What does without recourse mean on a check

Often the purchaser of such a note will acquire it at a substantial discount from the face value of the note, in recognition that the purchaser can only seek to collect the money from the original maker of note.

An example of a without recourse note is a personal check written by A, the maker, to B, the payee. B, in turn pays off a debt to C by endorsing the check and adding the without recourse phrase.

If A's bank refuses to pay C the check amount because A has insufficient funds in his checking account, C cannot demand payment from B. In this case, the exporter who is on the borrowing side holds no obligation in case the importer fails to make the payment or becomes bankrupt. The lending party accepts these risks in the without recourse financing, and is unable to collect payments or acquire assets of the parties who are not a part of the debt agreement. Without recourse refers to the non-involvement of any liability in future.

When a seller and a buyer enter into a sales contract, it outlines the rights and duties of the parties involved by mentioning if the sale falls in with recourse or without recourse category. A sale with recourse makes the seller liable for the product or goods sold in case it appears to be defective or fails to meet the expectations of the buyer. It is the ultimate right of the buyer to ask for recourse from the seller in case the product is below standards. In such cases, the buyer will either receive a product replacement of equivalent value or a refund from the seller.

Sales without recourse refers to the situation when the buyer holds himself or herself liable for any risks related to the product purchased. Therefore, he or she wont have any recourse against the seller in case the product turns out to be defective. The "without recourse" wording doesn't affect the bank's ability to charge the check back to its depositor if it is not paid, and it receives transfer warranties from both its depositor and the mortgage company.

First published on BankersOnline. Skip to content. Answered by:. These may be low, as in the case where Sally accepts a check and knows Jane is good for the money, so there should be no problems with cashing the third party check. If they are higher, the buyer may want to think about how to recover damages in the event of the problem, and whether the deal being offered is fair and reasonable. These types of contracts put people at a disadvantage, and it is important to review terms carefully and to ask an attorney for advice before signing such agreements.

Once people have committed to accepting full liability by signing the contract, they cannot back out unless they were deceived in some way and can prove it.