Commercial paper--also known as a negotiable instrument--helps make commercial transactions easier. Instead of having cash-on-hand or entering into a formal contract, commercial paper allows people to pay for goods and services with a document that contains an unconditional promise or order to pay a fixed amount of money at a certain time or on demand. One common type of negotiable instrument is a check.
Importance of Checks
A check is a draft that's payable on demand and drawn on a bank. Checks are useful instruments. The payor -- the person writing the check -- can restrict the payment to a specific person -- the payee -- and keep a record of the check as proof of payment. You must fill out the check properly, however, or it may not be honored. One particular concern is filling out the "Dollars" line.
The proper way to fill out the dollars line is to write out the dollar amount of the check in words and to use a fraction for the cents. If the amount of the check is $35.76, for example, you would write “Thirty-Five and 76/100” on the dollars line. According to New Mexico State University, you should begin writing out the dollars as far to the left as possible, to avoid running out of space. Scribble a line after the cents towards the word “Dollars” printed on the check to fill in any extra space. If the amount is for something less than a dollar, such as a check for 50 cents, you can write “Only fifty cents” and cross out the remainder of the space on the line as well as the word “Dollars” on the check.
Effect of Dollar Line
The check's dollar line helps resolve any conflicts regarding the actual amount of the check. For example, a problem exists if you write “$40.50” on the amount line, but write “Forty-two and 50/100” on the dollar line. The holder of the check may not know what you intended the amount to be. In general, the written-out amount is more indicative of your intent than the numeric value. A bank will generally cash the check for the amount written out, as opposed to the amount written in numerals.
Payee Name and Signatures
Checks may present other concerns. For example, the payee’s name may be misspelled on the “Pay to the Order of” line. If this happens, the payee can still cash the check, but she must first sign the check exactly as the name was spelled on the payee line, then sign her real name underneath. Before the payee can cash the check, the payor must have signed the signature line. Be wary of signing blank checks -- someone may find the check and fill it in for any amount he chooses. While this constitutes fraud, it can be difficult to track the person down or otherwise recover your loss.
- New Mexico State University: Write Checks the Right Way
- Cornell University Law School: UCC Section 3-104, Negotiable Instrument
- National Credit Union Administration. "Understanding a Check and Balancing a Checkbook." Accessed June 4, 2020.
- Consumer Financial Protection Bureau. "I Received a Check Where the Words and the Numbers for the Amount Are Different." Accessed June 4, 2020.
- Consumer Financial Protection Bureau. "Can a Bank or Credit Union Cash a Post-Dated Check Before the Date on the Check?" Accessed June 4, 2020.
- Consumer Financial Protection Bureau. "My Bank/Credit Union Cashed a Post-Dated Check Even Though I Told Them About the Post-Dated Check Before They Received It." Accessed June 4, 2020.
- Department of the Treasury. "U.S. Treasury Check Security Features." Accessed June 4, 2020.
- Federal Reserve Consumer Help. "Can a Bank Refuse to Cash My Check?" Accessed June 4, 2020.
- Georgia Department of Banking and Finance. "Check Fraud / Counterfeit Checks." Accessed June 4, 2020.
- American Bankers Association. "ABA Routing Number." Accessed June 4, 2020.
Based in Traverse City, Mich., George Lawrence has been writing professionally since 2009. His work primarily appears on various websites. An avid outdoorsman, Lawrence holds Bachelor of Arts degrees in both criminal justice and English from Michigan State University, as well as a Juris Doctor from the Thomas M. Cooley Law School, where he graduated with honors.