The UK Verification Rule: What is it? It is based on a simple legal rule which means that if you write a check to pay someone money, you are creating a contract by writing the check. If, for example, he has worked for someone who then pays him with a check and then the check is not honored, for example, he is stopped by the person writing the check, he may be relying on some old but well-established law. Under the Bills of Exchange Act of 1882, checks are classified as “bills of exchange.” In fact, the law in this piece of legislation is very strictly construed even now.
The use of checks as a means of payment: the law. When any good or service is paid for by check, there are legally two separate contracts made by the parties involved in the transaction. The main contract is what you expect it to be for the sale of goods or the provision of services. The second contract refers to the check itself. This is the important part of the ‘control rule’. The person who writes the check to pay the main contract legally agrees to pay the amount noted on the check. How can this help in practice? Offers an additional option to get paid if a check stops or bounces. First, as expected, there is the normal option to take legal action for non-payment of amounts due under the main contract. Also, based on the law in the ‘check rule’, there is the additional option to sue for the bounced check. In most cases, suing the check offers the significant advantage of leaving the buyer who bounced the check with a very limited set of defenses available. The exceptions that can be filed can only relate to the issuance of the check itself, for example, the check was issued under duress or as a result of fraud.
Is it faster to use the check rule than the normal approach? In most cases it will be much faster. If the seller sues for the main contract, the buyer can raise any of the normal defenses that relate to the contract itself to defend against legal action, for example, poor quality work, defective products, etc. This will normally result in a full trial of all issues in dispute between the parties. However, by suing for the bounced check, he can file a request for summary judgment. This allows a judge to decide the case without having a trial. Summary judgment is normally granted when there is no defense to the action. As mentioned above, the ‘check rule’ defenses only relate to the check itself and are rarely available. Therefore, suing for a stopped check can be a safer and simpler litigation process than suing for non-payment of the initial contract. This method of getting paid with so little to prove is something every businessperson should consider.
