Waiver of Demand

By definition, a waiver of demand is a legal document given by a party which endorses a cheque of a bank draft. Very simply, it says that if the original issuer of the cheque or draft defaults, the endorser will have the responsibility of honouring the cheque or the draft.

Waivers of demand can either be expressed or implied and can come in verbal and written form. In case of a default, it’s the dealing bank that reserves the right to charge any fees or penalties to the endorser.

A waiver of demand could make the endorser responsible for any penalties or fees imposed due to a bounced cheque. For that, the bank would send the endorser a notice informing him about the bouncing of the cheque and the penalties imposed thereof.

Highlights

• A waiver of demand is a legal agreement, causing the endorser of a cheque or draft to become responsible in the event of its default.
• The party endorsing the cheque can also be responsible for fines and penalties incurred.
• It can be issued in the written form, or verbally issued explicitly or implicitly, and can be conveyed verbally in some jurisdictions.

Understanding what a waiver means in legal terms:

In general terms, waivers imply that one understands and accepts the risks associated with an activity and that one waive the right to go to court if sued. Signing a waiver can bring the process more challenges and the party does it willfully.

How does waiver of demand work?

There are three parties involved when a cheque or a bank draft is written. These are drawer, payee and drawee. The drawer is the original writer of the cheque, the payee is the party to whom it is paid, and the drawee is the person from whose account funds are withdrawn.

So, if a cheque or a draft carries the waiver of demand clause, then it means that an endorser has accepted the legal responsibility of paying the amount in case of a default. If the drawer of the cheque defaults, the endorser becomes responsible for honouring the cheque and paying any fees or penalties that may be levied.

As regards banking, it is a term that can imply waiver of its right to formal notification when it presents debt instruments such as drafts to a central bank for rediscounting.

Examples

Express waivers are when the endorser agrees in writing to assume the liability for cheques and drafts if they are presented within a certain amount of time. Implied waivers, on the other hand  are when parties do not specify how long after issuing a cheque or draft that it can be presented without penalty but still expect it to be honoured at any point in time.

Why does waiver of demand matter?

Waiver of demand is important as it recognises that the endorser who signs the draft or the cheque is as good as the payee’s faith in the payer. Banks charge a hefty fee if a payer defaults.

 Waiver of protest:

A waiver of protest is a notice of dishonour, where the notice is present in instrument and it is binding on all parties, but where, but where it is written the signature of an endorser, it binds him only.

Are oral waivers prohibited by law?

Oral waivers could be prohibited by law in some countries.

Are there both express and implied waiver of demand?

There is both implied and express waiver of demand

What is a bank draft and why do they matter?

A bank draft is a popular concept in Britain. It is equivalent to a cashier’s cheque. In order to obtain a bank draft, a person must have funds in his account equal to or more than the cheque amount. A form That has to be filled must have the remitter’s name i.e., a person on whose name the cheque has been made and the name of the entity making the payment (it is usually the bank). The bank draft is signed by the bank cashier or manager. Banks charge a fee for it.
A bank draft ensures that funds are available because it is drawn upon and issued by a Bank.   

Bank drafts don’t bounce as there is a guarantee of the bank. It is because of this reason that people prefer to make or receive payments through this mode.

However, some feel that even bank drafts can be forged that’s why the advice is to not accept a bank draft or cashier’s note on Friday evenings when the bank is closed for the weekend and not in a position to detect any forgery.