Restriction on the use of cheques

A cheque convention is a contract by means of which a credit institution and the holder(s) of a current account (or representatives) agree on its operating by means of cheque.
 
Since there is no legal provision obliging credit institutions to celebrate a cheque convention with their clients, banks are not obliged to provide cheque books for account operations even if they have previously accepted to celebrate a deposit contract.
 
Credit institutions shall not celebrate the cheque convention with entities:

• in whose account opening file no indication may be found as to a data check based on the respective holder’s ID;
• whose name or designation is included in the List of Cheque Defaulters disclosed by  Banco de Portugal;
• that are legally forbidden to use cheques, as soon as they are informed of such.

The provision of cheque books in breach of the obligation to abstain from doing so obliges the drawee institution to pay any such cheque, irrespective of the amount carried therein, whereby it shall be subrogated to the rights of the bearer up to the limit of the amount paid.

Termination of the cheque convention

Credit institutions should terminate any cheque convention with anyone who, either in his own name or on behalf of a third party, due to undue utilisation, may put at risk the trustworthiness that should be behind cheque circulation.
 
Decisions on termination of the cheque convention are made in cases when the account holder:

• does not provide evidence to the drawee credit institution, within the period of thirty consecutive days, that action has been taken to settle the returned cheque (due to lack of or insufficient provision, closed account, irregular draft, or due to a frozen or suspended account, if its date of issue is subsequent to such freezing or suspension);
• does not settle a cheque paid in compliance with the payment obligation laid down by the law on credit institutions with regard to cheques of amounts up to €150 and cheques provided in breach of the obligation to abstain from doing so.

Cheques presented to payment after the established deadline, in the most common case eight days following date of issue, for cheques issued in Portugal, should not be considered for termination effects. Also, cheques issued to the drawer himself, except when endorsed, does not put at risk the trustworthiness that should be behind its circulation.
 
Credit institutions shall not refuse cheque payment based on termination of the convention or on the fact that the drawer is on the list disclosed by Banco de Portugal when the drawn account has provision for the effect.

Compulsory cheque payment

Drawee credit institutions are obliged to pay any cheque from a book issued by them to an amount of up to €150, irrespective of the lack of or insufficient provision, unless a justifiable motive exists as to payment refusal.
 
Cheque payment refusal is justified in the following circumstances:

• larceny, theft, loss, breach of trust, irregular endorsement, deletion of the amount in words so as to insert in the amount covered by payment obligation, the embezzlement of the cheque and the existence of serious signs of forgery; and
• justified cancellation, set out in a document signed by the drawer, and presentation after the deadlines laid down in the Uniform Law on Cheques.

Extension of cheque convention termination

Termination of the cheque convention is extensible to all co-holders of the account on which the cheque in question was issued, unless evidence is provided of non-involvement in actions leading to such termination, but shall not be extensible to the co-holders of other accounts.
 
As evidence of non-involvement the circumstances set out in Notice No 1741-C/98, published in the Official Gazette – Series II, 2nd  Supplement, of 4 February, pages 1600(70) and 1600(71), inter alia, are considered to constitute evidence.
 
If the non-issuing co-holders of the cheque provide the afore-mentioned evidence of non-involvement, the drawee credit institution shall annul the termination decision and not communicate such to Banco de Portugal or, in the case of already having done so, should request its elimination and subsequent annulment of inclusion in the List of Cheque Defaulters.
 
Termination of the convention with an entity due to inclusion of its name in the List of Cheque Defaulters, following communications from another credit institution, should not be extensible to its co-holders or representatives.
 
If termination of the convention with the representative of a natural or legal person is the result of actions practised by such representatives, this shall weigh on the holder of the respective account, but shall not be extensible to the other non-issuing representatives.