Hi

I run a company in Australia that regularly has to write cheques to American people or companies. Because there are a lot of cheques to be written, we get them pre-printed at A4 size, then run them through our printer to print the "pay to", and "sum of " fields, then I manually sign them.

Sometimes, the people we send cheques to say they cannot "cash" (presumably, they mean "bank") our cheques, while other people have no problem at all. The people who cannot cash them get quite angry with us, saying we're sending them bad cheques.

Here in Australia, you cross a cheque "not negotiable" if you want only the person / company named on the cheque to be able to bank it, and in fact I assumed that was a worldwide thing, especially as around half the people in the US we send cheques to have no problem with them.


So, in the US, when would you cross a cheque "non negotiable"? What happens if you do, vs do not?

Thanksabunch.

Hello there to our down-under friends!!

I think that you have a problem with a difference in the banking practices within the two nations and the meaning of the terminology.

In the US, there really isn't any method to require that a specific check be paid into someones account. In fact, all checks are consider negotiable in the US.

By placing the label on the check of "Not Negotiable" it would may lead the bank of the depositor to believe that it cannot expect that it will get paid for it upon presentment to your bank.

Most banks over here would not be familiar enough with the banking practices in your country to know any difference.

Therefore, the words "Not Negotiable" means two very diverse things in the two countries.

Hope this helps a little.

G'day Mate!

I would observe that Article 3-104(d) of the UCC states:

“A promise or order OTHER THAN A CHECK [my emphasis] is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable ….”

Therefore the UCC would seem to recognise a non-negotiable cheque. Also Article 3-201(a) states:

‘"Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.’

Therefore I cannot see any grounds for a U.S. banker to think the expression ‘not negotiable’ has any relevance to honour. Anyway, why not put ‘Not transferable’ on instead or -if you want really to confuse people- ‘Account payee’ as we do in the U.K.

It's obviously true that not all of the English-speaking world marches to the same drummer in matters of commercial law -- or orthography . I think it fair to say that not all banks in the United States have the level of knowledge of Australian banking practice that would be required to understand that "not negotiable" in Perth is not equivalent to "not negotiable" in New York.

The fact that more than half of the payees of our Australian friend's checks apparently have no problems with them may well be the result of their dealing with banks with international departments with some familiarity with customs Australian. But the vast majority of U.S. banks have no need for international departments, and might well be expected to look askance at verbiage that might appear, from their parochial perspectives, to make a document worthless.

The payroll notice I get - which looks exactly like a check, except for the fact that "non-negotiable" is watermarked across it - was always presumed by me to be marked in that way specifically to prevent me from depositing or cashing it. If I was a teller and saw the same notation on a foreign item prior to this posting, you can bet I would not have accepted it for deposit. (And even now I would say the appropriate way for our community bank to handle it would be to send it for collection.)

Anon, would it be possible to send a "fact sheet" the first time you pay a US vendor explaining how they should present the item to their banker?

Sorry if I’m being obtuse, but surely it is not a question of Australian banking practice not being known to U.S. bankers but of U.S. bankers failing to understand the correct meaning of ‘not negotiable’ in the context of UCC Article 3? As to the payroll notice alluded to above, it would seem the words ‘not negotiable’ are being used inappropriately.

Redcoat -- While there may be a distinct difference between the legal and common senses of the phrase "not negotiable," there can be no misunderstanding of the fact that a bank in the United States is under no obligation to either exchange a check not drawn upon itself for cash or to accept the same check for deposit. The practical result is that when checks that have been crossed "not negotiable" are encountered by U.S. bankers, it is to be expected that many would refuse to accept the checks, drawing upon their "common sense" of the phrase.

As for our Aussie friend's question, it is not a practice in the United States to "cross a [check]" (to borrow his phrase) to prevent the payee from exchanging the check for cash.

I'm sorry, but if something is "not negotiable" how could it NOT be understood that a holder would NOT have the ability to NEGOTIATE the item?

Let's stray just a bit from the UCC and study the definitions of the word:

negotiable
A adjective
1 assignable, conveyable, negotiable, transferable, transferrable

legally transferable to the ownership of another; "negotiable bonds"

2 negotiable, on_the_table

able to be negotiated or arranged by compromise; "negotiable demands"; "the proposal is still on the table"

3 negotiable

capable of being passed or negotiated; "a negotiable road"

When you put the word "not" before the word "negotiable", it just makes sense that the check is not to be cashed, passed, deposited, or in any other way NEGOTIATED.

I was going to let the matter drop (the expressions 'head' and 'brick wall' come to mind) but the posting immediately above has provoked me into further activity. Article 3.201a of the UCC says:

‘"Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.’

Therefore, ‘not negotiable’ on a cheque -in a state that has adopted the UCC- can ONLY mean that ‘transfer of possession’ is prohibited; and NOTHING ELSE (however the dictionary or everyday usage may treat the word ‘negotiable’ and thus ‘straying from the UCC’ is wholly inappropriate). I cannot see that the fact that ‘transfer of possession’ is prohibited is, of itself, any barrier to a bank collecting and crediting the proceeds of such a cheque to an account in the name of the payee. No doubt someone who actually understands the operation of negotiable instrument law in general and the UCC in particular will explain why it is, if in fact that is the case.

It certainly comes as a surprise to me that U.S. bankers would ‘draw upon their "common sense" of the phrase’ rather than its legal meaning. Clearly, the moral of this Antipodean story is that many U.S. cashiers do not receive any training in negotiable instrument law even though they -presumably- handle negotiable instruments ‘day-in day-out’.

Quote:

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‘"Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.’

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Redcoat - I believe your answer above explains it all. For example, Joe Smith writes a check to Fred Smith. Fred comes into my bank, Happy Bank, with this check that states "Not Negotiable" on this check. Fred would like to transfer the possession of this check from himself to Happy Bank, by either cashing it, transferring ownership to me in exchange for a cashiers check, or depositing the item into his account. However, Fred is not the original issuer of this check, and therefore cannot transfer ownership to Happy Bank. If Happy Bank were to cash or deposit this check, Happy Bank would now be the holder in due course (ownership) of this item, which Happy Bank is legally prevented from being, based on the "Not Negotiable" stamp.