Check Your Cheques
Although more and more business is done with payment being made electronically or by credit and debit card it is surprising how often we are consulted by clients who have lost money through bounced personal cheques.
For larger transactions personal cheques still play a big part in business life here in Spain, and it is common for post-dated personal cheques to be used for the repayment of loans between private individuals.
The basic law on the use of cheques in Spain is Law 19 of 1985 which has been modified by a number of later regulations to bring the law into line with European Union Directives and to deal with the introduction of the Euro.
For a Spanish cheque to be valid it must clearly state,
·         The amount in words and figures.  If the words and figures do not agree it is the amount stated 
           in words which prevails.
·         The name and address of the bank on which it is drawn
·         The date and place when and where the cheque was issued.
·         The name and signature of the person issuing the cheque
A cheque can be made payable to a specific person or payee, or “Al Portador” – to the bearer.  If no payee is entered it is assumed that the cheque is payable to the bearer which makes it a very valuable document to a thief if it should be stolen.
A valid cheque must be presented for payment within 15 days of the date on which it was issued, or 20 days if it was issued outside Spain.  A “crossed” cheque which bears two parallel lines can only be paid through a bank into a bank account, and cannot be paid in cash over the counter.
If you draw a cheque on your bank account, you can only put a “stop” on the cheque if it is lost or stolen, or if it was obtained by fraud. However, if you were negligent in allowing the cheque to be stolen the bank or being duped into issuing the cheque the bank is not obliged to stop payment.
If you receive a personal cheque and there are insufficient funds to cover it, the bank on which it is drawn may pay part of the amount for which funds are available, leaving you to reclaim the unpaid amount from the person who gave you the cheque.
If there are no funds at all to cover the cheque then the bank will return it completely unpaid or “bounce” it.  In this case you are entitled to make a claim against the person who gave you the bad cheque.  As first step in this process the dishonour of the cheque, must be formally protested by  issuing “a Deed of Protest” at a Notary.  If the cheque still remains unpaid you can then take legal action to recover
      The amount of the cheque, plus
      Legal interest stipulated by article 1108 of the Spanish Civil Code from the date of the cheque  which for 2010 is set at 4% per year plus 2% extra, unless you have agreed in writing other terms with the person issuing the cheque, plus
      The costs and expenses associated with receiving the bounced cheque such as bank charges, and  the cost of formally protesting the dishonor of the cheque at a Notary, plus
      An additional 10% of the unpaid amount together with compensation for any other losses you have suffered
If you are offered payment by personal cheque, say for the sale of a car, it is possible ask the bank on which the cheque has been drawn to guarantee that the cheque will be paid.  If the bank is prepared to do this it cannot later “bounce” the cheque.
The safest method of payment between individuals is direct bank transfer from one account to another, but if you are asked to accept a cheque for the sale of goods or the provision of services, either ask for a bankers draft issued by the bank itself, or wait for the cheque to clear before parting with the goods or providing the services.   Oh, and one must not forget that even today “cash is king”.