, and provided the only naughty party is X, the banks
will carry the can and A will keep the money and Y will get it back
from the drawee.

When it is
discovered to be a forgery (this might takea long court case I suppose) ,
then either the money is 'recalled' from A, and A is out of pocket, or it
isnt and B, or B's bank, is. (lets assume at this point that X is long
gone)

Ah, well, this bit in brackets is important. Were X not long gone, then of
course he would be made to face the music.

Given that if you unwittingly buy a stolen car (or anything else) and the
theft is later discovered, the car is taken from you and you are left
'high and dry',, I'd be inclined to go with the money being recalled from
A as its a parallel situation AFAICS.

I don't think that is really an equivalent situation. If you buy a
stolen car, the real owner gets it back, you lose the money, and the
thief, if unidentified, keeps it. A cheque is supposed to be like
money, and the whole point of cheques and of keeping one's money in
banks, is that it's supposed to be safe both for the payee and for
the payer. A forged cheque is like forged money, which if paid in
to a bank and not noticed right away, is as good as gold.

 

[john boyle]

not sure JB has ever answered what happens if X forges a cheque on Y's
account and pays it to A, and it isnt noticed by Y for some time, lets say a
month or two, but enough for the cheque to have cleared. When it is
discovered to be a forgery (this might takea long court case I suppose) ,
then either the money is 'recalled' from A, and A is out of pocket, or it
isnt and B, or B's bank, is. (lets assume at this point that X is long gone)

Who's B? Is it really Y on a bad day? What about Z?

Lets talk names. The drawee doesn't bounce the cheque and the payee
doesn't have the dosh 'recalled'. The drawee must refund the account
holder unless the account holder is estopped from denying liability.
(i.e. he owed the dosh to the payee anyway; or even though knowledgeable
of the forger forging cheques in the past had done nothing to stop it).
(Greenwood V Barclays 1933, Brown V Westminster Bank 1964 ;and Bills of
Exchange Act S24) It then becomes a matter between the drawee and the
forger. If investigations reveal that the payee is in on this in some
way then the bank would have a right of action against the payee as
well, but the cheque remains 'paid'.

Given that if you unwittingly buy a stolen car (or anything else) and the
theft is later discovered, the car is taken from you and you are left 'high
and dry',, I'd be inclined to go with the money being recalled from A as its
a parallel situation AFAICS.

No, 'money' isnt a physical item, it is an accounting entry. And if
somebody nicks fifty nicker from grannie's handbag and puts the fifty
nicker in his pocket in which, by chance, there already happened to be
another fifty nicker and then was caught by Inspector Knackers Men and
despite a superb defence by Messrs Sue Grabbit & Runne, is found guilty
of robbery and made to pay the old bag the fifty nicker back, would it
matter which of the notes he gave back?

 

[Ronald Raygun]

And if
somebody nicks fifty nicker from grannie's handbag and ...
is found guilty
of robbery and made to pay the old bag the fifty nicker back,

How do you know how old granny's handbag is?

 

[john boyle]

How do you know how old granny's handbag is?

Because James Brown said it was only Papa who has a brand new bag, not
Grandma.

 

[Tumbleweed]

Who is B?

X = forger
Y = accountholder
A = payee
B = ?

LOL/Ooops.

B is Q's long lost relative? Must have been drinking when I wrote that

replace B with Y.

 

[Tumbleweed]

Who's B? Is it really Y on a bad day? What about Z?

Lets talk names. The drawee doesn't bounce the cheque and the payee
doesn't have the dosh 'recalled'. The drawee must refund the account
holder unless the account holder is estopped from denying liability. (i.e.
he owed the dosh to the payee anyway; or even though knowledgeable of the
forger forging cheques in the past had done nothing to stop it).
(Greenwood V Barclays 1933, Brown V Westminster Bank 1964 ;and Bills of
Exchange Act S24) It then becomes a matter between the drawee and the
forger. If investigations reveal that the payee is in on this in some way
then the bank would have a right of action against the payee as well, but
the cheque remains 'paid'.

No, 'money' isnt a physical item, it is an accounting entry. And if
somebody nicks fifty nicker from grannie's handbag and puts the fifty
nicker in his pocket in which, by chance, there already happened to be
another fifty nicker and then was caught by Inspector Knackers Men and
despite a superb defence by Messrs Sue Grabbit & Runne, is found guilty of
robbery and made to pay the old bag the fifty nicker back, would it matter
which of the notes he gave back?

Not a good analogy JB, because in your case the somebody is caught so he can
be forced to pay it back, with cheques he isnt, and the only Q is which of
the innocents lose out.

I read a story in the 'financial problem pages' of a newspaper, someone paid
electronically and put the wrong account no, but it happened to be a real
one so wasnt picked up as wrong, and thus got paid into that someone elses
account. They couldnt get the money back from the person they paid who were
unwilling to return it. At that stage it hadnt gone to court so it may have
been that a court would be able to order that.

You also say 'it then becomes a matter between the drawee and the forger'
but the forger is long gone, so is the drawee out of pocket then?

 

[Tumbleweed]

Yes. Slingsby & others v District Bank Ltd 1932

Thanks.