When a Deposit cheque bounces, it provides an opportunity for the seller to either keep the contract alive or treat the contract as discharged. The seller may also sue the buyer for damages & compensation. The contract should specify details of action to be taken if the deposit cheque bounces.
As per SC 2.2.2 the seller has to give notice to the buyer that the cheque bounced and that the contract stands breached. However, the buyer should give notice within 7 days of dishonour of cheque. SCPC 2.3.7 also has similar provisions to apply in situations when the cheque is paid in an auction. In other cases SCPC 2.2.2 is applicable. This makes it clear that the deposit should be paid by direct debit, thereby negating the possibility of a bounced cheque.
Even if the contract is treated as discharged, this is of little or no relief to the seller who may have committed to contract with another person for purchasing a property. Thus, it is always preferred to choose a method where the payment will be honoured on presentation. It is for this purpose that the Standard Conditions mention that the payment should be made via electronic transfer or by solicitor’s cheque, and that the solicitor should hold the money as a stakeholder.
Photo courtesyu: Don DeBold