A guide to new rules of checks and checking.

• Author: Winslow, Edward, III
• Position: North Carolina - 1997 Law Journal

Although banking is being transformed by electronic payments and paperless commerce, the old-fashioned system of payments by check is bigger than ever. And it's still growing. The future may belong to the electron, but for now and the near future North Carolina businesses and their banks remain tied to the centuries-old system of negotiable instruments.

Two years ago, the legislature rewrote the North Carolina law of checks and checking. It made a number of nuts-and-bolts changes to the system. Here are some of the new rules most likely to make a practical difference to North Carolina businesses.

The "full-payment" check

In years past, North Carolina courts have been kept busy deciding who wins when one party writes a check and labels it "full and final payment" or words to that effect, then the payee crosses out those words and negotiates the check. This is now the subject of a special statute.

Under the new law, a full-payment check is enforceable if tendered in good faith in full satisfaction of a claim that is unliquidated or subject to a bona fide dispute, if either the check or an accompanying writing contains a conspicuous statement that the check is tendered in full payment of the claim. When that happens and the payee negotiates the check, there is a final payment even if the payee marks out the offending words.

This procedure could be a source of trouble for companies engaged in sizable collections activities. Must creditors scan every check to ensure that the debtor isn't trying to slip a full-payment check through the system? The statute anticipates this problem. Corporations and other organizations may establish separate addresses to which all full-payment checks must be sent. If that's not done, "full-payment checks" can be mailed to the general address, and the new rules will apply.

The postdated check

Under the old law, if a bank accepted a postdated check before the prescribed date, the customer might complain that the bank was not authorized to pay the check. That is, banks were liable for damages that resulted from paying a postdated check too soon.

That has been changed. Now, banks are not liable for paying postdated checks unless customers give advance notice to the bank. Banks can be expected to make an appropriate charge for this service. If no notice is given, the fact that a check is postdated will have no significance as far as the bank is concerned.

Does a bank have to read a check?

From its beginnings, the law of...