IS A POST-DATED CHEQUE A VALID MODE OF PAYMENT?

One of our readers asked if a post-dated cheque is a valid mode of payment. We address this important issue in this edition of WKA Newsletters.

Under Kenyan law, there is no specific legal reason to decline post-dated cheques for debt settlement, as long as there is a willingness to pay the debt and accrued interest. Typically, a post-dated cheque is issued when a debtor does not have sufficient funds on the date the creditor demands payment and instead provides a cheque with a future date. This gives the creditor assurance that the payment will be honored on that future date. However, it is essential to consider the specific circumstances and agreements between the parties involved when accepting or issuing a post-dated cheque.

Legal Provisions and Case Law

Section 316A of the Penal Code, Cap 63, states:

1. Any person who draws or issues a cheque on an account is guilty of a misdemeanor if the person—
   • Knows that the account has insufficient funds;
   • Knows that the account has been closed; or
   • Has previously instructed the bank or institution not to honor the cheque.
2. Subsection (1)(a) does not apply to a post-dated cheque.
3. A person guilty of a misdemeanor under this section is liable to a fine not exceeding fifty thousand shillings, or imprisonment for up to one year, or both.

In Daniel Simiyu Omali & another v Attorney General & 3 others [2016] eKLR, the court held that a misdemeanor offense could not be founded on post-dated cheques drawn when the drawer knows the account has insufficient funds.

In Amis Makokha Wanekhwe v Republic [2019] eKLR, the court found that issuing post-dated cheques that were dishonored due to insufficient funds could not sustain criminal charges under Section 316A(2) of the Penal Code.

Francis Mwangi & another v Republic [2015] eKLR and Republic v Charles Kithinji HCCA No.159 of 2003 further supported that dishonesty is not proven where a post-dated cheque has been issued. The Abdalla v Republic (1971) E.A. 657(CAD) and Oware v Republic (1989) KLR 289 cases clarified that a post-dated cheque is a representation that there will be funds on the future date shown on the cheque, not that there are sufficient funds at the time of issuance.

Conclusion

A post-dated cheque is a valid means of payment, especially where there is a willingness to pay the sum owed. However, we recommend parties also consider executing an Acknowledgment of Debt Settlement Agreement to ensure a legally binding instrument enforceable in court, providing further assurance that the post-dated cheque will not be dishonored.

We hope this information helps in understanding the debt settlement laws. Please note that the contents of this newsletter provide a general guide and should not be relied upon without legal advice.

For further information or legal assistance on compliance or any other legal issue, please contact us:

• Email: info@wka.co.ke
• Website: wakilihub.co.ke/
• Phone: +254 798 03 580
• Address: Nairobi Hub, Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road

Authors:

• William Karoki, Founding Partner
• Florence Mwende, Associate