Exam 31: Checks and Funds Transfers

Ordinarily, the drawee bank is liable to the drawer when it pays a check on which the drawer's signature has been forged.

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?

The standard form of check does not specify when it is payable, and it is therefore automatically payable on demand.

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

A check is a particular kind of draft.

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

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.

Most states provide that if a dishonored check is not made good within a stated period of time, it will be presumed that the check was originally issued with the intent to defraud.

A written stop payment order or confirmation is effective for:

A written stop payment order is effective for one year.

Funds transfers made by businesses are governed by __________ regulations.

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.

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

A certified check was presented for payment to the drawee bank, and the drawee bank dishonored the check. Which of the following parties is/are potentially liable to the holder?

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

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

Certification of a check at the request of a holder:

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?

A thief stole Art's checkbook and forged Art's name as drawer of a check. The drawee paid the check in good faith and sent it to Art with the monthly statement on January 3, 2008. The thief forged other checks during February and March of 2008, which the drawee in good faith paid. All paid checks were sent to Art with monthly statements. On May 25, 2009, Art discovered all of the forgeries and notified the drawee. For which check(s) is Art entitled to be reimbursed?

Payment over a stop payment order gives rise to liability: