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Elements of Negotiability

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					Elements of Negotiability
What makes a check negotiable?



A check or a share draft is an order, payable on demand to make payment, or a negotiable instrument. A negotiable instrument is a written order or promise a demand

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To be negotiable a check or share draft should contain the following:
1. 2.

3.
4. 5. 6.

Date Payee Amount Signature Financial Institution MICR Encoding Numbers

Date: Every check or share draft should have the current, definite date. Payee: Every check or draft should contain the words “Pay to the order of.”

Amount: A check or draft must be made out for a definite amount of money.

Signature: must be genuine and authorized. Financial Institution: must be indicated clearly on the face of the check MICR Encoding Numbers: Includes the transit routing number (ABA number), account number and check number

If one of these elements are missing, the check should not be negotiated!

Dorothy Norwood 222 Anhouster Drive Anywhere, GA 77789

64-7443/2611 7103600999992

1525 Date 06/30/04

$150.00______ Pay to the order of Sears Dept. Store Written Amount One Hundred Fifty and 00/100**************
MEMBERSFIRST_
Credit Union
Decatur, Georgia 30033

Dorothy Norwood
Signature of Maker

|:261174432|:

7103600999992

1525

Endorsements
An endorsement is nothing more than the Signature of a payee on the back of a check


It serves to transfer ownership of the check It is an implied promise that the check is genuine (not forged or fictitious) It guarantees all, if any, previous endorsements





Types of Endorsements
    

Blank Restrictive Special Conditional Qualified

Blank Endorsement
Ima Member



The mere writing of the payee's name on the back of the check

Restrictive Endorsement


This type of endorsement restricts the right of the party to whom the check is endorsed

Ima Member

For Deposit Only

Special Endorsement
Ima Member -Pay to the order of
Precious Dollar

Transferal of the negotiable instrument to someone else.

What should be done next?

Special Endorsement
Now, Precious Dollar must endorse the check in order for the check to be further negotiated
Ima Member –Pay to the order of Precious Dollar Precious Dollar

Conditional Endorsement
Pay to Precious Dollar when she graduates



Requires something to be done before the check is negotiable Rarely seen



Ex. "Pay to Precious Dollar when she graduates."

Qualified Endorsement
The endorser refuses to Take responsibility for the validity of the check
Pay to the order of Precious Dollar without recourse

Ima Member

Endorsement Rules
 

Single Payee Multi-Payee checks - AND - OR - No indication Checks or share drafts payable to “cash”, “self”, “myself” or “bearer”



Single Payee Endorsement



The check is endorsed as drawn

Multi-Payee Checks


More than one name listed besides “pay to the order of” May be payable…
  



Jointly Alternatively Ambiguously

Multi-Payee


And


These checks are considered to be joint checks
Endorsement of each payee Verify identification when cashing check







Member’s signature must be last on the back of check

Multi-Payee


OR


Either payee may endorse the check as drawn

Multi-Payee


If the check does not state

“AND” nor “OR” or has a COMMA(,)


The check is considered to be ambiguous Either payee may endorse the check as drawn and negotiate the check Exception to the rule





“Cash”, “Self”, “Myself” or “Bearer”



The check belongs to whomever endorses the check on the back

Account Numbers


The member’s account number MUST be written on the back of each check and legible

Ima Member

100023333

Endorsement Ink Color

What questions do you have?


				
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