Question & Answer

Question: We cashed out a check about an hour after the stop payment was put on, before we had a chance to get it onto the system. Are we liable? This is a tenant/landlord dispute, and the landlord rushed right in and cashed the check as soon as it was handed to him. The tenant gave him the check, but evidently had no intention of us paying it, as he called the stop payment in right away - but it was too late for us to take action. Now he wants his money back.

Answer: There are a couple of problems here. First, the timing of the stop payment. The courts have traditionally found that you must have a "reasonable time" to effect a stop payment. Before the days of computers and instant information, that used to mean up to 36 hours! I think you'd have a hard time holding off that long, but certainly an hour is not completely "reasonable." The UCC is pretty clear in this area.

The other problem really is not yours, but your customer's. Basically he gave out what he knew was a bad check. Giving out a check on which you intend to stop payment ranks right up there with check fraud. You paid the check in good faith to the intended payee. We think you should tell your customer to battle it out with his landlord.

Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 12, 12/98