G. Bradley Hargrave
A check is payable initially to the person named by the drawer (the "payee"). Moreover, the drawer need not identify the payee accurately for the check to be properly payable. Pursuant to UCC [Rev.] Section 3-110 (a), "the check is payable to the person intended by the drawer even if that person is identified on the check by a name or other identification that is not that of the intended person." Should the drawer intend that payment be made to two or more payees, however, a few additional rules come into play.
A check payable to two or more payees is payable either jointly or alternatively. If it is intended to be payable in the alternative, the drawer should make the item payable to "X or Y", or to "X/Y", in order that any named payee in possession of the item may negotiate it without the endorsements of the others. If, on the other hand, the drawer intends that all of the named payees indorse the item as a condition of payment, the check must be made payable to "X and Y" or to "X & Y".
An ambiguity on the face of the check, such as the naming of two payees on two separate lines without further instruction, has resulted in some litigation. The 1990 revision of the UCC should reduce future conflicts, however, as it now provides that any ambiguous instrument is to be construed as being payable in the alternative. Thus, this section places the onus on the drawer to make it clear that he intends an endorsement by one payee to be unacceptable. Furthermore, it permits one payee of an ambiguous check the ability to rely on his single endorsement without the risk of incurring liability to any other payee.
