When did the joint check regain popularity? I thought they were a thing of the past. I have gotten several requests for them and have been presented with at least one to pay on an account that I didn't even know about. Our customer said his customer preferred to do business that way. I am not confident with them--help!
Signed, Managing in Maine
While they weren't as widely used for a while (think pre-downturn of our industry), they came back with a vengeance once that recession hit. Everybody wanted assurances and as direct a tie to the money as possible. They actually are a great tool and not scary or intimidating at all once you set some ground rules.
The most challenging aspect of the joint check is the joint check agreement itself. Once you have that mastered, it is pretty easy sailing and a good way to have a connection to the money. I never rely on someone else's joint check agreement. I prefer to use my own, in-house crafted one that addresses my company's concerns--like getting paid and not getting drawn into any of the drama that may be between the other parties involved.
Since imitation is the considered the sincerest form of flattery, don't feel you have to recreate the wheel here. Over the years, I have collected a varied group of examples of joint check agreements. Some I saved because the were so crazy I couldn't help myself (occupational hazard, I do this with lien releases, credit applications, and requests for credit ratings), some basic, and some I really admired and wanted to show my appreciation for by incorporating into my own agreement form.
Things you want to take into consideration:
1. Joint checks only work if they actually get written. So make sure you have some verbiage in there that allows the check issuer to issue payment directly to you in the event of a dispute between them and your customer. Much as I love a good telenovela, I don't want to be part of one.
2. Don't waive your lien or bond rights. Even if it isn't illegal in your state to do so, it is just a bad idea.
3. Make sure you are not waiving any other legal rights.
4. Include a limited power of attorney from your customer. It is a bitter pill to swallow if you have to wait for someone to come in and sign off on a jointly issued check before you can put it in the bank, or if your customer is out of state. FedEx-ing is expensive and time consuming.
5. Clearly identify the project, the address of the project, and what your estimated/projected portion of this project is.
6. Clearly identify who your customer is, who you are, and the general contractor or owner (or whoever the actual check issuer is). Make sure all the players are identified.
7. Have signature areas for your company, your customer, and the check issuer. Include the complete printed name, address, signature line, and date signed. I have foolishly not included a printed name line and date and lived to regret it. Most people's signatures are almost illegible. Trying to figure out who you are contacting when there is a problem is embarrassing and frustrating.
8. Indemnification. Make it clear if you are a material supplier, that is all you are doing--not supplying labor or becoming part of the larger contract, nor offering warranty of work.
9. Check out the general contractor/owner (check issuer). Make sure they are creditworthy.
Those a few things to consider. I wrote one and ran it by several attorneys. Each had a little something to offer I had not considered. Remember, unlike mechanic's lien law, joint checks are a beast of contract, not statute. They are not security, but another layer of comfort in order to either extend additional credit to a customer, offer credit to one who is challenged, or support a good customer who may like a little extra assurance. By providing your customer collection assistance if things start to get, how shall we say, "crunchy" you have a direct tie to the money to find out what is going on.
If you get pushback on using your form and the customer insists on using the GC's form, review it carefully and make the appropriate changes, additions, or deletions. You may get questioned, but explain your logic. If they push back that hard, you may have to be prepared to walk away from this adventure.
Having a solid joint check agreement allows you to offer more to your customers while knowing exactly what you are signing up for. In other words, keep your poop in a group and you can limit your worries. There are plenty of other things to stress over--like who didn't make another pot of coffee when they took the last cup!