Joint-Check Rule Law and Legal Definition
Joint check rule is a principle that when an owner or general contractor issues a check that is made jointly payable to a subcontractor and the subcontractor's materialman, the materialman's endorsement on the check certifies that that it has been paid all amounts due to it, up to the amount of the check. This rule protects the owner or general contractor from lien foreclosure by a material man who was not paid by the subcontractor. The use of joint checks is well established by custom and practice in the construction industry.
When a subcontractor and his materialman are joint payees, and no agreement exists with the owner or general contractor as to allocation of proceeds, the materialman by endorsing the check will be deemed to have received the money due him. The material man may protect himself by simply refusing to endorse the check until assured by escrow of other arrangement that he will recover his rightful share of the check. Because the materialman is positioned to demand immediate payment in exchange for his endorsement, the custom and use of joint checks is beneficial to materialmen. The joint check rule is likewise beneficial to owner and general contractor. They have contracted with the subcontractor, not the materialman and are usually unaware of the nature and size of the materialman's claim against the subcontractor. The joint check rule provides a simple yet expeditious method for owner and general contractor to pay their debts to the person with whom they have contracted while eliminating the risk the subcontractor will not pay the person with whom he has contracted. [Post Bros. Constr. Co. v. Yoder, 569 P.2d 133, 135 (Cal. 1977)]
