A joint check is a simple device. It is a check made out jointly to two

parties. Widely used in the construction industry, it is not, however,

limited to that industry and can be used in many situations.

Consider the typical situation of a supplier selling to the marginal

customer. The customer (vendor) secures an order from their customer (end user) whose credit reputation is excellent. The problem is the amount of the order exceeds the vendors credit capacity. The supplier knows that the end user has the ability to pay, and will, but there is a chance their customer (vendor) will use the proceeds from this sale to pay other obligations not related to this transaction.

To protect against this, the supplier can seek a joint check from the end user. The end user then issues a check made payable to both the vendor and the supplier in an amount equal to what the vendor is owed for the order. The check should then be signed by the vendor and given to the supplier for deposit. Both signatures are needed before the check can be deposited.

The supplier then issues a check back to their customer (vendor) for the difference of what was paid by the end user and what the vendor owed the supplier for the product. In this way the supplier has reduced the risk of providing their marginal customer a large order and at the same time not lost a sale.

The Agreement is a contract between all three parties (supplier, vendor and end user) and should contain all the information concerning what is expected of all the parties and the consequences and remedies should the Agreement not be fulfilled. The Agreement should be signed by all of the parties prior to the supplier releasing the order.

Generic joint check agreements can be obtained from several sources including NACM and the Associated General Contractors. They can also be found in the major office supply outlets or you can request your attorney to draft an Agreement.

Regardless, before using any joint check agreement, it should be reviewed by your law department or legal counsel to make certain that it meets all the necessary requirements and does not contain language that may constitute a breech of the Agreement.

THE PRECEDING INFORMATION HAS BEEN PROVIDED FOR GENERAL INFORMATION PURPOSES AND HAS NOT BEEN OFFERED AS LEGAL ADVICE. FOR LEGAL ADVICE CONSULT YOUR LAW DEPARTMENT OR LEGAL COUNSEL.