If I require a subcontractor to get a joint check agreement from the general contractor before I extend them credit, how do the mechanics work with the check?

Joint check agreements are widely used in the construction industry where many firms may employ one another, but all work for the same customer. Joint check agreements are contractual agreements that allow a payer to issue a check that is payable to two parties. For example, with a joint check agreement, a general contractor could make out a check to a subcontractor who did work on the site and a supplier who provided materials. Frequently, a supplier might request a joint check agreement before extending credit to a subcontractor.

According to Adam Goodman with The Goodman Law Offices in Chicago, it’s extremely important for the payer to write a check to both parties. The check should be made out to “A and B,” not to either party (“A or B”) or with a slash between the names (“A/B”). The way to protect is to prepare it flawlessly, the attorney explains. Both parties should sign the check to cash or deposit it. If the check isn’t signed by both parties and is deposited, the issuer can complain to the bank.

While there is no universal joint check agreement document, Goodman says, the parties involved should draft a contractual agreement. It’s best to have an attorney write or review the agreement, Goodman advises. “States have different laws. In different industries, a joint check agreement can mean different things."

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