Exam 31: Checks and Funds Transfers

A written stop payment order is effective for one year.

Sondra realized on Tuesday that she had dropped her bank EFT card after using it at an automatic teller machine. She telephoned the bank on the following Monday to notify it of the loss. By that time, someone had used the card to withdraw $800 from Sondra's account. The bank said it would cover $300 of that amount. Sondra sued for the full amount, claiming that she had exercised reasonable care in reporting the loss, especially because the card was lost on bank premises. Will she be able to recover the full $800?

The act of stopping payment on a check imposes no liability on the depositor.

When a drawee bank pays on a check that lacks an essential endorsement:

A bank always is liable to the depositor on a forged check that the bank has paid.

The EFTA is concerned with the:

A written stop payment order or confirmation is effective for:

Payment over a stop payment order gives rise to liability:

A forged endorsement must be reported to the bank within one year of the time that the bank statement is received.

Miriam issued two checks. The first check was made payable to her neighbor for a used car that the neighbor sold to Miriam. The second check was a rent payment to Miriam's landlord for the current month's rent. The car was purchased on the basis of the neighbor's written assurance that the car had only 38,000 miles of use. After Miriam took possession of the car, Miriam's mechanic checked the vehicle and substantiated that the odometer had been turned back. The car had actually been used for 79,000 miles. Miriam stopped payment on the check and offered to return the car. Meanwhile, the neighbor had purchased a computer and had negotiated Miriam's check to the vendor in payment. Discouraged by the problems with the car, Miriam decided to take a vacation. She issued a written stop payment to her bank on the rent check because she intended to use this money for the vacation. Although the drawee bank had ample time to act, it made an error and paid the rent check instead of stopping payment. Two lawsuits resulted. In the first, the vendor of the computer sued Miriam on the check. In the second, Miriam sued her bank for paying over her timely stop payment order. Decide both cases.

A "tender" occurs when the holder of a check or other consumer transaction authorization demands payment.

Checks that involve amounts of more than $1,000 generally trigger the bank reporting requirements under the USA Patriot Act.

When a bank certifies a check, the amount involved in the certification will be retained in the depositor's account until payment of the certified check.

A bank's liability to the drawer of a check for wrongfully dishonoring a check is based largely on contract law.

A check may be certified by a bank on request of the drawer or the holder.

A check is a particular kind of draft.

The Electronic Fund Transfers Act (EFTA) does not cover transactions originated by commercial paper.

The duties of a drawee bank include all of the following except to:

A forged indorsement must be reported within:

If a check has not been certified, a holder has no claim against the bank for the dishonor of a check.