Legal Definitions - memorandum check

A memorandum check is a check that is written and delivered with an explicit understanding or agreement between the person writing the check (the drawer) and the person receiving it (the payee) that it will not be presented to a bank for payment immediately, or perhaps ever. Instead, it serves as a temporary acknowledgment of a debt, a receipt for a transaction, or a placeholder for an obligation, rather than a direct instruction for the bank to transfer funds.

Here are some examples to illustrate this concept:

• Personal Loan Acknowledgment: Imagine a situation where Alex lends his friend Ben $300. Ben writes Alex a check for $300, but they both agree that Alex will hold onto it and not cash it until Ben receives his next paycheck in two weeks. In this case, the check serves as a written acknowledgment of Ben's debt to Alex and the amount owed. It's a "memorandum" of their agreement, not an immediate demand for payment from Ben's bank account.

• Security Deposit for Equipment: A small photography studio rents out lighting equipment. For a particular rental, they require a $500 security deposit. Instead of processing a credit card charge or taking cash upfront, they ask the customer to write a check for $500. The studio agrees to hold onto this check and only deposit it if the equipment is returned damaged. If the equipment is returned in good condition, they will return the check to the customer. Here, the check functions as a temporary guarantee or placeholder for a potential future obligation, acting as a memorandum of the customer's commitment to cover damages.

• Receipt for Cash Payment: Consider a small business owner, Ms. Chen, who receives a $750 cash payment from a client for consulting services. To provide the client with a formal receipt and a clear record of the transaction, Ms. Chen writes a check *to herself* for $750, marks it "Paid in Cash," and gives a copy to the client. The original check is never intended to be deposited into her bank account. In this unusual scenario, the check functions purely as a receipt or a record of a cash transaction, serving as a "memorandum" of the payment rather than an instruction to a bank to transfer funds.