1 A written order by a person having money, or the equivalent of money, in a banking institution for it to pay, on demand, during banking hours, a stated sum to the person named in the order, or to whomsoever that person may in turn, by proper indorsement (see " Indorse "), direct it to be paid. As strange as it may seem, there are a great many people who know comparatively little about drawing a check, and who do not take proper precaution in so doing.
The two common forms of checks are as follows:
Keesville, N. Y., Jan. 2, 1921. No. 611.
Pay to the order of Charles King_____________________________$75.00
Keesville, N. Y., Jan. 2, 1921. No. 207.
The First National Bank
Pay to the order of Frank Yeaton_____________________or bearer $125 75/100
One hundred twenty-five___________________________________75/100 Dollars.
The first form of check is practically the only one now in use, for in the second case, the check is good in the hands of Frank Yeaton, or in the hands of any one else, without Yeaton's indorsement; therefore, care must be taken not to lose it. A check of the same character may be drawn by making it payable to " cash " or " currency," and using the first form. To deposit a check drawn in this way the bank should require the indorsement of the depositor, so, in case Richard Ordway, the " maker " of it, is not good for the amount, then the depositor who indorsed it can be held responsible. The first form of a check is only good in the hands of Charles King, unless he signs his name upon the back, in which event it is payable to any one holding the check, unless it is suspected of being in the hands of a thief. A check, however, made payable to " cash" or "bearer" is good in the hands of any one, always excepting the thief, without indorsement upon the back. In filling out the blanks, as in the case of, " Pay to the order of Frank Yeaton, or bearer/' it is better to fill in all the remaining part of the blank with a wavy line, so that no additional writing can be inserted; the same, and more particularly so, in the blank in which the amount is filled out. For instance, it would be very easy, if a check were drawn for fifty dollars to insert " two hundred " before it, making it " Two hundred fifty dollars," if there had been sufficient room left without any wavy line being filled in. The better way is to begin the writing of the amount, and the name of the person to whom the check is payable, as far to the left as possible, in the spaces left for their insertion, filling up the remainder of the spaces with wavy ink lines.
When a check, in the hands of a dishonest person, is increased in amount, by changing or adding figures, it is said to be "raised." In the corner of the check the amount should be in figures and agree with the sum preceding the word "dollars," which sum should always be in written words, not figures. If the amount in figures does not agree with the amount in writing, and the bank at which it is presented for payment is unable to communicate with the person who wrote the check to ascertain which amount is correct, it pays the latter amount. (For information regarding " indorsing checks for deposit," " in blank " and all facts relating to " indorsing," see matter under " Indorse.")
It is a very common practice among people not familiar with business affairs, to hold checks in their possession without presenting for payment for a long period, thinking, possibly there is no need of cashing them until the money is actually needed. This is wrong for several reasons: First, it is an annoyance to the person who drew the check, if it happens that he desires to balance his bank-book in the meantime; Second, in case of financial failure on the part of the person who drew the check, after drawing of the same, the holder of such a check would not have any claim for payment in case other checks should have been presented and paid in the meantime; that is, he would not have prior claim to such checks, although his was drawn before those, for the law would hold him negligent; Third, in case of the failure of the bank itself, the holder who has delayed the presentation of a check an unreasonable time will suffer the loss even if the drawer of the check has funds to meet it in the bank at the time of failure; Fourth, a most important reason, t. e. to hold the " indorser " or " indorsers." A holder of a check should present for payment or forward for collection without loss of time; in no event beyond the second day after its receipt, and all who are parties to the collection thereto should send it along on its course for collection the day received, Sundays and holidays excepted. The only exception thereto may be that of the case of the bank which receives it for final collection which may postpone presentation till the following business day, if received after banking hours.
The law expects checks to go forward in their usual course for collection without unnecessary delay, and any delay is entirely at the holder's risk. Again, a bank may hesitate to pay a check long since dated, on the supposition that it may have been lost and the liability discharged by another check, or in some other way.
Should there be checks outstanding and not presented for payment at the time of the death of the one who drew them, in most of our States such checks would cease to have value and should not be cashed by the bank upon which drawn. However, ignorance of the death of the depositor would protect the bank in case of cashing such checks.
Do not date a check so far ahead that it may be presented for payment prior to its date, as such a check should not be paid by the bank when so presented. In England it is illegal to "post date" a check.
If a check comes into the holder's possession without being dated, and the date of its execution is not known, he may insert the date upon which it is received by him.
A bank is not bound to pay checks in the order in which they are drawn, but may pay them in the order presented, even although the aggregate amount of the checks outstanding may exceed the depositor's account, and some of the earlier drawn checks may happen to be presented after subsequently drawn checks, and thus at a time when funds are depleted. (See " No Funds.")
Always sign a check as nearly as possible like the signature as originally entered upon the signature book of the bank.
If, in drawing a check, an error is made, do not attempt to correct it; remove the check from the book, destroy the check, taking particular care to mutilate the signature if it has been attached, and then, in large plain letters, write the word " Void " across the stub. Emphasis is laid upon making no attempt whatsoever at correction in a check.
If one wishes to draw a check for a sum less than $1.00, some extra precaution should be taken so that the amount - which really represents cents - shall not be changed, in the hands of a dishonest person, to mean dollars. One good method is to insert in the blank in that part of the check preceding the word "Dollars," "Only sixty cents," for example, finishing out with a wavy line, and lining out "Dollars." It would be a difficult matter to make "Only sixty cents" read as "Sixty Dollars." Stamps are often used across the face of a check, the words either being in ink or cut through the check, showing that it must not be cashed in excess of a stated amount, as, for instance, in the above case, " Not Exceeding $1.00."
If, for any reason, the drawer of a check, after issuing same, wishes to stop its payment, he has simply to notify the bank to that effect, under which circumstances it is incumbent upon the bank to refuse payment, letting the holder collect his claim in any way he can. If notice is given in writing to stop payment, a description of the check, such as date of issue, number, to whom drawn, and amount, should be given.
Should a bank pay a check upon which an indorsement has been forged and so make payment to an improper holder, the bank must make the amount good to the real owner.
The check is always a good receipt as evidence of a payment, and, therefore, all checks should be preserved and properly filed as described under " Check-book."
It is interesting to note that the Wall Street Journal states that 95% of the current bank deposits are in checks and only 5% in money; that for the last fifty-two years the only balances paid in cash at the New York Clearing-house have averaged 4.74% of the clearings. It would appear from these statistics that at least 90% of the business of the country is conducted by the use of bank credits.