Check

A check is a written order of the depositor or drawer to his bank to pay a designated person or the payee the monetary amount specified on the check. A check is a demand instrument, against which payment must be made by the drawee bank on the demand or on presentation by the payee or his collecting bank.

A check can be negotiated any number of times during its validity period or currency by endorsement and delivery, unless such negotiation is specifically forbidden.

A payee usually receives payment of a check upon endorsing it and presenting it to a bank in which the payee has an account. Such bank is the collecting banker of the payee. Such collecting bank has no obligation to cash a check for a person who is not its customer or depositor.

In case the drawer of the check does not have sufficient funds in his account or the check amount exceeds arrangement, the check is liable to be dishonored on presentation for payment or encashment.

A certified check is guaranteed by a bank, at the instance of its drawer or endorser. A bank is not bound to certify a check, but it usually will do so for a customer who has sufficient funds in his account in lieu of a nominal fee. A certified check is as good as liquid cash because any bank must honor it when the payee presents it for encashment.

A drawer can revoke a check unless it has been certified or before payment or encashment. The notice of revocation is often called a ‘stop payment order’. In the event of the death of the drawer before payment or certification of the check, it stands automatically revoked, since the drawer's bank has no authority to complete the transaction in such circumstance. However, if the drawer's bank does not have notice of the drawer's death, it is not liable for the payment or certification of that drawer's checks.

At the request of the drawer, a bank must return him with all the checks it has paid, so that the drawer can reconcile. In case the drawer finds any discrepancy or forgery, he must report it to the banker immediately. In default, he will also be held responsible or liable for the loss, if any.