CERTIFIED CHECK
A sample certified check
A written order made by a depositor to a bank to pay a certain sum to the person designated – the payee – which is marked by the bank as ”accepted” or “certified”, thereby unconditionally promising that the bank will pay the order upon its presentation by the payee.
A certified check is considered the equivalent of cash since the bank, by its certification,
guarantees it to be cashable. No bank is under a duty to its depositors or anyone else to certify checks since it involves the assumption of a new obligation for which it is primarily responsible.
It is a commonplace practice, however, and there
is usually a small fee for this service. A certified
check is often required by a payee who does not
want to rely only upon the credit of the drawer,
the person who wrote the check.
A payee who requires a drawer’s check to be
certified ensures his or her right to payment.
Not only can the payee seek payment from the
certified bank, but if for some reason the bank
refuses to pay, the payee retains the right to
enforce payment from the drawer. In this situa-
tion the bank is primarily liable while the drawer
is secondarily liable.
Occasionally the payee or subsequent holder
of the check – a person who has been legally
given possession and the right to payment – will
present the check to the drawer’s bank for certi-
fication. Although the bank is obligated to cash
the check, it need not certify the check because
only it, not the drawer or any subsequent
endorsers, would be liable for its payment. Some
banks will certify a check in such instances only
with the approval of the drawer.
If a bank refuses to pay a check that it has
certified, its drawer or holder may sue the bank
for its wrongful conduct, called dishonor. A cer-
tified check, a type of COMMERCIAL PAPER or
negotiable instrument, is governed by Article 3 of the UNIFORM COMMERCIAL CODE.
