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View Full Version : "not negotiable" on cheques, banking cheques ("checks")


abby
04-13-2005, 01:52 AM
Hi

I run a company in Australia that regularly has to write cheques to American people or companies. Because there are a lot of cheques to be written, we get them pre-printed at A4 size, then run them through our printer to print the "pay to", and "sum of " fields, then I manually sign them.

Sometimes, the people we send cheques to say they cannot "cash" our cheques, while other people have no problem at all. The people who cannot cash them get quite angry with us, saying we're sending them bad cheques.

Here in Australia, you cross a cheque "not negotiable" if you want only the person / company named on the cheque to be able to bank it, and in fact I assumed that was a worldwide thing, especially as around half the people in the US we send cheques to have no problem with them.

I thinking it may be a terminology issue. Here in Australia, if you want to cash a cheque, you go a bank and expect them to give you cold hard cash. AFAIK, no bank in the world is going to do that with an internalional cheque (nor should they - they have no idea if the cheque is real or not, let alone if there is any money in the account).

If you want to bank a cheque here, no problem. You go to a bank with your cheque, you fill out a deposit slip, your bank sends it to my bank who approves it (checks the signature, confirms funds are available), and sends it back. It takes a few weeks if the banks are in other countries, a few days if they are in the same country.

So:
(1) in the US, when would you cross a cheque "non negotiable"? What happens if you do, vs do not?
(2) what does "cash" a cheque mean in the US?

I love WAG'ing myself, but in this instance I'd really like to hear from people who know the facts.

Thanksabunch.

caphis
04-13-2005, 02:40 AM
(1) in the US, when would you cross a cheque "non negotiable"? What happens if you do, vs do not?

No real answer for you, but a humorous anecdote about "non negotiable" checks is here (http://man1bank0.com/).

(2) what does "cash" a cheque mean in the US?

Well, I personally use the phrase "cash a check" to mean that I'm taking a check to the bank to get the amount in cash. Others probably use it interchangably to mean "deposit a check," which I'd say means taking a check to the bank with the intent to deposit it (either in full or partially) into an account. YMMV.

Lok
04-13-2005, 02:44 AM
1. Non Negotiable does not have any meaning on the face of a check here. But it is an obscure piece of financial regulations, so some banks may think the check is no good. It is common for advertisers here in the US to use what looks like checks with those words on them to entice people to borrow from them. There is a story here (http://goodthink.com/writing/stories.cfm) about what happened to a man that cashed one of them.

2. Cashing a check depends on the person and the region. Some mean depositing it in their bank, others mean getting cash for it. Most people in my part of the coutry usually mean the second.

Hope this helps.

Lok
04-13-2005, 02:46 AM
I guess great minds think alike. :D

Lok

Canadjun
04-13-2005, 09:13 AM
A lot of people in North America would read "not negotiable" as meaning "this is a pretend cheque", although I realize that in the financial community that is not what it means. I'm not surprised you've had a few people go "Huh?".

The nearest equivalent that is common here to "crossing a cheque" would be to write on the back "For Deposit Only". However, that is normally done by the recipient (if they so choose), not by the sender.

It might vary in different parts of North America, but to me "cashing" a cheque doesn't necessarily mean exchanging it directlly for cash, it can also mean depositing it in a bank account (I don't think I have ever exchanged a cheque for cash without going via a bank account).

Related question. WHY do you cross cheques or mark them not negotiable when you send them out? Doesn't the person to whom the cheque is made out still have to sign the back (even if they then endorse it "Pay to the order of" somebody else)? I can see the point for a recipient to do so - it retains a little security even after you sign it if it's inconvenient to wait to sign it until you physically deposit it, but I can't see the point for a sender.

Spectre of Pithecanthropus
04-13-2005, 09:37 AM
Sometimes, the people we send cheques to say they cannot "cash" our cheques, while other people have no problem at all. .

Just curious, why do you have "cash" in quotes? Is the word not used like that in Austrailia? Strictly speaking, "cash" means to present a check for immediate cash payment over the counter, but broadly it also includes the meaning of depositing into your own account. It also means to write a check to yourself and present it to the teller at your own bank, for cash--not done very much anymore with ATM machines everywhere.

Balthisar
04-13-2005, 09:44 AM
Wow. My fellow Americans surprise me. I'd never, ever imagine that "cashing a check" was anything aside from exchanging it for cash. Otherwise one is just depositing it. I've used ATM's all over the USA, and I've never seen "cash a check" instead of "deposit" on the options screen. :)

Biffy the Elephant Shrew
04-13-2005, 09:57 AM
A lot of people in North America would read "not negotiable" as meaning "this is a pretend cheque", although I realize that in the financial community that is not what it means. I'm not surprised you've had a few people go "Huh?".

I'm sure that's what's printed on the mock-up checks that are commonly included in junk mail come-ons. To me those words clearly communicate "this document has no monetary value."

jacobsta811
04-13-2005, 10:30 AM
Where I come from, if you said I already "cashed" that check, I would just assume that you had endorsed it and received the money, whether it be via a deposit or actually getting cash back from the check. As far as "Not Negotiable" if you put that on my check I would assume you were sending me funny money- thats the kind of thing you get instead of a signature on "checks" that are really just a deposit slip for direct deposit. AFAIK there is no way for you to prevent people from receiving cash for a valid check (although no bank in their right mind will do it w/out a larger amount already in your account or a LOOONNNG relationship with your company). So all you are really doing is confusing the hell out of your american customers/suppliers/ whatever- I suggest you drop the Not Negotiable part.

Mr. Slant
04-13-2005, 10:55 AM
I have discovered that in the US, banks are staffed by people with little to no training in the law as it relates to banking.
Tellers and their immediate superiors are trained in a specific limited set of transactions and how to perform them. If your request deviates from the norm, even if it is both lawful and in the interests of the bank, you'll wind up speaking to the branch manager.
The branch manager is probably an intelligent and well-educated person. For some reason, the education given to the branch manager never included federal banking regulations, the uniform commercial code, or (at larger banks) even the inner workings of the bank employing the branch manager.
In handling what should have been a routine transaction relating to an ATM refund, I've wound up going over the branch manager's head and straight to their operations manager at the bank's data processing center... just to fill out a dispute form that the bank is mandated by Federal law to make available to its customers.

My remarks to the original poster:
1. At US law, there is no meaning associated with the terms "non-negotiable" when printed on a Check. So don't put it on your checks headed to the US.. there's no point.
2. Your problems stem from the fact that front office bank staff is poorly trained and ill-educated.

RayMan
04-13-2005, 12:42 PM
Jonathan Woodall, perhaps you are in a position to speak intellignetly about your bank, but I find your characterization of banking staff in general to be arrogant and unfortunate. I used to be a bank teller. I was trained in bank procedure and laws regulating banking, including relevant sections of the Uniform Commercial Code. I found my colleagues to be intelligent, commited, hard-working individuals, generally knowledgeable about banking laws. I know for certain that I made mistakes as a teller, but I would hope that my customers gave me the benefit of the doubt, before they questioned my training or level of education. I hope you will extend bank staff the same courtesy.

As to the question at hand, the situation is complicated by the fact that, under certain circumstances, the phrase "not negotiable", or wording to that effect, does have legal meaning. As we see below, though, checks are specifically exempted from this restriction, as per the Uniform Commercial Code (http://law.cornell.edu/ucc/3/):
(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Article.Bolding mine.

So, if the instrument presented for payment is in fact a check (as defined in excruciating detail elsewhere in the UCC), it should be honored, despite the presence of the statement "not negotiable". I realize that this is exactly the point that Jonathan Woodall was making in his previous post.

I would argue that it is not unreasonable for a teller to question the legitimacy of a check with the phrase "not negotiable" conspicuously displayed on it. As someone mentioned before, some not-so-reputable outfits like to send out check look alikes as promotions. By not writing "not negotiable" on a check in the first palce, everyone involved will be saved a lot of hassle.

As a final question, what do you mean, abby, when you write, "cross a cheque"? What does cross refer to? Do you mean the phrase "not negotiable" is written on the face of the check? Or is it literally written across the whole check? You'll have to clarify for me.

Spectre of Pithecanthropus
04-13-2005, 01:20 PM
Wow. My fellow Americans surprise me. I'd never, ever imagine that "cashing a check" was anything aside from exchanging it for cash. Otherwise one is just depositing it. I've used ATM's all over the USA, and I've never seen "cash a check" instead of "deposit" on the options screen. :)

I hear it used in figurative senses, for example "the XYZ company is in such dire financial straits that their checks will be dishonored when the vendors attempt to cash them." We know these vendors aren't going to physically walk the checks into a bank and cash them over the counter; rather they'd just deposit them in their own banks, but I've still heard the word used this way.

Cunctator
04-13-2005, 07:19 PM
As a final question, what do you mean, abby, when you write, "cross a cheque"? What does cross refer to? Do you mean the phrase "not negotiable" is written on the face of the check? Or is it literally written across the whole check? You'll have to clarify for me.To "cross a cheque" means to draw two parallel lines across the cheque. When I write a cheque I draw the two lines diagonally across the cheque towards the right hand side and then write the words "not negotiable" within the parallel lines. On pre-printed cheques, the lines and words "not negotiable" are usually just printed somewhere on the cheque - often the bottom left corner.


If you "cross a cheque" then it tells the drawee bank not to pay the cheque otherwise than to a bank.

If you write "not negotiable" between the lines it basically means that the person receiving the cheque cannot gain, and therefore cannot cannot give, a better title than that which the previous person had.

GorillaMan
04-13-2005, 07:32 PM
I think I'm the first Brit to add extra confusion:

When we take a cheque (and only one spelling is acceptable ;) ) and pay it into our bank account, we pay in a cheque. The same as with cash, or anything else. 'Cashing' a cheque means a straight switch of paper-for-cash. This is generally reserved for the kind of people who are constantly on the run from debt collectors. Not least because it's either done by your own bank (who know what you owe them), or legitimate high-street traders with clearly-advertised extortionate charges.

If you said you were going to bank a cheque, you'd seem either foreign or very crude.

In respect to the OP: Only ever assume cheques are to be used within the country of issue. Exchange or negotiation of cheques across borders is a wonderful way for banks to make money (oh, I'm sorry, that should read "a wonderful way for banks to demonstrate their efficiency in processing simple transactions). Every and any excuse will crop up.

Mk VII
04-13-2005, 07:47 PM
we would expect 'not negotiable' to mean it cannot be paid into another account than that of the payee whose name is written on it.

HMS Irruncible
04-13-2005, 08:14 PM
To "cross a cheque" means to draw two parallel lines across the cheque. When I write a cheque I draw the two lines diagonally across the cheque towards the right hand side and then write the words "not negotiable" within the parallel lines. On pre-printed cheques, the lines and words "not negotiable" are usually just printed somewhere on the cheque - often the bottom left corner.
I can't speak for residents of other English-speaking countries. But any American seeing such a check will first assume that the issuer intended that the check not be redeemed, and might not consider the matter beyond that initial assumption. Diagonal lines crossing the check and the words "not negotiable" are both informal ways used to communicate that the check is erroneous, false, already processed, or not to be redeemed for other reasons. The key word is informal.

The irony is, of course, that under US banking law the check may be valid even if it is "crossed" and bears the terms "non-negotiable." There are (IIRC) 9 criteria used to determine the validity of a check, and if 7 of the 9 criteria are met, then the check must be considered a legal financial instrument in spite of any printed or written notices to the contrary.

A few years ago, a man named Patrick Combs tested this law to spectacular and entertaining effect. If you read his story (http://man1bank0.com/), you will be entertained for 20 minutes and be introduced to some salient points of US check processing that are also relevant to your situation.

HMS Irruncible
04-13-2005, 08:20 PM
If you write "not negotiable" between the lines it basically means that the person receiving the cheque cannot gain, and therefore cannot cannot give, a better title than that which the previous person had.

Sorry I did not mention this in my previous post, but in the US, this is accomplished by writing "For Deposit Only" on the endorser's signature block. I do not know whether that is statutory or informal, but it is the most common thing I have seen.

wonderwench
04-13-2005, 08:26 PM
A few years ago, a man named Patrick Combs tested this law to spectacular and entertaining effect. If you read his story (http://man1bank0.com/), you will be entertained for 20 minutes and be introduced to some salient points of US check processing that are also relevant to your situation.


I've read Patrick's saga, which is quite hysterical. Another funny encounter with the wonderful world of consumer finance is the Credit Card Prank.

http://zug.com/pranks/credit_card/

HMS Irruncible
04-13-2005, 08:55 PM
(2) what does "cash" a cheque mean in the US?
The literal meaning is the same as everywhere else... to exchange the check for cash.

The metaphorical meaning is to have the check honored. Thus, "I can't cash this check" is the same as saying "I have reason to believe that my bank won't honor this check." Thus follow the implications that you can't deposit, cash, or otherwise tender the check.

Cunctator
04-13-2005, 09:14 PM
Sorry I did not mention this in my previous post, but in the US, this is accomplished by writing "For Deposit Only" on the endorser's signature block. I do not know whether that is statutory or informal, but it is the most common thing I have seen.The crossed lines perform that function in Australia.

Mr. Slant
04-13-2005, 11:25 PM
Jonathan Woodall, perhaps you are in a position to speak intellignetly about your bank, but I find your characterization of banking staff in general to be arrogant and unfortunate. I used to be a bank teller. I was trained in bank procedure and laws regulating banking, including relevant sections of the Uniform Commercial Code. I found my colleagues to be intelligent, commited, hard-working individuals, generally knowledgeable about banking laws. SNIP

In my former capacity, I had cause to deal with a substantial number of banks.
I was not complaining about a particular bank I did business with. I was complaining about dozens.
I will gladly concede that 3/4ths of the time I had no trouble at all straightening out the problems my customers got into.
I would imagine that our OP's customers have a batting average at least as good as that, even with his "non-negotiable" checks.
I'd bet that the bank you were employed by would have been one of the ones where I would not have run into 3 seconds worth of trouble in helping my clients.
As far as your feelings about my attitudes towards banking staff, you're correct. This would be pit material if you said it about me, but I'll concede I'm simply flat-out arrogant and self-centered. I try to work on that character flaw, but it's hard to change overnight.

Northern Piper
04-13-2005, 11:55 PM
Cuncutator, we have crossed cheques in Canada (at least, our law deals with them - I've never seen one myself). See the federal Bills of Exchange Act (http://laws.justice.gc.ca/en/B-4/7580.html), at ss. 168-175.

For those who've asked about why one would cross a cheque and make it non-negotiable - there's confusion in the discussions here about "payable" and "negotiable." "Payable" means that the cheque is valid as between the person who wrote it (the "drawer") and the person named in it (the "payee"). "Negotiable" means that the payee can exchange the cheque for value to an innocent third party.

So what's the diff? Basically, the ability of the maker of the cheque to stop payment, so long as it's still with the person it's been made out to.

Suppose I buy a used car from my buddy Albert, and pay him for it with a cheque made out to him. The next day, the police come by and tell me that the car was stolen and they re-possess it to return it to the true owner. Naturally, I rush to the phone and tell my bank to stop payment on the cheque to Albert. If Albert still has it, the bank can accept my instructions to dishonour the cheque. If Albert sues me for failure to honour the cheque, I can raise as a defence that the cheque was payment for a car, Albert failed to pass good title to the car, so he's got no right to payment of the cheque.

But what if Albert has gone to one of those Cheque-Cashing Places™, and assigned the cheque to them for cash? At that moment, he's negotiated the cheque, to an innocent third party, for value. Now that it's been negotiated, if I stop payment and the Cheque-Cashing Place sues me on the cheque, I can't raise as a defence against the Cheque-Cashing Place that Albert is in breach of our contract. Their reaction, not surprisingly, is that's between me and Albert, but they have a piece of paper with my name on it and I have to honour it. My only remedy is to sue Albert and hope he's not blown it all.

What it boils down to is that the payee of a negotiable cheque can give a better title to the cheque than he has himself, provided he negotiates it with an innocent third party for value.

That's why it's open to the drawer of a cheque to say that it's a non-negotiable cheque. That doesn't prevent the payee from exchanging with a third party - but it puts the third party on notice that he's taking the cheque subject to whatever claims the drawer of the cheque may have had against the payee. Or, as Cuncutator put it: If you write "not negotiable" between the lines it basically means that the person receiving the cheque cannot gain, and therefore cannot cannot give, a better title than that which the previous person had. See s. 174 of the Canadian Bills of Exchange Act (http://laws.justice.gc.ca/en/B-4/7580.html) for the same point.

Crossing the cheque provides some protection to the drawer of the cheque, which I assume may have some comfort for Cuncutator's employer, who seems to be sending cheques all over the world.

Note that this is not the same as the payee writing "for deposit only" on the cheque. That protects the payee, if he loses the endorsed cheque on the way to the bank, not the drawer of the cheque.

And as usual, this is not legal advice, but simply to comment on a matter of public interest. It may not even be correct in your jursidiction, since the law can vary on these sorts of things from jurisdiciton to jurisdiction. If you need advice on an issue of this sort, consult a lawyer skilled in the law on this point in your jurisdiction.

Northern Piper
04-13-2005, 11:59 PM
piffle. I meant to say abby, not Cuncutator in the first reference and the last, but Cuncutator in the middle reference. This is all so confusing sometimes. :smack:

abby
04-14-2005, 01:54 AM
Thanks for the info guys. Looks like "not negotiable" just causes too much trouble, so we'll leave it off the next batch of cheques we get printed.

a

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