Cheque Bounce Clause in Agreement: A Legal Protection for Businesses

In a business transaction, a cheque is a popular mode of payment for goods and services. However, it is not uncommon for cheques to bounce due to insufficient funds in the account or other reasons. A cheque bounce results in financial loss and inconvenience for the payee. To prevent such losses, businesses often include a cheque bounce clause in their agreements.

A cheque bounce clause is a legal provision that allows the payee to take legal action against the payer in case of a bounced cheque. This clause is usually written in agreements between parties to ensure timely and secure payment. It clarifies the consequences of a cheque bounce and the procedure for resolving the issue.

The cheque bounce clause typically includes the following elements:

1. Notification: The clause outlines the procedure for notifying the payer of a bounced cheque. It may require the payee to send a formal notice to the payer informing them of the bounced cheque and requesting immediate payment.

2. Penalty: The clause specifies the penalty that the payer will have to pay for a bounced cheque. This penalty can be a fixed amount or a percentage of the cheque value. The penalty serves as a deterrent to prevent cheque bounce.

3. Legal action: If the payer does not pay the penalty or settle the dues after receiving the notice, the clause authorizes the payee to take legal action against the payer. Legal action may include filing a case in court or approaching a debt recovery agency.

Including a cheque bounce clause in the agreement provides legal protection for businesses. It ensures that the payer is aware of the consequences of a bounced cheque and motivates them to ensure sufficient funds in their account before issuing a cheque.

Moreover, the clause also saves time and effort spent on recovering dues from the payer. It streamlines the process and provides a clear roadmap for resolving the issue.

In conclusion, a cheque bounce clause is a vital legal provision for businesses to safeguard themselves from financial loss and inconvenience due to a bounced cheque. It is advisable to consult a legal expert while drafting the agreement and including the clause to ensure compliance with legal norms and regulations.