Legal Question in Banking Law in Texas

stop payment on a payroll check lost in the mail.

We mailed a payroll check out to a terminated employee. The employee called several times over a 2 week period stating that he had not received the check. We put a stop payment on the check and issued a new one because we assumed it was lost in the mail. A few months later said employee took the check that we had put a stop payment on and cashed it at a check cashing business. This business has now filed a lawsuit against us stating that we cannot stop payment on a check. Can someone please tell me what our legal rights are regarding a stop payment on a check?


Asked on 9/08/05, 3:19 pm

1 Answer from Attorneys

Re: stop payment on a payroll check lost in the mail.

Stop-payment fees are among the highest fees banks charge; right up they�re with fees for bouncing a check. Partially because of the effort it takes to catch the check before it's paid and to manually process it and partially because your bank assumes the risk.

"When a bank accepts a stop-payment order, they acknowledge you have written a check and given it to the payee and now they will play defense for you and keep this check from being debited from your account. It is similar to a guarantee in that if the customer makes a timely stop-payment order and gives an adequate description of the check and the bank accidentally pays the check, then the bank is liable to the customer for the amount of the check.

If the stop-payment order isn't made quickly enough, or if the customer can't adequately describe the check -- the check number, payee and amount -- then the bank is not responsible. The bank has to be given adequate time to notify all of its branches of the order. Once the check has been paid, the consumer is on his own in trying to retrieve the money from the person who cashed the check.

The Uniform Commercial Code is a set of statutes that deals with, among other things, negotiable instruments, and governs some aspects regarding stop-payment orders. Written stop-payment orders are good for six months. You can call your bank and make an oral stop-payment order, but it will expire after 14 days if you don't come into the bank and put it in writing. A stop-payment order can be renewed for an additional six months.

What bank was this? What company filed suit? Have you hired counsel on this?

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Answered on 9/08/05, 3:56 pm


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