Image via WikipediaPOSTDATING CHECKS
Postdated checks frequently demanded of delinquent installment plan debtors by finance companies or collection agencies, sometimes are deposited immediately. No one owns up to this tricky business, except to blame it on a clerical error and to stress that the payee is not legally at fault. The check may clear the bank because: (1) Checks in batches tend not to be date-scrutinized. (2) The account somehow contains sufficient funds when it’s presented. However, your postdated check may be paid while other checks bounce.
WHEN THE BANK CAN’T BOUNCE A CHECK
The bank may have to honor a check if it takes too long to bounce it. Uniform Commercial Code requires that the bank take some action by midnight of the business day after it receives the check. But the bank gets more time if there’s an emergency beyond its control; for example, computer breakdown.
CASHING A LETTER
Letters or telegrams may serve as checks. Requirements: The letter must be addressed to a bank. And it must state that a specific amount is to be paid on demand either to the bearer of the letter or to the order of a named person. Point: If anyone of these requirements is not met, the letter will not be valid as a check. Of course, the hank will make its usual effort to verify that the “check” is valid. Source: United Milk Prods. Co. vs. Lawndale National Bank, 392 F. 2d 876, 5 UCC Rep. 143.
DEPOSIT AN UNSIGNED CHECK
Write or type the word “over” on the line where the signature would normally appear. On the back, type “lack of signature guaranteed” … and add your company’s name, and your name and title. Then sign. This guarantees your bank that you’ll take back the check as a charge against your account if it isn’t honored. Most banks will then process the check and remit the funds. This saves you the trouble of returning the check to your customer for signature. Source: Credit & Financial Management, 475 Park Ave. S., New York 10016.
FORGED CHECKS
Examine canceled checks immediately when they are returned from the bank. Reason: A bank is normally liable if it honors a forged check, but it is not liable if it pays out on repeated forgeries that a customer should have discovered. Example: An employee embezzled money by making out stolen company checks to himself. Held: The bank was liable on only the first forged check. Reason: If the company owners had regularly examined their returned checks, they would have discovered the first forgery and prevented the later ones from occurring. Source: Terry v. Puget Sound National Bank, 492 P2d 534, 10 UCC Rep. 173.
