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Agreement Cheque Bounce

Agreement Cheque Bounce: A Guide to Avoiding Legal Issues

As businesses grow and expand, agreements and contracts become an essential part of everyday operations. One such form of agreement is the issuance of cheques to beneficiaries. However, there are instances where cheque payments may bounce, leading to legal issues that can be costly and time-consuming to resolve. In this article, we will explore the concept of agreement cheque bounce, its implications, and measures that businesses can take to avoid this.

What is Agreement Cheque Bounce?

Agreement cheque bounce occurs when a cheque issued to a beneficiary is returned by the bank due to insufficient funds or other reasons. It also includes cases where the beneficiary’s bank account has been closed or where the cheque is forged or altered. When a cheque bounces, it results in a breach of agreement, leading to legal action against the issuer.

Implications of Agreement Cheque Bounce

The effects of agreement cheque bounce can be severe. The primary consequence is the loss of trust and credibility between the issuer and the beneficiary. Additionally, legal proceedings can be initiated against the issuer by the beneficiary. This can result in a loss of time, money, and resources for businesses. There may also be implications on credit ratings and future business prospects.

How to Avoid Agreement Cheque Bounce

There are several measures that businesses can take to avoid agreement cheque bounce. These include:

1. Maintaining Adequate Account Balance – Issuers must ensure that their bank accounts have sufficient funds to honor the cheques issued. A thorough understanding of the available balance is essential to avoid cheque bouncing.

2. Verification of Beneficiary’s Account Status – It is crucial to verify the beneficiary’s account status before issuing the cheque. This includes checking for closed accounts or accounts with insufficient funds.

3. Clear and Legible Cheque Writing – The cheque must be correctly and legibly written, including the beneficiary’s name and amount in words and figures. Any alterations or cancellations must be counter-signed by the issuer.

4. Timely Deposit of Cheques – The beneficiary should deposit the cheque without delay to avoid cheque bouncing due to account closure or insufficient funds.

5. Use of Electronic Payment Systems – Electronic payment systems, such as wire transfers and online payments, are more secure and efficient than cheques. They also reduce the risk of cheque bouncing.


Agreement cheque bounce can have severe implications for businesses, including legal action, loss of trust, and credit rating implications. It is essential to take measures to avoid these issues, such as maintaining adequate account balance and using electronic payment systems. By taking these precautions, businesses can ensure smooth operations and protect their reputation and financial interests.