Presenting Checks for Payment

1. Presenting Checks for Payment Created By: Laura Kinchen

2. 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.

3. Written • Written documents are easily transferrable and universally recognized as legally binding • There is no legally prescribed form for a check

4. 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

5. 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

6. 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.

7. Sum Certain • State clearly on its face the principal amount to be paid, and it must be a monetary value

8. 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

9. 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

10. Checkpoint • What is meant by “elements of negotiability”?

11. Endorsement of Checks • Blank Endorsement • Restrictive Endorsement • Full Endorsement • Qualified Endorsement

12. 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

13. 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

14. 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”

15. 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.

16. Qualified Endorsement • “Pay to the order of Tamara Billings” • “without recourse” • “R Wilson Atlaw”

17. 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