Is a check to cash a binding contract?

[investorda]

What is the name of your state (only U.S. law)? NJ

Is a check made payable to cash a binding contract? May the bank on which a check made payable to cash is drawn refuse to honor that check by refusing to cash it? Does the bank have a legal obligation to cash a check made payable to cash drawn on that bank? Assume its a good check, that there are adequate funds in the account and that the signature is good and valid. May a bank have a "policy" that says it doesn't have to honor a check drawn on it? May a bank claim it has a "security" obligation to the depositor to make sure the bearer of the check is the person the check was given to? Isn't a check to cash a bearer document by definition?

 

[tranquility]

Better is to say what happened and then ask questions. Each of your questions have many answers depending on the facts.

 

[Dandy Don]

It is not a binding contract and they can refuse for security reasons. You should have offered to provide identification and better yet, asked the bank to contact the person who wrote you the check (do you have the person's daytime phone number) for confirmation from them that it was written to you.

 

[Antigone*]

Better is to say what happened and then ask questions. Each of your questions have many answers depending on the facts.

I agree with tranquility. Since a check made out to cash is very high risk, a teller can generally refuse any transaction that poses risk to the bank and the depositor.

 

[mmmagique]

If you attempt to cash a check without proper identification, no, a bank does not have to cash it. It would not be in their best interests, nor in the best interests of their clients to do so.

 

[Antigone*]

If you attempt to cash a check without proper identification, no, a bank does not have to cash it. It would not be in their best interests, nor in the best interests of their clients to do so.

The identification process with a check made out to cash is going to be an issue in all cases except one. You cannot authenticate a person when the check is made out to cash. The only exception would be if the actual check writer was the person cashing the check.

The ID could be authentic or it could be a phoney ~ doesn't matter ~ cannot verify a person unless their name is CASH

 

[Zigner]

The ID could be authentic or it could be a phoney ~ doesn't matter ~ cannot verify a person unless their name is CASH

Which could explain where Johnny Cash gets all his money!

 

[investorda]

For the record: The answer when I paid for it was: You are technically correct. However, the bank is not obligated to honor the check immediately. It has 24 hours or one business day to determine whether it will honor the check or not. You do not need to have an account at the bank. The bank's relationship is with its customer, not the payee of the check. If the bank dishonors the check, it has breached its contract with its customer. On the other hand, the failure to honor constitutes a breach of contract between the customer and you, the payee.

Making something payable to cash is the same as making it payable to the bearer. You actually do not need indentification. Neither are you required to endorse the check. The 24 hours gives them time to check with their customer to make sure the check is to be honored.

Normally banks seek identification to know with whom they are dealing. However, most tellers do not know the actual legal requirements and this leads to many erroneous assertions, such as you have to have an account at the bank or you must endorse the check.

 

[Isis1]

Which could explain where Johnny Cash gets all his money!

that is exactly what ran through my head when i first read that post!!

 

[Zigner]

For the record: The answer when I paid for it was: You are technically correct. However, the bank is not obligated to honor the check immediately. It has 24 hours or one business day to determine whether it will honor the check or not. You do not need to have an account at the bank. The bank's relationship is with its customer, not the payee of the check. If the bank dishonors the check, it has breached its contract with its customer. On the other hand, the failure to honor constitutes a breach of contract between the customer and you, the payee.

And, in a nutshell...the person trying to cash the check (made out to CASH) has no recourse against the bank for not honoring the check!

 

[tranquility]

I agree with the fact the presenter has no recourse against the bank in any event, even if the bank had a duty to pay the check. I disagree with the paid advice. I'd say UCC 3-501(b) would apply and the presenter (the law does not just apply to payee) would need to endorse and/or sign a receipt and/or identify himself. Period. Even if the payee is different. Even if it is to cash. The bank also has the right to make other rules in it's depositing agreement too.

I think the Patriot Act would apply here as well. Banks are required to know who they are dealing with.

 

[latigo]

Yes. In that sense a check is a “binding contract” on the part of the maker of the check. It is nothing more than a promise to pay to the bearer.

But the bearer HAS NO CONTRACT with the bank on whom the check is drawn.

The bank's contract is with its depositor. And one of the implied stipulations of that contract is to protect what the bank sees as the best interests of its depositors.

Now if you want to sue the drawee bank on theory of a third party beneficiary of its agreement with the depositor, then have at it.

Sax

 

[investorda]

The bearer of a check payable to cash has no contract with the bank, and hence can not sue the bank, that's correct. However, the bearer of a cash check does have a contract with the signatory, the checkmaker, who is a customer of the bank. So the bearer can sue the checkmaker if the checkmaker's bank does not honor its contract with the checkmaker. Convoluted? Yes. But what bank wants its customers sued for no good reason?

Regarding the Patriot Act, you are getting close to the point. Some are tired of being treated as if we are going to take the 3 figure cash from this check, go buy a gun, and shoot someone. Bin Laden has indeed ruined our quality of life when our local banks feel entitled/obligated to treat every housewife like a homeless smuck or terrorist. The legislative intent of the Patriot Act was not to twist us all into bureaucratic, inefficient and stupid knots, or to overempower bank clerks. The purpose of the Patriot Act was to protect against bona fide security risks to our nation.

A checkmaker who writes a check to cash creates a bearer contract and, de facto, waives the security issue of to whom the check was intended. It becomes a negotiable instrument, similar to a greenback written by Uncle Sam.

If the law says the bank gets 24 hours to decide, well then they get their 24 hours. Ultimately banks need to follow the rules and obey the law. They've forgotten the common laws of lending...and they've forgotten the basics of tort. Whether its a big deal or a little deal, let's everyone demand that financial institutions to play by the rules again.

With research in hand, I suspect they'll cash the check this time.

 

[Zigner]

The bearer of a check payable to cash has no contract with the bank, and hence can not sue the bank, that's correct. However, the bearer of a cash check does have a contract with the signatory, the checkmaker, who is a customer of the bank. So the bearer can sue the checkmaker if the checkmaker's bank does not honor its contract with the checkmaker. Convoluted? Yes. But what bank wants its customers sued for no good reason?

Regarding the Patriot Act, you are getting close to the point. Some are tired of being treated as if we are going to take the 3 figure cash from this check, go buy a gun, and shoot someone. Bin Laden has indeed ruined our quality of life when our local banks feel entitled/obligated to treat every housewife like a homeless smuck or terrorist. The legislative intent of the Patriot Act was not to twist us all into bureaucratic, inefficient and stupid knots, or to overempower bank clerks. The purpose of the Patriot Act was to protect against bona fide security risks to our nation.

A checkmaker who writes a check to cash creates a bearer contract and, de facto, waives the security issue of to whom the check was intended. It becomes a negotiable instrument, similar to a greenback written by Uncle Sam.

If the law says the bank gets 24 hours to decide, well then they get their 24 hours. Ultimately banks need to follow the rules and obey the law. They've forgotten the common laws of lending...and they've forgotten the basics of tort. Whether its a big deal or a little deal, let's everyone demand that financial institutions to play by the rules again.

With research in hand, I suspect they'll cash the check this time.

They are not required to cash a check made out to "cash". Period. Good luck.

 

[investorda]

Zigner, You've made blanket short statements with no analysis/support and with definitive all-knowing tone. Your answer contradicts the answer from the lawyer I paid to answer the question when it was clear that the answers on this "free" advice site were winged blogger ramblings, and not bona fide legal advice. (Silly of me to have hoped otherwise.) I shared the paid-for legal advice I received in the spirit of having the right answer posted for future viewers.