Here’s a little something you might not ever have considered: Every time you write a check you have given someone your name, your address, possibly your phone number and – in some cases – even your driver’s license number if it’s included on the check.
That information, therefore, becomes part of the public domain. It’s out there and the person to whom you wrote the check might have some mischief in mind when he or she receives that check.
If you’re victimized by some act of fraud, it is more difficult than you think to issue a “stop payment” on that check. You still might be held liable for the amount of the check you’ve written.
The law has a term called “Holder in Due Course,” which is defined as anyone who accepts a check for payment. If the check contains no evidence of fraud, the HIDC is entitled to be paid the amount of the check, under the Uniform Commercial Code.
If fraud occurs, it isn’t a simple process to simply stop payment. Case law is full of instances in which individuals have been forced to pay the amount of a check.
The HIDC has considerable power once the check is written and given to the individual or the company that accepts the check as payment. Consider one appellate court case that didn’t go too well for an insurance company.
In 1993, Cigna Insurance issued a worker’s comp check to a man in the amount of $484. The man, Robert Triffin, claimed he didn’t receive the check because of an address change. Cigna issued a new check, but Griffin cashed the check he actually did receive. Cigna didn’t honor the check and sent it back to the market’s bank. The check was sent back to the market, where the owner stuck it on a wall.
Triffin obtained the check from the bank. He became the new HIDC and was able to sue Cigna for the amount he said the company owed him.
The court ruled in Triffin’s favor. He got paid the money, plus interest.
The lesson? Be very careful when writing checks. Something very well could go wrong and it could cost you a bundle of money.