Certified Check

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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 situation 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 certification. 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 certified check, a type of Commercial Paper or negotiable instrument, is governed by Article 3 of the Uniform Commercial Code.

certified check

n. a check issued by a bank which certifies that the maker of the check has enough money in his/her account to cover the amount to be paid. The bank sets aside the funds so that the check will remain good even if other checks are written on the particular account. Like a cashier's check, a certified check guarantees that it is immediately good since it is guaranteed by the bank and the recipient does not have to wait until it "clears." (See: cashier's check)

References in periodicals archive ?
I just want people to know that banker's drafts are not the guarantee of payment that you might think they are," he said.
He asked for my name, address, telephone number and account details so he could send me a banker's draft.
One suitcase contained four new suits, a computer and mobile phone, and the banker's drafts and cheques were in a black toilet bag which he put to one side rousing the officers' suspicions, said prosecutor Shaun Dodds.
Banker's drafts can be stolen or altered like any other cheque and if it is altered, stolen or counterfeit it will not be honoured.
But the banker's drafts were forged and the cheque later bounced.
After the case, one of Rimdeika's victims, who asked not to be named, warned people to be aware of the risks of banker's drafts.
To buy it the crime lord was forced to change pounds 80,000 (EUR100,000) in cash into banker's drafts for the purchase.
Only banker's drafts to other people or companies are affected and customers taking one payable to themselves don't have to pay.