A supplier of construction materials received a security check intended to secure payment of products and goods ordered by a contractor for a customer who requested to purchase them in credit. Due to a dispute with the contractor, the client refused to honor the check.
The Court rejected the client's objection and held that the debt will be covered by the check given as a security. A security check is a conditional payment and the person opposing its enforcement must show the terms of the transaction under which the check was issued and also the holder’s lack of power to use the check to pay off the debt due to the non-fulfillment of the condition. Here, the check was intended to be used as a security measure to guarantee purchases made under the customer line of credit. The customer granted the contractor unlimited permission to order and receive goods that were provided at the customer's construction sites. The customer did not give an instruction to stop delivering the goods at any stage and even periodically gave approvals to the goods collection. The legal dispute that arose between the contractor and the customer does not concern the supplier (who is a third party who received the security check) who duly supplied the goods, therefore the check issued for security must be honored.