Restrictive Legends Printed on Checks
Question: We have had a discussion on whether or not we should be checking the date and amount on checks that come in for payment that our customers have had printed that say right on the face of it that the check is void after 90 days, or that the check is not good over $500. If we are not checking those accounts, are we liable if we pay the checks when they come in through the exchange and are either over 90 days old, or are over $500?
Answer: One area that the revised UCC Articles 3 and 4 did not address was restrictive legends and similar items printed on the front of checks. In order to protect itself, therefore, a bank must build language into its deposit account contract to limit its liability.
Examples of restrictive or similar legends include not only the two you mention - Void After 90 days", and "Not Valid Over $500", but also "Two Signatures Required."
One way for the bank to protect itself is to have a provision in the deposit contract that states that the bank shall not be liable for payment of any check contrary to a restrictive legend or other limitation contained in or on the check unless the bank has specifically agreed in writing to the restrictions or limitations. This language is crucial, particularly with the use of third-party check printers, because the bank might not even have knowledge that the legend is on the check until a problem surfaces.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 5, 6/05
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