The Check

This article is to be read in conjunction with this one, RA 9160 and BP 22.

A check is a bill of exchange drawn on a bank and payable on demand. This is because checks are ordinarily intended for immediate payment. After its issue, a check must be presented for payment within a reasonable period. Once accepted or certified, the drawer and indorsers of the check are released from liability.

Special Kinds of Checks

1.) Memorandum Check

Also called a "memo check." Looks like an ordinary check except that "memorandum," "mem" or "memo" is written on it. The drawer agrees to pay the bona fide holder of the check absolutely, not upon presentment at maturity and if due notice of the presentment and non-payment should be given. The drawer may therefore be sued like the maker of a promissory note.

2.) Cashier's Check

A check drawn by the cashier of the bank on the bank itself and considered accepted by its mere issuance. It is the bank's own check and can be treated as its promissory note. Operates as an assignment of funds represented by the check to the holder/payee's credit. If drawn by a bank on another bank, it's called a bank draft.

3.) Manager's Check

Similar to a cashier's check in use and effect but is drawn by the bank manager himself.

4.) Traveler's Check

A check intended to supply a traveler with funds without having to carry money along. The holder's signature must appear twice on the check: first at the time it is issued and second (counter-signature) in the payee's presence before it is paid. If not, it's incomplete. The bank or issuing company can refuse payment if there is no counter-signature or if the agreed counter-signature is not present.

5.) Certified Check

A check that bears an agreement to be paid upon presentation. Like a memorandum check, it looks like a regular check until "Certified" is stamped or written on its face. Its purpose is to enable the holder to use it for money.

6.) Crossed Check

Initially an ordinary check until 2 diagonal lines are drawn on it, usually on the upper left side. There are 2 kinds: crossed generally and crossed specially. Crossed specially checks have the name of a particular bank or company to be paid written between the diagonal lines; the drawee bank must pay when the bank/company named in the check presents it for payment. Generally crossed checks have "and Co." written between the lines and the drawee bank must pay through the intervention of another bank; this is the check that can't be encashed and must be deposited directly to the holder's account. A crossed check's purpose is to ensure that the payee gets paid, especially if sent through mail or through an agent. Crossing a check won't affect its negotiability.

Stale Check

If a check hasn't been presented for payment within a reasonable time since its issuance, it loses its value (goes stale.) Banking practice sets a maximum of 6 months from the date of issuance as a reasonable enough time to present the check for payment. The bank will not pay such a check without first consulting the drawer. The drawer isn't freed from liability by a mere delay in the presentation of the check if he won't suffer any loss from delay.

Discharge of Liability

The drawer of the check can be freed from his liability if the following requisites are present:

1.) The check isn't presented within a reasonable time after its issuance (6 month rule)

2.) The drawer suffers a loss

3.) The loss of the drawer is attributable to the delay in presentation

The liability of the drawer in case of delay is to the extent that he suffered the loss in question; the indorser on the other hand is discharged fully, regardless of loss or injury by delay in presentment unless presentment is excused/dispensed with. This difference is due to the indorser, by legal fiction, suffers prejudice while the drawer doesn't necessarily suffer prejudice. If, however, the check is presented within the time limit the drawer can still be freed from liability if he isn't given a notice of dishonor within the prescribed time.