Legal Question in Business Law in California

Re: Accepting a post dated check for goods

Commercial Code section 4401(c) allows a bank to pay a postdated check and debit the customer's account unless the bank has been pre-notified about the particular item, i.e. there is a "stop payment" on it.

Civil Code section 1719 has some rather lengthy provisions regarding civil penalties and damages for passing bad checks and unwarranted use of stop-payment orders. However, I did not see anything in either Code that would suggest that the proposition you state is true. I think someone is trying to pull a fast one one you.

Nevertheless, there is some truth to the proposition. If you agree to hold the check for a specified number of days, you are forming a contract or modifying your contractual terms of sale to turn it into, in effect, a sale on credit. You have to honor your agreement to hold the check until the date thereon. After that, you can deposit it, and if it turns out to be NSF, the drawer of the check has breached the contract and also committed a bad-check offense.

If the drawer (payer) asks you to hold the check to an uncertain future date "when he has funds," you are foolish to take the deal, but even so there is an implied obligation on the drawer's part to have funds available within a reasonable time. This puts you in the undesirable position of having to ask the bank frequently, "Will this check go through today?" If it is never covered, the drawer is again in breach and has also committed a bad check offense, but when the breach and the offense occur is uncertain.

In any event, the customer/payer/drawer has a legal obligation to pay you for the goods or services, sooner or later, one way or another.