Contradictory Terms in Checks: Formalism and Practice

Bashar H. Malkawi*

I. Introduction

The use of cash in transactions carries several drawbacks including insecurity as it

can be lost or stolen.1 The purpose of the law of negotiable instruments is to facilitate

transactions by using cash substitutes. Cash substitutes incorporate checks, drafts, and

promissory notes. However, checks are the most commonly used form as a payment

system. In 2006, for example, the total number of check transactions in Jordan was

109319.2 In comparison, checks were used in 42.5 billion transactions in the U.S.3

Therefore, the article will concentrate on the regulatory framework of checks in Jordan

and their practical usages as conducted by banks.

The Jordanian law on negotiable instruments, or commercial papers, provides

certain formalities for checks. 4 In addition, recent court decisions emphasize these

formalities and act as gap fillers in cases which the law does not address. The law as well

as court decisions form coherent body that governs bank's practice. However, banks in

Jordan practice in a manner not in line with the letter of the law and court decisions. The

practice by banks creates law-practice discrepancy and de facto pattern different from

what the law and court decisions say. Practice of banks can be considered as informal

* Department of Law, Yarmouk University, LL.B. 1999; James E. Rogers College of Law, University of
Arizona, LL.M. 2001; Washington College of Law, American University, S.J.D. 2005.
1
See Geva, From Commodity to Currency in Ancient History-on Commerce, Tyranny, and the Modern
Law of Money, 25 Osgoode Hall L.J. 115, 130 (1987).
2
See Central Bank of Jordan, Yearly Statistics Series-Check Clearing, available at
<http://www.cbj.gov.jo/uploads/si_15.xls> (last visited November 10, 2009).
3
See Geoffrey R. Gerdes & Jack K. Walton II, The Use of Checks and Other Non-cash Payment
Instruments in the United States, 88 Fed. Res. Bull. 360, 360 (2002).
4
The terms "commercial papers" and "negotiable instruments" can be used interchangeably. See Ronald J.
Mann, Searching for Negotiability in Payment and Credit Systems, 44 UCLA L. Rev. 951, 983 (1997) (the
term "commercial paper" generically describes all types of commercial negotiable instruments-promissory
notes, drafts, checks and certificates of deposit). See also William H. Lawrence, Diagramming Commercial
Paper Transactions, 52 Ohio St. L.J. 267, 271 (1991).

1
amendment to the law. The best example for law-practice discrepancy is the case of

contradictory terms in checks, especially as they relate to use of words and numbers.

The following sections analyze contradictory terms in checks as a matter of law and

practice. The starting section provides discussion of the legal framework governing

checks. The article then moves to analyze the law as pertains to formalities in checks and

a recent court decision regarding contradictory terms in checks. The article, finally,

provides conclusions aimed to streamline banking practices in the area of contradictory

terms.

II. The Legal Framework of Checks

A check is a three party instrument. The drawer calls upon a drawee to pay to the

order of a named payee or to the bearer of the instrument an indicated sum of money.5 A

check is a demand instrument. The check can be presented to the drawee bank

immediately. Thus, the holder of a check can exercise substantial leverage over the

debtor since it is due and payable at execution and full payment can be demanded at any

time.6

The law does not differentiate between ordinary checks, cashier's checks, teller's

checks, and traveler's checks.7 The law treats these types as checks without distinction.

5
See Jordanian Code of Commerce No. 12 of 1966, art. 123.c (1966).
6
Such leverage, however, is not possible with instruments payable at a definite time such as promissory
notes or bills of exchange. Time instruments are not due until the date specified in the note, and demand for
payment cannot be made until that date arrives. See Kurt Eggert, Held up in Due Course: Codification and
the Victory of Form over Intent in Negotiable Instrument Law, 35 Creighton L. Rev. 363, 375, 377-389
(2002).
7
A cashier's check is one issued by a bank, and sold to its customer to be payable to a third party, while a
teller's check is drawn by a bank on another bank. A traveler's check is an instrument issued by banks and
non-banks that is payable to the order of the purchaser and is payable on demand. See Alex Y. Lieberman,
Checking in and Cashing out: Cashier's Check Fraud, Depository Liability and Proposed Solutions, 12 N.C.
Banking Inst. 353, 356 (2008). See Gregory E. Maggs, Determining the Rights and Liabilities of the
Remitter of a Negotiable Instrument: A Theory Applied to Some Unsettled Questions, 36 B.C. L. Rev 619
(1995). See also Henry H. Perritt, Jr., Legal and Technological Infrastructure for Electronic Payment
Systems, 22 Rutgers Computer & Tech. L.J. 1, 10-13 (1996).

2
Cashier's checks and teller's checks are classified as bank checks and differ from ordinary

or personal checks. Unlike the drawer of an ordinary check, the purchaser of a cashier's

check or teller's check may not be able to require the bank to stop payment.8

Additionally, since the cashier's check or teller's check is drawn by a bank on its own

funds, the possibility of dishonor due to insufficient funds is small. Hence, cashier's

checks and teller's checks can be considered as the equivalent of cash.

A. Requisites for a Valid Check

For a writing to qualify as a check, it must comply with the requisites set forth in the

law. A failure to comply with these requisites renders the check invalid. 9 The requisites

of a valid check are related to the risks and administrative costs incurred by the payee.

The risks are measured by the likelihood that the payee will be paid the sum owed when

payment is due.

The word "check" must be inserted within the very text of the check and expressed in

the language used for writing it.10 In other words, the law requires that the item to be

called a "check." The need for inserting the word "check" seems to be historical. Even if

the word "check" is missing, the instrument can still be called a check and is considered

valid if all essential terms can be ascertained from the face of the instrument.

The check is an unconditional order to pay a determined sum.11 The instrument must

be free from any condition.12 However, there is a presumptive condition that, at the time

8
See Beane, Rights of Drawers, Banks, and Holders in Bank Checks and Other Cash Equivalents, 19 Tulsa
L.J. 612 (1984).
9
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 229. See also Court of Cassation,
Case No. 1731/2005, Adaleh Publications (2005).
10
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 228.a. See also Court of Cassation,
Case No. 258/88, Journal of Bar Association 328 (1990).
11
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 228.b.

3
of creating the instrument, the drawer has sufficient funds to cover the sum of the

check.13 As currently stands, the law does not provide further details. The law does not

specify what type of conditions invalidates a check. Will a reference in the writing that

the check is issued for payment of rent invalidates the instrument? It can be assumed that

what invalidates a check as a negotiable instrument would be subjecting the check to

another writing. For example, a check can be invalid if payment is contingent upon

receiving a functioning bicycle. Also, the check must call for payment of a fixed amount

of money. 14 Money can be in local or foreign currency.

The check must include the name of drawee, place of payment, and date of

issuance.15 A check is always drawn on a bank.16 In the absence of an indication to the

place of payment, it is the place indicated beside the name of the drawee or the place of

the main establishment of the drawee. Date of issuing the check plays an important role

in determining the capacity of the drawer and commencing of the prescription period.17

The check must be signed by the drawer.18 Any symbol can be used to sign. The purpose

of requiring signature is to authenticate the intention to be bound by the instrument.

12
See Court of Cassation, Case No. 153/87, Journal of Bar Association 1028 (1988) (The check is not
considered a negotiable instrument if contained a condition that it would be paid if the land is sold). See
also Court of Cassation, Case No. 1785/2006, Adaleh Publications (2006).
13
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 231.a.
14
Id. art. 228.b.
15
Id. art. 228.c, d & e.
16
Id. art. 230. See also Arthur Lewis, Banking Law and Practice 155 (1998).
17
Prescription is a mode of barring of actions as a result of inaction for a period of time. Prescription is not
merely a mechanism for the release of debts; rather, it is a mode of extinction of claims. See Mahir Jalili,
Time Bar Clauses in Saudi Arabian Contracts, 13 Int'l Construction L. Rev. 488, 490-91 (1996). See also
Reinhard Zimmermann, Comparative Foundations of the Law on Set-Off and Prescription 76 (2002).
18
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 228.f.

4
B. Parties to a Check

In a check, the drawer calls upon the drawee to pay a fixed amount of money. 19

While the drawee has primary liability for payment, the liability of the drawer of a check

is secondary. Once a check is accepted, the drawer is discharged. The beneficiary is the

party to whom a check is issued. The check may be made to a specific person or to the

bearer.20 The check may be made also to the order of the drawer himself or for a third

party's account.

The drawee is called upon to payment the amount due on the check.21 Hence, the

drawee is not party to the check until the drawee accept the obligation. Failure by the

drawee to accept the check may give rise to the drawee being liable to the drawer to

whom a duty to accept is owed.

C. Endorsement

Negotiation in the law of negotiable instruments is a special transfer of intangible

rights in a negotiable instrument.22 Negotiation of a check always entails the delivery of

the instrument to an entity who becomes a holder. Negotiation of a bearer check requires

transfer of possession. In the case of a check payable to a specific payee, negotiation

requires endorsement by the drawer or holder and transfer of possession.23 If a check is

deposited into a bank, the payee will have to endorse the check so that it can be

negotiated when moving through the bank's collection process.

19
Id. art. 123.
20
Id. art. 233.
21
Id. art. 230.
22
See James E. Byrne, Negotiation in Letter of Credit Practice and Law: The Evolution of the Doctrine, 42
Tex. Int'l L.J. 561, 563-564 (2007).
23
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 239. See Court of Cassation, Case
No. 4179/2005, Adaleh Publications (2006).

5
 Check can be transferable by endorsement through drawer's notation on the back of

the check. Under the law, any person to whom a check is issued can negotiate it. There

need be no special designation or nomination of a person for it to do so.24 Endorsement

entitles the endorsee to claim under the check as if it were payable directly to him.

An endorsement must be unconditional.25 Any condition on which endorsement may

depend is unacceptable. To effect negotiation, an endorsement must purport to convey the

entire instrument. Thus, partial endorsement is void.

An endorsement can be a "blank endorsement" which specifies no specific person

and just consist of a signature.26 A blank endorsement can convert a check into bearer

check. An endorsement can be also a "special endorsement" which specifies the person to

whom order the check is payable and requires that person's endorsement to enable further

negotiation of the instrument. Thus, a blank endorsement can be converted into a special

endorsement by adding words identifying the person to whom the instrument is to be

paid.

In general, negotiation of a check cannot be prevented. However, it is possible to

restrict further negotiation by indicating in the endorsement that it is "for collection" or

"for deposit."27 In this case, there can be no further negotiation and the check enters into

the bank collection process. A way to increase the value of the instrument is by an

endorsement "collection guaranteed."28 This type of endorsement gives rise to liability in

the guarantor only when the check after being presented was not honored.

24
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 144.
25
Id. art. 240.
26
Id.
27
Id. art. 148. See Court of Cassation, Case No. 601/1988, Journal of Bar Association (1988).
28
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 149.

6
D. Presentment and Payment

A check is payable on demand.29 Presentment is the demand to honor the instrument

made upon a drawee to pay the check that has become due. The check collection process

is not instantaneous. In most cases, the payee presents the check directly to the payor

bank for payment or the payee will deposit the check at another bank for collection which

will forward the check, usually through intermediary banks, to the payor bank. The bank

will review the signature(s) and examine the check for alterations or other indication of

fraud. The depositary bank will require the payee to indorse the check and that

endorsement will trigger the collection process. Since checks in fact are paid, each

collecting bank in the chain gives provisional credit for the amount of the check to its

predecessor in the chain as the check moves toward the payor bank.30 Then, in the

unlikely event that the payor bank dishonors the check, the credits can be reversed.

In the case is presented for payment before the date indicated as the date of issue, it

is payable on the day of presentation. Once payment is made, the drawer and drawee are

discharged. If the check, presented in due time, is not paid, then the payee can sue the

drawer, endorser, and other obligees. 31 The payee can establish his case for recovery by

simply producing the check and establishing the authenticity of the drawer's signature.

Once the case is substantiated, the payee is entitled to recover unless the drawer

establishes a defense. In this case, the payee can recover the unpaid amount of the check,

interests, and other charges.

29
Id. art. 245. See Court of Cassation, Case No. 2266/2001, Adaleh Publications (2001).
30
This practice is characteristic of the U.S. check collection system. It is reflected in the rules of article 4 of
the U.C.C concerning the entry of provisional settlements as checks are forwarded for collection. See
William F. Savino and David S. Widenor, Commercial Law, 57 Syracuse L. Rev. 837, 856 (2007).
31
See Jordanian Code of Commerce No. 12 of 1966, supra note 5, art. 260.

7
III. Formalism and Practice: A Dissonance

The largest volume of negotiable instruments handled by banks is checks. Checks are

simplified documents with certain pre-determined requirements. The volume of papers

involved in checks forced banks in Jordan to resort to automation and computerization.32

Some of legal requirements for a check can be outdated in the digital age. In practice,

banks ignore some formalities as a result of the volume of paper involved. However,

courts have been unprepared to go along with bank's practices.

One area of divergence between formalism and practice is contradictory terms. The

law in Jordan does not provide specific provisions that address for example the case

whereby typewritten terms on the check differ from printed terms or numbers. In

comparison, in the United States, the Uniform Commercial Code (UCC) reconciled

contradictory terms. For example, the UCC provides that typewritten terms prevail over

printed terms and handwritten terms over both. Additionally, words prevail over

numbers. 33 Thus, law in the United States expressly attempts to reconcile the difference

caused by contradictory terms. In Jordan, courts have stepped in to fill the gap that exists

in the law. However, banks still do not follow courts' decisions and rather follow their

own practices. An examination of the divergence between formalism and practice in

Jordan with regard to contradictory terms in checks is illustrated in the following case.

32
Jordan adopted an electronic collection for checks. The purpose of this system is to eliminate the physical
movement of paper. Also, the electronic collection of checks is intended to speed up the check collection
process and to expedite the availability of funds to depositors. The depository bank, instead of physically
sending a check for collection, it simply forwards a computerized image. See Jordan Starts the System of
Electronic Collection of Checks, Vol. 27 Banks in Jordan Magazine 34 (February 2008).
33
See U.C.C § 3-114 (2005).

8
A. The Case

On February 30, 2001, the drawer executed a check to Waleed Al-Khateeb, the

payee, in the amount of Jordanian Dinar 7587 (equivalent of US $10,707) written in

words.34 However, the amount of the check was Jordanian Dinar 7578 (equivalent of US

$10,695) in numbers. Later on, Waleed presented the check for payment to the Housing

Bank for Trade and Finance. The Housing Bank for Trade and Finance refused to accept

the check because of the difference between words and numbers. Waleed filed suit in

Amman Court of First Instance on June 13, 2001 against the drawer and the Housing

Bank for Trade and Finance.35 The Court of First Instance rules in favor of Waleed.36 The

Court of Appeals reversed. The court reasoned that the Instructions of the Central Bank

No. 23 of 1971 and their amendments permit bank to refuse to accept a check for

irregularities. Also, the Court of Appeals based its decision, in part, on Egyptian

jurisprudence.

The Court of Cassation rejected the argument made by the Court of Appeals. The

Court of Cassation stated that the Instructions of the Central Bank No. 23 of 1971 and

their amendments apply to relationships among banks and do not address the

34
See Court of Cassation, Case No. 4010/2004, Adaleh Publications (March 30, 2005).
35
The Judiciary branch in Jordan is divided into three categories: regular courts, religious courts, and
special courts. Regular courts, Nizamiyya, have jurisdiction in all matters, including trade. Trade cases, if
they are within JD3,000 value limit, which is updated from time to time, could be heard before Courts of
Peace, akin to small claims courts in the U.S. Trade cases could also be heard before Courts of First
Instance, Courts of Appeal, and Court of Cassation which stands at the apex of the judiciary. Currently
there are 73 courts in Jordan. The Court of Cassation decides on matters of law or procedure. It could
affirm the decision of the Court of Appeal, or remand it for further reconsideration. See Jordan CONST.
art. 99. See also Law of Courts of Peace No. 15, art. 3.1, Official Gazette No. 1102 (March 16, 1952) as
amended by law No. 13 of 2001, Official Gazette No. 4480 (March 3, 2001).
36
Id.

9
relationships between banks and their customers.37 Therefore, the Court of Appeals erred

in basing its decisions on the Instructions of the Central Bank.

The Court of Cassation stated that the check in question is unclear and ambiguous as

there is difference between words and numbers. The Court found that words prevail over

numbers on the basis of the presumption that by writing out numbers, more care has been

taken to make sure the right term has been used.38 The Court of Cassation drew a parallel

to earlier precedents to support its position that words prevail over numbers. 39

B. Analysis

The law in Jordan does not address the case whereby the amount of the check as

written out is different from the amount stated in numbers. The practices of banks varied

when faced a check that has conflicting terms. Some banks refuse to accept the check if

the amount written in words is different from the amount written numbers.40 So, banks

send such a check to the drawer for correction. Other banks accept a check whereby

words differ from numbers. However, in the latter case, these banks pay the lesser

amount.41 For example, suppose a check is made for Jordanian Dinar 22000 in numbers

and for Jordanian Dinar 2200 in words. In this case, banks would pay the Jordanian Dinar

2200 since it is obviously the lesser amount. Also, if the check is made for Jordanian

Dinar 2200 in numbers and for Jordanian Dinar 22000 in words, banks would pay the

Jordanian Dinar 2200 since it is the lesser amount. In sum, banks would pay the lesser

amount in the check whether it is the written words or numbers.

37
Id.
38
Id.
39
See Court of Cassation, Case No. 46/94, Journal of Bar Association 1789 (1994) (the check must be free
of any ambiguity. Therefore, there is an ambiguity in a check drawn for US $60,000 in writing and
Jordanian Dinar 60,000 in numbers).
40
See Judicial Activism in Checks, Vol. 24 Banks in Jordan Magazine 44 (November 2005).
41
Id.

10
 The Court of Cassation saw in Waleed's case an opportunity to settle the question of

contradictory terms. The foundation of the Court of Cassation decision is instructive.

There is no clear text in the law that would guide the Court in making its decision. Article

3 of the Code of Commerce provides the Court with the authority to resort to judicial

precedents and reasoning if the law is silent.

The Court of Cassation provided a well-reasoned decision when it announced that in

case of contradictory terms words prevail over numbers. In writing out numbers, more

care has been taken to make sure the right term has been used. The Court of Cassation

could simply have referred to the practice and custom of banks. The notion of

interpreting terms by referring to custom or practice is not alien to Jordanian law. In order

to achieve uniformity and consistency with respect to checks law, the Court entertained a

discussion of why words should prevail over numbers. The Court tried to harmonize

divergent practices of banks with regard to contradictory terms.

Thus, the test that emerged from Waleed's case is instructive. The Court did not, for

example, leave it to banks to determine whether to accept a check with contradictory

terms for the lesser amount, larger amount, pay according to words, or pay according to

numbers. In fact, the Court's test is clear. If contradictory terms exist in a check, then

according to the Court, words should prevail over numbers.

In so ruling, the Court of Cassation could have referred to the laws of other countries

such as the United States. In the United States, there is an explicit provision concerning

the issue of contradictory terms. 42 However, the Court of Cassation did not refer to

foreign laws and jurisprudence as the Court of Appeals did. The reason for the approach

adopted by the Court could be attributed to the fact that Jordanian law does not create
42
See U.C.C § 3-114 (2005), supra note 29.

11
significant externalities. Many in Jordan would resist the temptation to apply foreign laws

into domestic legal issues. Domestic courts should address only local matters. Foreign

laws are written for different environments or circumstances that do not necessarily fit

well in Jordan. For the moment, however, the Court of Cassation believed that local

jurisprudence suffices to solve local matters.

C. Legislative Solutions

The decisions of the Court of Cassation make it clear for banks that in case of

contradictory terms in check, words prevail over numbers. However, banks in Jordan still

follow their own practices and ignore decisions of the Court of Cassation. In case of

contradictory terms, banks refuse to accept the check or pay the lesser amount.43 Banks

reason that in such a case, they assume bad faith on the part of drawer and desire to avoid

being entangled in litigation. The reasoning of banks is all but flawed. Although

conflicting terms of words and numbers can be attributed to bad faith on the part of the

drawer, the conflicting terms could be the result of mistake or negligence.

Reforming the law regarding contradictory terms seems the viable solution. Any

sound legislative solution must address the customer right to know, before an account is

opened and periodically after it is opened, the general policy of the institution with regard

to checks. Further, the customer needs to be informed of the bank's decision to place a

hold on any specific item. The law must also restrict the opportunity for banks to vary

their practices by providing explicitly that words should over numbers in case of

contradiction and provide an appropriate penalty for violations.

43
Telephone Interview with Khaled Badawi, Branch Manager, Amman-Arab Bank (Nov. 11, 2009).

12
 The amendment of law with regard to conflicting terms will help mitigate the

burgeoning problem of returned checks in Jordan.44 Moreover, the amendment will

provide certainty for payees in the face of divergent court decisions and bank practices.

Conclusion

The bulk of payments in the Jordanian economy are made by checks. Currency forms

only a small portion of the monetary system. In a sense, therefore, checks are considered

currency substitutes. The viability of using checks in the payment system depends on the

clarity and consistency of the law, courts' decisions, and banks' practices.

The law, as currently stands, fails to provide comprehensive rules for checks. For

instance, although they were in use, there is no mention in the law of cashier's checks or

teller's checks. The uncertainty with regard to contradictory terms in checks not only

threatens to jeopardize the viability of checks as an integral part of the current payment

system, but promises to generate increased litigation.

The law on negotiable instruments drafted more than sixty years ago and is in need

of revision. The law should modernize language and take into account technological

developments and changes in business practice. In addition, the revision resolves

conflicting lines of case authority. In sum, the law should promote simplicity, clarity, and

uniformity. To achieve these goals, the law could have rules governing virtually all of the

commonly arising problems. Alternatively, the law could contain rules general and

flexible enough to permit courts to shape predictable answers to unforeseen questions.

44
See Ali Shaheen, Returned Checks in Jordan and the Role of Monetary Policy and Banking Management
in Addressing the Issue, Vol. 6.2 Irbid Journal for Research and Studies 65, 70 (2003) (the number of
returned checks in Jordan is increasing). See The Central Bank Issues Instructions of the Returned Checks
Unit, Vol. 24 Banks in Jordan Magazine 16-18 (July 2005) (On August 4, 2005, the Central Bank of Jordan
issued the Instruction for the Unit of Returned Checks in order to minimize the phenomenon of returned
checks). See also Isam Qadamani, Bounced Checks, Al Ra'I Newspaper (April 20, 2008) (the percentage of
bounced checks in Jordan reached 76%).

13
This generality could be achieved by incorporating an element of judicial discretion into

the rules. Without this flexibility a court would not be able to stretch the rules to

accommodate unforeseen circumstances.

Courts' decisions construing contradictory terms in checks are clear. For example,

words prevail over numbers whenever there is a conflict between them. These decisions

provide a sound rationale; by writing out numbers, more care has been taken to make sure

the right term has been used. At first blush, these decisions seem to solve the matter.

However, the matter is far from reconcilable and even raises bigger issues.

Courts must explicitly state that its interpretation is a general one and is not intended

to be limited to the specific facts of that case. Courts deciding cases must hold that even

if banks prove its conformity with local practice, banks will have to follow courts'

jurisprudence. When the law has been in force for a time, has been interpreted in a series

of judicial decisions, these decisions themselves become part of the law complex: the

meaning of the law must now be sought not merely in the legal text but in the law and the

cases that have been decided under it.

The failure of banks to embrace courts' decisions should be taken not as proof of

satisfaction with the present law but as a clear demonstration of disregard to court's

jurisprudence. Unless there is a re-evaluation of basic concepts, the rationalization of

payment systems law will continue to be an elusive goal. Until the government acts,

courts should continue to construe checks in light of their jurisprudence.

14