Counselor's Corner

by Mark Hargrave, Esq.

Question: We recently attended a seminar where we were told we had to wait 90 days to reissue a lost official (cashier's/teller's) check. Our customer is upset. He mailed the check three weeks ago, and it hasn't been received. It's for a real estate deal, and he isn't willing to wait the three weeks. Can we do anything?

Answer: What your seminar leader was talking about is the new Uniform Commercial Code guidance and limitations on official checks. Under the old code, if you issued a new check, and then the old check was presented later by a holder in due course, you were on the hook. You'd have to pay both, and hope you could get your money back from the original purchaser, unless he or she had purchased a bond guaranteeing the repayment.

Under the new code, if your customer signs a "Declaration of Loss", and you then wait the 90 days before issuing a new check, you no longer are liable for the original check-even if it is presented by a holder in due course. It takes you "out of the middle", so to speak.

Be sure your state has the appropriate UCC section covering this (UCC Article 3, Section 3-312) The revisions to UCC were presented in 1990. This one came along in 1991 and was not part of the original revision. Some states either have not or did not adopt this particular section along with the others.

Mark is a partner with Shook, Hardy & Bacon L.L.P., Kansas City. His practice focuses on the law of financial institutions, with special emphasis on issues involving commercial paper, bank deposits, and collections and regulatory compliance matters. Questions for the Counselor's Corner can be forwarded to the BANKERS' HOTLINE editorial office, FAX (610) 610-872-6231; email: hurst@bankersonline.

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 12, 12/97