Exam 31: Checks and Funds Transfers

Where a depositor receives a bank statement and the checks the bank has paid, the failure to notify the bank within a reasonable time of forgeries of the depositor's signature may preclude recovery for other forged checks thereafter paid by the bank.

Morris issued a check to Al in payment of a debt. There were sufficient funds in Morris' account to cover the check when it was presented for payment. However, due to an error, the bank dishonored the check. Which of the following parties is/are potentially liable to the holder?

Although a drawer has stopped payment on a check, the drawer still may be held liable on the check unless the drawer has a defense that will defeat the holder in a lawsuit.

The Railway Express Agency delivered a shipment of goods to Lorraine. Payment for the goods was made with a certified check, payable to the order of the Railway Express Agency. The check was drawn by Lorraine on the First National Bank of Detroit. Later, the bank refused to pay the check when it was presented by Railway Express, the holder, because the bank had become insolvent and stopped doing business. The Railway Express Agency sued Lorraine. Lorraine claimed that she was not liable on the check because it was certified. Is she correct?

Which of the following statements is correct concerning a stale check?

The drawee of a check is always a bank.

In the case of either a check or a draft, the drawer may be held civilly liable if the instrument is dishonored.

Which of the following statements describes a check?

If a bank improperly refuses to make payment of checks for which its customer has sufficient funds on deposit, it is liable to the drawer for damages sustained by the drawer in consequence of such dishonor.

A bank is required to pay a check presented more than six months after its date.

A consumer who notifies the issuer of an EFT card within two (2) days after learning of a loss or theft of the card can be held to a maximum liability of $500 for unauthorized use of the card; failure to notify within this time will increase the consumer's liability for losses to a maximum of $5,000.

An "encryption" warranty is a warranty made by any party who encodes electronic information on an instrument.

A check is drawn on the assumption that the bank has sufficient funds in the drawer's account for payment.