Exam 31: Checks and Funds Transfers

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.

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 notice of dishonor may be oral,written or electronic.

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

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?

Consumers have the responsibility to examine periodic statements provided by their financial institutions.If a loss would not have occurred but for the failure of a consumer to report within __________ of the transmittal of the statement any unauthorized transfer,the loss is borne by the consumer.

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

The EFTA is concerned with the:

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.

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?

Although a drawer has stopped payment on a check,the drawer still may be held liable on the check.

To be effective,checks must be executed on forms that are printed expressly for that purpose and issued by a bank or other financial institution.

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