Understanding Checks: History, Concepts, and Legal Aspects
Check History and Evolution
- Origins: Similar to the bill of exchange in Europe during the Middle Ages.
- England: 17th century, Exchequer Bills – King orders the Treasury.
- France: 1865, first legal distinction between checks and bills of exchange.
- Brazil: 1860, first Brazilian legislation.
- Uniform Law: Geneva Convention in 1931, applied in Brazil since 1966.
- Brazil: 1985, Act 7357 (Check Act) – articles cited without source refer to this law.
General Check Concepts
Concept: An unconditional order of payment in cash, issued against a financial institution with a deposit contract and funds.
Law 7.357/85: Applies the check law, with the Uniform Law (Geneva Convention) as a secondary source for uncovered issues.
Subsidiary Application: Uniform Law of the check (Geneva Convention).
Check vs. Bill of Exchange: A check is an order against a financial institution (banks), while a bill of exchange is an order against anyone. A bill of exchange requires acceptance, unlike a check. Checks are based on a contractual relationship, while bills of exchange have an acceptance figure.
Key Check Features
Title of Credit: Considered an improper credit title by a minority doctrine, as it is for immediate payment with available funds.
Linked, Not Causal: The check is linked to a standardized form created by the bank, unlike bills of exchange and promissory notes. It is not causal because it is not directly linked to the legal business that led to its issuance, similar to bills and notes when endorsed.
Money Order: Not accepted.
QuesÃvel Obligation: The debtor is sought by the creditor for payment, not a portable obligation.
Required Check Characters
- Drawer (Issuer): The one who issues the check.
- Drawee (Bank): The financial institution against whom the order is issued.
- Payee (Beneficiary): The person or entity to whom the check is payable. Initially, bearer checks were allowed, but now checks over a certain amount must be registered.
Nominal Check: Should be nominal, but if the payee’s name is omitted, it can be filled later in good faith.
Clause to Order: Can be canceled by a simple line through the check.
Optional Check Characters
- Guarantors/Endorsed:
- Endorser/Endorsee:
Endorsement
Partial Endorsement: Not allowed. Must endorse the full amount or not at all.
Endorsement and CPMF: Initially, only one endorsement was allowed to prevent tax evasion. With the extinction of CPMF, any number of endorsements are now permitted.
Partial Endorsement: Now allowed, can be evaluated in part.
Joint Accounts
- Generates active solidarity between co-owners against the bank.
- Joint and several liability between co-owners and the lender.
- Only the co-owner who signed the check is the legitimate passive party.