Originally Posted by
Shoonra
The instruction PAY TO THE ORDER OF on the face of a check evidently has a reason for this wording (and for not using the much older working of simply PAY TO). After spending some time chasing down some UCC textbooks, I believe I have an explanation (not necessarily the only one).
The issue os the endorsement of checks over to third parties. This may not have been very common before the 20th century, but the current wording facilitates such endorsements.
If a check is made payable to Joe Blough, and Joe Blough is the person who will take the check to the bank, then it really doesn't matter whether the check uses the expression PAY TO Joe Blough or PAY TO THE ORDER OF Joe Blough, because either way it's Joe Blough and he's the one depositing or cashing the check.
But suppose Joe Blough endorses the check over to you. He signs the back of the check as an endorsement and now it's cashable by whoever is holding it, which, for the moment, is you.
If you take the check to the bank, there is a problem; yes, it's true that Joe Blough, the named payee, signed the back but if the check says PAY TO Joe Blough then the banker cannot pay you because the phrasing is such that the money has to be handed to Joe Blough, regardless of his endorsement over to you.
On the other hand, if the check said PAY TO THE ORDER OF Joe Blough, then you can cash or deposit the check. Joe Blough already "ordered" the check paid by endorsing the back of the check, so the check will be paid by Joe Blough's order, even though the money won't be put into Joe Blough's hands.
I hope this clarifies it.
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