This past Wednesday, Nate & I co-hosted a very successful Webinar: The Joint Check Agreement Mistakes That Can Cost You Thousands. It was very successful, and we had a great discussion about problems you may encounter when dealing with these popular instruments. The slides from the presentation are available on our SlideShare account and viewable at the top of this post.
If you missed the Webinar don’t fret. Not only do we conduct Webinars every Wednesday afternoon, we also have scheduled a re-do of this Joint Checks webinar because of its popularity.
Summary Of The Most Dangerous Joint Check Agreement Mistakes
[quote style=”boxed” float=”right”]The joint check rule is a jurisprudential rule that confuses and upsets a lot of credit managers, but if you don’t understand it, you could lose a lot of money at her hands.[/quote] Joint check agreements are not an obscure instrument in the construction industry. These things are very common, but one of the first things I point out to folks in the Webinar is that they are a suspect instrument.
Although many credit managers think of joint check agreements as some type of security blanket, nothing could be further from the truth. Instead, I like to think of joint check agreements as a life ring. These agreements are usually tossed to the parties whenever payment is desperate. For one reason or another, the account can’t be paid for, and a joint check agreement is a compromise to make the creditor feel better.
Sometimes they can feel better. Other times, however, they can get burned. That leads us to the frequent things that burn credit professionals with these agreements.
Joint Check Agreement Language is Unregulated And Messy
There is no such thing as a “standard” joint check agreement. There are no laws that regulate joint check agreements. These are simply contracts, and almost every agreement that comes across your desk will be different, and will be interpreted differently.
Accordingly, you must be very careful that the agreement’s language says what you think it says. There are a lot of details to manage, and these details are commonly misunderstood. We touched on this in Most Common Joint Check Misunderstands and How It Can Burn Your Company.
It’s unfortunate, but fraud with these documents is prevalent. It is a mistake if your company jumps into these joint check contracts without understanding how fraud can work against you…as you’ll be completely incapable of taking steps to prevent it.
That is precisely the topic of a previous article on this blog: Joint Check Agreement Fraud, Understand and Prevent It.
The Dreadful Joint Check Rule
“Fairness is something they teach you in Kindergarten,” I say during our presentation on the joint check rule. The joint check rule is a jurisprudential rule that confuses and upsets a lot of credit managers, but if you don’t understand it, you could lose a lot of money at her hands.
Check out this article for more on this important topic: The Joint Check Rule Can Limit A Material Supplier’s Claim for Further Payment.
The Joint Check Agreement eBook
There is so much to talk about with joint check agreements. This blog post and our Webinar only scratches the surface. In fact, last year we conducted a blog series on the topic, and converted those articles into a comprehensive eBook.
The eBook contains a lot of important information about these agreements and even a sample form that you can use in your business.