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