Legal Question in Banking Law in Pennsylvania

Cashing third party checks

My grandaughter's husband was paid $3,000 by check for work performed on someone's home. When cashing the check at his own bank he was told he would need to wait five (5) days before the funds could be released. After the required 5 days the bank honored the check and paid out the money. Sometime after this, a bank representative contacted my grandaughter by phone and told her the check was no good and she and her husband must make good on the $3,000. She told the representative that since the bank cleared the check after the required waiting period and paid out the money they themselves should be responsible and not she and her husband. After much screaming and threats by this bank representative the bank has now filed a suit against my grandaughter and her husband with a hearing scheduled for late July.

What is the law in this case?


Asked on 7/15/06, 6:29 pm

1 Answer from Attorneys

Roger Traversa Arjont Group (Law Office of Roger Traversa)

Re: Cashing third party checks

The party depositing the check must make good on the funds and then file a claim against the drawer of the check. The bank cannot do this because the second bank does not have privity of contract with the drawer of the check.

In other words your grand-daughter's husband must pay the bank and then make a claim against the drawer (homeowner). In Pennsylvania a bad check of this size is a felony. The grand-son-in-law can 1) file a complaint with the police in the homeowner's locality, 2) can file a mechanics lien against the homeowner's property, 3) sue in small claims court.

There are very definite benefits and problems with all three actions and none are mutually exclusive. But, that said, maybe he should go back to the homeowner and request cash payment.

In many cases it is the best practice to cash a check at the drawee's banking institution. That way if the check actually is bad then the bank takes the hit if the bank pays on the check.


Roger Traversa

email: [email protected]

P.S. Are your estate documents up to date? Now is the time to act to make certain you are prepared for the future.

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Answered on 7/15/06, 7:17 pm

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