Putnam's Handy Law Book for the Layman

[58]

Check. - A check should be properly signed. A check signed by an individual with the word "agent," "treasurer," or other descriptive term, has sometimes been regarded as the check of the individual signer, and not that of a principal or company. The proper way is to sign the name of the principal or company, adding the name of the person by whom this is done, thus: "John Smith by John Doe, agent," or "The Atlas Co. by John King, Treasurer," or other official designation.

The statement will not accord with the view of many a reader, that a bank on which a check is drawn is under no legal agreement with the holder to pay it, whether the maker has a sufficient deposit or not. Consequently, should the bank refuse to pay, the holder has no cause of action against the bank. The agreement to pay is between the bank and the depositor, and if the bank fails to fulfill its agreement with him, he has a just cause for complaint. Sometimes a bank declines to pay supposing, through an error of bookkeeping perhaps, that the depositor has not money enough there to pay his check. In such a case, as the bank is in the wrong, if the depositor has suffered from loss of credit or in any other way from the bank's action, it must respond and make the loss good.

Suppose a person presents a check and the maker's deposit is not enough to pay the full amount, what can be done? Usually the bank declines to [59]pay. Suppose the holder says he is willing to give up the check and take the amount in the bank? There is no reason why the bank should not accede to his wishes. Suppose a bank should pay more than the amount on deposit through no fraud of the holder, from whom can it recover the amount? If the holder has been free from wrong in presenting the check, the bank cannot look to him, but to the drawer for repayment. If the maker of a check has no money in the bank, perhaps he may not be a depositor, he commits a fraud in making and giving his check to another, and the offense in many states is deemed a crime: likewise a person who receives such a check knowing its true nature is equally deep in the wrong.

The law is very strict in its requirement of banks when paying the checks of customers. After a check has been delivered and has therefore passed beyond the maker's control, the law requires the greatest care on the part of a bank in paying it. The bank must be especially careful in examining the signature and the amount, and if the signature has been forged, or the amount changed, the bank is liable for an improper payment. Once an employer gave his trusted clerk a post-dated check, which he was to present on the day specified, and, after drawing the money, was to pay this to his employees. The clerk changed the date to an earlier one, drew the money, kept it and fled. The court said the bank should have detected the alteration. The bank contended that had the clerk waited until the proper day, and then drawn the money, it would not have been liable. The court said that was not the case presented, the clerk did not wait. Banks suffer, far more than the public knows, from the payment of raised checks, for it is quite [60]impossible always to detect them, yet banks are held liable therefor.

There are two rules relating to the payment of checks worth mentioning. One is, the maker of a check should use proper precaution in making it. He should write in a way that will not be likely to confuse the paying official. For instance, if in the above case the maker, intending to give a post-dated check, had written the date so imperfectly that the teller was misled, the bank would not have been liable for paying it, or for refusing to pay because there was not money enough in the bank at the time of presentation for payment. Some persons are very careless in making figures; when they are, they cannot look to the bank for the ill consequence of their own neglect.

Again, if a bank paid forged checks, for example, which were returned with other checks on the balancing of a depositor's book, and months, perhaps years afterward, the depositor discovered the forgeries or forged indorsements, he could, notwithstanding the lapse of time, demand of the bank the sums wrongfully paid. This was a great hardship to banks, and has been corrected in many states by statutes and by the courts in others. The rule now is, the depositor must, within a reasonable time after the return of his bank book, examine it, also his checks, and, if payments have been improperly made, demand immediate correction.

The holder of a check should demand payment within a reasonable time after he has received it. He may keep it longer if he pleases, but if he does, and the bank should fail, he cannot demand payment again from the maker of the check. He in effect says to the holder of the check when giving it to him, "present this check to the bank within [61]the proper time and it will be paid, if you keep it longer, you do it at your risk." What is a reasonable time? The law has fixed it. If the bank is in the town or city where the holder of the check dwells, he must present it the day he received it, or the next day. If it is drawn on a bank outside, the check must be forwarded for presentment at the latest on the day after it is received. With respect to the first class of checks therefore if the maker and receiver are both depositors of the same bank, the operation on the part of the bank consists simply in debiting one account and crediting another with the amount; if checks are drawn on another bank in the same city the receiver usually deposits them in his own bank and they are paid through the clearing house the next day.

A drawer may stop the payment of his check. And when he requests the bank to do so it must heed his instruction, and is liable if neglecting, though not always for the whole amount of the check. Suppose the check was given for a bill which the maker actually owed, yet for some reason, after giving the check, he did not wish to pay. If it was actually due and undisputed it would be hardly just to require the bank to pay the check over again to the holder, this would be too much. But for whatever injury the maker of the check may have sustained the bank must make good.

When a check has been certified by the bank on which it is drawn, the effect of the certification after the drawer has parted with it "is precisely as if the bank had paid the money upon that check instead of making a certificate of its being good." The check is charged up to the maker, or should be, and therefore as between him and the bank has been paid.

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Law for the Laymen - Check
Page Updated 7:26 PM Thursday 6/13/2013