Presenting Checks for Payment

Created By: Laura Kinchen

Elements of Negotiability

Conditions from the Uniform Commercial Code (Articles 3&4) that covers notes, drafts, and checks

Every state has adopted these legal guidelines

Checks must meet certain legal requirements or conditions to be considered legally valid.

Written

Written documents are easily transferrable and universally recognized as legally binding

There is no legally prescribed form for a check

Written

Standards created by the American Bankers Association & American National Standards Institute (ANSI) (These do not govern negotiability) Size Placement of Information Paper thickness Colors Security Features

Signature

A check is not legally payable if it does not bear the drawer’s GENUINE signature

The bank that paid such a check would be liable, not the drawer

Does not have to be human, can be electronic

Unconditional Promise or Order

To be negotiable, an instrument must make an unconditional promise or order to pay Explicit-Not enough to authorize payment or

acknowledge a debt Unconditional-If the value of the instrument

cannot be transferred or obtained, an instrument is not negotiable.

Sum Certain

State clearly on its face the principal amount to be paid, and it must be a monetary value

Payable on Demand or at a Defined Time

If instrument bears no instruction as to when it is due, it is payable on demand, or immediately.

Checks are commonly payable on demand

Words of Negotiation

Instructions about how the instrument’s value may be obtained.

Pay to the order of: Tamara Billings Tamara Billings or Ryan Wilson Tamara Billings and Ryan Wilson Cash

Checkpoint

What is meant by “elements of negotiability”?

Endorsement of Checks

Blank Endorsement

Restrictive Endorsement

Full Endorsement

Qualified Endorsement

Blank Endorsement

Most common form AKA Open endorsement Least secure, but most negotiable Requires only the signature Once signed, can be cashed by anyone Can have secondary endorsement

Restrictive Endorsement

Limits the use of the instrument to a means specified by the endorser

Ends further negotiation of the instrument Most common form:

“For Deposit Only” Signature

Full Endorsement

Transfers the check to another specified party

Further negotiability depends on what that party does with it

Example: “Pay to the order of Tamara Billings” Signature of the payee “Ryan Wilson”

Qualified Endorsement

An attempt to limit the liablity of the endorser without limiting an instrument’s further negotiability

“Without recourse” appear in the endorsement intending to move the instrument along without incurring liability if the check is no good.

Qualified Endorsement

“Pay to the order of Tamara Billings” “without recourse” “R Wilson Atlaw”

Identification & Check Acceptance

Check fraud is a serious issue Banks may require identification or

fingerprinting to prevent fraud Greatest risks of fraud are from personal

checks from new customers and noncustomers