ISOs selling check guarantee should be familiar with some basic legal terminology. While the following represents only a cursory review of the terminology surrounding the issuance and acceptance of checks, everyone should be comfortable with a few basic terms. For those of you with a solid grounding in the law of checks, consider the following a refresher.
Check-While many definitions exist, most would agree that a check is a negotiable demand drawn on or payable through an office of a bank. In almost all instances, checks are three party instruments, involving a maker, a payee and a drawee bank.
Maker or Payor-The party ordering his or her bank to pay a certain sum to order or to bearer (i.e., the check writer).
Payee-The party to whose order the check is paid (i.e., the merchant).
Drawee Bank or Payor Bank-The drawer's bank i.e., the bank upon which the check is drawn.
Holder-The payee in possession of the check when it is issued or any person to whom the check is delivered by endorsement or negotiation. In short, the party with physical possession of the check possessing the right to enforce it.
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