Understanding Checks: A Comprehensive Overview

Checks: A Comprehensive Overview

What is a Check?

A check is a document instructing a bank (the drawee) to pay a specific amount of money to the check holder (the payee) from the account of the person who wrote the check (the drawer).

Parties Involved

• Drawer: The person who writes and signs the check, authorizing the payment.
• Drawee: The bank or financial institution where the drawer has an account.
• Payee/Holder: The person or entity to whom the check is made payable.
• Guarantor: A person who guarantees payment if the drawer's account has insufficient funds.
• Endorser: The payee who signs the back of the check to transfer ownership.
• Endorsee: The person to whom the check is endorsed.

Types of Checks

Forms of Writing

• Bearer: Payable to the person holding the check.
• Nominative: Payable to a specific person. Can be further categorized as:
  • To Order: Transferable by endorsement.
  • Not to Order: Non-transferable.

Special Checks

• Certified Check: Guaranteed by the drawee bank, confirming sufficient funds.
• Crossed Check: Marked with two parallel lines to restrict payment. Can be:
  • General Cross: No specific bank indicated; payable only to a bank account.
  • Special Cross: Payable only to the specified bank.
• Check to be Credited: Marked "to pay into account," requiring deposit into an account.
• Banker's Check: Issued by a bank, guaranteed by the bank's funds.

Payment and Time Limits

Checks are payable on demand. Legal time limits for presenting a check for payment vary:

• Within Spain: 15 days
• Within Europe: 20 days
• Outside Europe: 60 days

These periods are calculated from the date of issue. If the due date falls on a non-working day, the next business day becomes the due date.

Non-Payment

If the drawer's account lacks funds, the holder can exercise their right to payment. Non-payment must be formally documented through a notary protest or an equivalent declaration from the drawee bank.

Endorsement

Endorsement is the process of transferring check ownership. The endorser signs the back of the check, making it payable to the endorsee. Checks payable "to order" are transferable through endorsement. A blank endorsement omits the endorsee's name.