According to Longman Business Dictionary, a dud cheque is simply
a cheque that cannot be paid because the person who issued it has no money or not enough money in their bank account.
In most contractual transactions, buyers pay for goods using post-dated cheques.
Also, most money lenders demand a signed cheque from their customers as a form of collateral for the repayment of loans advanced to their customers.
It is a criminal offence to issue a cheque and it bounces. In other words, a person who issues a cheque with knowledge of lack of money in his account at the time of issuing such cheque and on the date for the cheque to be cashed, it is discovered that the account has no sufficient money, commits a criminal offence punishable with imprisonment for a term not exceeding 2years.
However, it will not amount to a criminal offence, if the cheque was issued with a reasonable expectation of money, which without the fault of the issuer, did not come as expected.
What is reasonable depends on the facts and circumstances of the case. The fact that someone promised you money will not be sufficient.
It will also not amount to a crime, if before the date for the cheque to be cashed, the issuer takes reasonable steps to inform the person in whose favour the cheque was issued, of his inability to make funds available in his account as earlier agreed.
Whatever be the case, it is important to avoid issuing a cheque when you don’t have money in your account, or sure of having money on the date slated for the issued cheque to be cashed.
Ignorance of the law is never an excuse.