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What is a Check?

• It is a bill of exchange drawn on a bank payable on demand.

• It is a written order addressed to a bank or a person carrying on the business of banking by a


party having money in their hands requesting them to pay on presentment to a person named
therein or to his order or to bearer, a named sum of money.

Characteristics

• They are drawn on a bank

- the use of such form is not required by law. The bank simply honors that check if it gives credit and
pays the money.

• Payable instantly on demand

- by issuing the check, the drawer in effect represents that there are funds in the bank for its
payment.

Uses of a Check

• A representation of funds on deposit

• A representation of credit stated in monetary value

• A substitute for cash

• A payment for obligation

• Nature of a Post-dated Check

• It is payable on demand or at any time after the day of its date.

• It is a representation by the drawer that he expects to have funds in the bank with which to pay
the check on the date named therein.

Types of Check

A. Memorandum Check

• It is an ordinary check except that the word “memorandum” , “mem” or “memo” is written
upon the face of the check signifying that the drawer engages to pay the bonafide holder
absolutely and not upon a condition to pay upon presentment at maturity and if due notice of
the presentment and non-payment should be given.
B. Cashier’s Check

• It is a check of the bank’s cashier itself payable on demand to a payee. It has the same legal
effect of a manager’s check and a certified check.

C. Manager’s Check

• It is one drawn by the bank’s manager upon the bank itself as a drawee, promising to pay upon
demand.

D. Traveler’s Check

• It is one upon which the holder’s signature must appear twice; one to be affixed by him at the
time it is issued and another for counter- signature, to be affixed by him in the presence of the
payee before it is incomplete.

E. Certified Check

• It is one which bears upon its face an agreement by the drawee bank that the check will be paid
on presentation. It is deemed to have been accepted by the bank that certified it.

F. Crossed Check

• It is one which bears across its face or corner two parallel lines diagonally, usually on the upper
left corner between which either the name of the bank or the word “and company” in full or
abbreviated.

Modes in Crossing a Check

• Specially

The name of a particular bank or company is written or appears between the parallel lines in which
case the drawee-bank must pay the check only upon presentment by such bank or company on
penalty of being made to pay again by the rightful owner should the first payment prove to have
been erroneous.

• Generally

Only the word “and Co” are written between the parallel lines or when none at all is written at all
between said lines. In case the drawee- bank must pay the check through the intervention of some
bank or banker.

Purpose of Crossing a Check

• To ensure payment to the rightful person, the payee, particularly when it is forwarded by mail or
when it is entrusted to an agent. A crossed check may only be deposited but may not be
converted into cash by the drawee. When a check is crossed, it is the duty of the collecting bank
to ascertain that the check is only to the payee’s account.

Effects of Crossing a Check

It does not destroy its negotiability but its effect would be that:

a. the check may only be negotiated once.

b. the check may not be encashed but only deposited in the bank.

c. the act of crossing the check serves as a warning to the holder that the check has been issued for
a definite purpose so that he must inquire if he has received the check pursuant to that purpose;
otherwise he is not a holder in due course.