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Making Payment With Joint Cheques

It is not uncommon in the construction industry for a subcontractor to reach out to the owner where the general contractor is in default of its payment obligations to the subcontractor.  If keeping the subcontractor working is vital to maintaining the project schedule, the owner may have a strong interest in seeing that the subcontractor get paid.  Often there is an underlying concern that the general contractor is using the funds it has received from the owner for something other than paying the trades.  While there is more than one way to solve this problem, issuing a joint cheque is one method of ensuring that money paid to a general contractor reaches a particular subcontractor. 


How to joint cheques work?  A cheque is one example of a 'bill of exchange' and they are regulated by the federal Bills of Exchange Act.  Section 62(2) of the Act provides that both parties named in a joint cheque must endorse the cheque before it can be cashed: 


Two or more payees

62(2) Where a bill is payable to the order of two or more payees or endorsees who are not partners, all must endorse, unless the one endorsing has authority to endorse for the others.


Going back to the our example, if an owner issues a joint cheque to a subcontractor and a general contractor, the bank will not cash the cheque unless it is endorsed by both the subcontractor and general contractor.  Assuming the general contractor agrees that the subcontractor should be paid, a general contractor who receives a joint cheque should endorse the back of the cheque and give it to the subcontractor.  The subcontractor can then endorse the cheque and deposit it in the subcontractor's bank account. 


Ted Dreyer is a construction and insurance lawyer at Madorin, Snyder LLP. Madorin, Snyder LLP is a full service law firm serving Kitchener, Waterloo, Cambridge, Guelph and the surrounding area.  


The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

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