Some rules to write (your checks) by


by John Sparks - SVP / Branch Services Administrator, Scott Valley Bank

“The consequence of an ambiguous designation of payees.” This is probably not what you hope to hear as a result of a court ruling regarding payment of one of your checks. Unfortunately, what may be clear to one person may not be clear to someone else.  How does this come into play in the negotiation of a check?  In many cases, it is about the use of and or ampersand (&), or, a virgule (/) and other symbols commonly used when listing multiple payees on a check.  The virgule (/) is defined in the dictionary as disjunctive or alternative. In much the same manner a comma (,) by itself has a singular or either meaning.

Many bankers attempt to play it safe and get everyone, no matter how they are listed on the check, to provide endorsement, and may even go so far as to call the maker for clarification.  Litigation is expensive for everyone involved, including the bank, which may have to defend its payment decision. However, mistakes can and do occur, leaving it up to the court system to sort it out.

One might assume the rules for negotiating a check made payable to joint payees as straight forward; however, in an environment of computer-generated checks and check preparation by staff not familiar with financial transaction formalities, knowledge of correctly structuring how payee names appear on a check becomes important. Efforts to squeeze names into a predetermined space by using abbreviations and short cuts can have unintended outcome.  Or, as the Farmers Almanac has quoted, “to err is human, but to really foul things up requires a computer”.

check writingHere are a few examples and the consequences:

  • •a check payable to Jones Construction and Schwartz Electric must be endorsed by both parties to be negotiable.
  • Either however can negotiate the same check made payable to Jones Construction/Schwartz Electric.
  • Either can also negotiate the check made payable to Jones Construction, Schwartz Electric.
  • a check payable to Jones Construction  Schwartz Electric and Roberts Conduit, Inc. Courts have ruled that such a check is payable to either Jones Construction or Schwartz Electric and Roberts Conduit, Inc.

In 1990, revisions to the Uniform Commercial Code* state:  If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.

Stacking names can also lead to ambiguous results, such as:

Jones Construction
Schwartz Electric

With no designation, courts have found in the either meaning.

Also of note, the following rules apply if a check is not completed fully or if the amounts entered do not match:

  • Typewritten terms take precedence over the terms pre-printed on the check; handwritten terms take precedence over both.
  • Words take precedence over numbers.

The gist of this article is to be clear when you are paying multiple payees: spell it out, AND use as many "ands" as it takes.

*The Uniform Commercial Code was adopted in California under the California Commercial Code 3110(d) and in the Oregon Revised Statutes as ORS73.0110(4).

View Scott Valley Bank - The Vault - January 2014