Restrictions on the back of a cheque

My father has always been in the habit, when writing a cheque, of writing on the back “for deposit only.” If it was a cheque to his father, for example, he would add the account number – “for deposit only in account no. XXXXXX.”

I told him that my understanding (from my commercial paper class) was that actually cheques, as negotiable instruments, weren’t supposed to work this way and that such instructions could be legally ignored by banks.

Indeed, once when depositing such a cheque from my father, I decided I wanted some of it in cash and the bank teller told me just to strike out the “for deposit only” when I indorsed it.

Now, he has started writing “for deposit only after positive identification.”

So far as I understand, the indoser need only strike out such an instruction. Is this correct?

In general, I guess what I want to know is whether the person writing a cheque can put such restrictions on its use; can a valid indorser strike such instructions; and what would a bank do when confronted with such a situation?

That sort of instruction is supposed to be honored by the bank; a teller could get in a lot of trouble if they handed out cash on a check listed “for deposit only” and someone pushed the issue.

Legally, any endorsement on the back of the check is considered a contract. Now, the issue isn’t cut and dried; if it’s something that is beyond the control of the bank, they have an out. And if there was further evidence that negated the endorsement (e.g., if a $10 check has “this is payment in full for a new Ferrari”), the signer won’t be held to it. In addition, a teller might ignore the instructions just to keep good customer service.

But if the check was stolen, and the teller handed out cash on a “for deposit only” check, the teller’s ass would be on the line.

I always endorse checks made out to me as soon as I get them, as follows:

For Deposit Only
<the name of my bank>
<my account number>
<my signature>

That way, if they’re stolen, whomever cashes them would theoretically find it harder to do something with them.

The businesses I’ve worked for have always had an inked stamp on hard with which they stamp a very similar endorsement as soon as the check comes in. And for the same reason.

I’m not so naive as to think that this removes all chances of shenanigans, but it sure puts the bank that cashes the check in the crosshairs if they ignore the endorsement.

By the way, I assume that the OP is not writing from the US, due to the spelling of the word “cheque”. I have no idea if the laws in your home country work the same way, but since at least the UK, Oz, and 49 or our 50 states base their legal system on English Common Law, I suppose that what constitutes a contract doesn’t vary that much.

Let me just clarify, what I’m talking about is a “for deposit only” note written by the maker of the cheque, not the payee. My dad is writing the cheque and he’s adding a restriction on the back before giving it to me. It’s not me that’s writing “for deposit only” before indorsing it.

Despite the way I spell “cheque,” I’m in the United States.

From the U.C.C.:

So, no, a bank is not generally obligated to honor a restrictive endorsement, unless state law supercedes.

What if it says void?

Also I see little difference if the person writing out the check is John Doe and he makes it out to Jane Plain and John Doe writes for deposit only Account 12345. Jane has access to account 12345 so she could just do it in two steps. One deposit the check and two write herself out a check for the amount just deposited.

Crossing it out would save a step. Also regardless if Jane didn’t have the same amount money in her account her bank wouldn’t release it to her, till the check clears. Assuming John Doe is on another account.

Umm, stolen checks and bank account numbers are something to think twice about. Obviously the account number of the payer is going to be there for the thief to exploit, but I see no reason to also give the thief the account number of the payee. Two for the price of none?

In reality, hardly any sanity tests are ever done on checks. Newsmagazines have done tests where they have made up all sorts of obviously phony checks (e.g., signed “Mickey Mouse”) and all were accepted.

The “rules” are intended to be invoked retroactively. I.e., to resolve a dispute once it occurs, not to prevent them.

By the way, the binding status of contracts, as in “You agree to these terms by cashing this check” is governed by state law, and is highly variable.
I realize this is not the exact OP question, but worth noting.

I don’t believe the maker of a draft is permitted to create conditions on the draft. If he wants to put conditions on the face of the document, I’d think he needs to make a promissory note instead. Of course, the holder can make a restrictive indorsement, but that’s a different matter.


That’s exactly what I thought. Thanks, Cliffy.

Careful there. That refers to payor and intermediary banks where a human never actually sees the check; the check is processed by high speed check processing equipment, so they get a break under the UCC and aren’t liable for conversion if they don’t honor a restrictive endorsement. Depository banks, the first bank to see the check, have to live up to valid restrictive indorsements, like “for deposit only”, or be liable for conversion. If the payor bank is also the depository bank it has to live up to the restrictive indorsement.

But what ascenray proposes, like Cliffy pointed out, isn’t a valid restrictive indorsement by a payee. It’s a condition the drawer of the instrument put on payment, and a negotiable instument is an unconditional promise or order to pay.