Check endorsement: Pay to the order of vs. For deposit only xxx-xxxxx

[Kimmy_Gibbler]

@Saint_Cad

Now explain how I can get rid of my debt by writing a check for $1 and putting “Paid in full” on the memo line and signing it saint cad, sov. cit.?

Just kidding.

It’s a misunderstanding (possibly deliberate) of UCC § 3-311’s accord and satisfaction provisions.

In particular UCC § 3-311(a)(ii) requires that the amount due be a matter of bona fide dispute (i.e., “the store sent me a bill for the full price, but I contend I had a raincheck that entitled me to a sale price.” NOT “the store sent me a bill, but I decided, after buying on credit, that I didn’t want to pay as much as we had agreed, so I sent them a check for 20% of the bill and wrote ‘PAID IN FULL’ on it”).

Moreover UCC § 3-311(c), imposes, in addition to the substantive requirement of a bona fide dispute as to the amount owed, procedural obligations on the obligor whose obligee is an “organization” (like a bank, or credit card company, or utility company). In that case, if:

(1) within a reasonable time before the tender [of the “PAID IN FULL” check], the [business] sent a conspicuous statement to the [billed party] that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and

(2) the billed party doesn’t send it to that designated person, office, or place

then there is no discharge of the obligation, the annotation “PAID IN FULL” notwithstanding.

(To be completely comprehensive, if there is a bona fide dispute and the recipient is genuinely notified that the check is being offered for accord and satisfaction and the recipient takes payment on the check, the obligation will be discharged.)

The provisions of paragraph (c) were meant to allow automatic processing of checks without throwing an accord-and-satisfaction monkey wrench into the mix. Generally, major businesses will be able to avail themselves of 3-311(c) because there communications will have contained notices about where to take disputes and it will not be the general remittance address. The workers at this special disputes address will obviously be on the lookout for checks that attempt to assert accord and satisfaction and will return them to the customer uncashed.

[robert_columbia]

@ratatoskK

Here’s a related question… I have a child, the child receives a gift of a check, what’s the right way to endorse it? Usually I just sign

Kid’s Name
My Name

or sometimes

“For deposit only”
Kid’s Name
My Name

It doesn’t seem to matter how I do it, they always take the check!

When I was a child, we would sometimes get insurance benefit checks that came payable to me. My parents would ask me to sign the check and apparently they would just deposit it in their account. This seems more or less fair because they probably had forked over a prepayment out of their own pockets and the check was reimbursement for that, so it wasn’t like I was being cheated out of something that was morally mine.

@Bearflag70

Former bank teller here…

(1) “Pay to the order of [BANK]” means that you are signing the check over to the bank. Why would you want to give the bank your money? You wouldn’t. I don’t recommend this endorsement.
…

I have a brokerage account and one of the ways to deposit money into it is by signing a check payable to you over to the brokerage, but they claim that they won’t accept just any random check signed over that way but reserve the right to only accept government, cashier’s, and possibly payroll checks signed over that way. A check from Aunt Edna’s last boyfriend’s little sister’s BFF, not so much.

[TriPolar]

I remember checks.

[kayaker]

@TriPolar

I remember checks.

My business stopped accepting checks 4 years ago. The % of checks that were no good was higher than the national average. I looked into check guarantee services, but the cost was too high unless I increased the number of checks I was getting dramatically. So I stopped taking them.

I got some attention from local consumer type groups and the county DA stopped to discuss the situation. He felt it reflected badly on the area if businesses would not accept checks. I told him I would happily accept checks if he would personally make good on the ones that bounced, but he declined.