Martin Silver is a practicing attorney with offices in Hauppauge, N.Y. He was a flooring installer before and during the time he went to law school and has since represented numerous industry people and companies. To contact him, call 631-435-0700.
In today's world, a retailer receives "payment" from his customer in many different types of ways:
• Cash. This used to be just about the only way consumers paid for goods. Today you hardly see it anymore. Obviously, a cash payment cannot be "stopped" once you receive it. The only problems associated with cash are: (1) You have to take the time to count it; (2) You have to keep it around with the risk of theft, and (3) You have to hope it's not counterfeit. Cash is still a good way to get paid.
• Personal checks. This is actually an "order" from the "maker" (your customer) directing her bank to deduct a certain amount of money and credit it to you. Usually, once a check has "cleared," you are safe from any future problems. However, when you deposit the check in your own bank, it has a legal obligation to "clear" that check within two to five days- this clearance refers to the time period after which your bank must make the funds available to you.
Often the legal clearance period is less than it takes for the check to have actually been paid, which is why we occasionally see a "cleared" check bounce. Until your customer's bank actually deducts the money from her account, she has the right to direct her bank to "stop payment" on the check without a justified reason.
A personal check may also be returned unpaid for a number of other reasons: (1) There are insufficient funds in the account; (2) The account has been closed; (3) There is some sort of legal "hold" on the account. For the above reasons, it is OK to accept personal checks as deposits but a little risky when they are given in final payment after delivery and installation.
In just about every state it is considered a criminal offense to issue a "bad check." The crime is based upon the "intent" of the customer to defraud the dealer. Proving this "intent" existed at the time the check was written can be very difficult. For this reason, the criminal laws of many states provide that such intent is presumed if: (1) There were not enough funds in the account to cover the check when it was written; (2) There are not enough funds in the account to cover the check after it is deposited, and (3) The check actually bounces.
• Certified or bank checks. When a bank certifies its customer's check, or issues its own official check, it is telling you the customer has given the bank that sum of money and the bank itself is now issuing its own obligation to pay the amount on the check to the named payee. When this type of check is issued, the customer- even though it was issued at her request- has pretty much no right to tell the bank not to pay it, even if the goods are the wrong color or are not delivered when they were supposed to be.
• Money orders. You have to be a little careful with these since they are actually the same as a personal check. The customer goes to a bank, or post office, and gives them the amount of cash she wants the money order for. It, in effect, opens a personal checking account for her with that deposit and gives her one check- he money order- that she can make payable to anyone. Although this money order cannot bounce for insufficient funds, closed account, etc., it can be stopped, for any reason, by the customer.
• Credit cards. The most common form of payment, and perhaps the riskiest, is the credit card. All your customer has to do is call her credit card company and tell it you did not properly deliver or install and the money gets deducted from your account- even if the installation was a month ago.
Edited by Admin 7/12/2009