Exam 19: Checks and Banking in the Digital Age

Fact Pattern 19-1 Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order. -Refer to Fact Pattern 19-1. Capital Bank

The Uniform Commercial Code governs checks.

Today, most checks are processed manually.

Ellen pays State Bank $500 plus a service fee to draw a check on itself payable to Paul's Plumbing. Which of the following parties is responsible for paying the check?

Each bank in a collection chain must pass a check on before noon of the day of its receipt.

Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment. This instrument is the most common type of negotiable instrument, which is

Finance Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 p.m. Friday. Hildy, the presenter of the check, is not one of the bank's customers. The bank uses deferred posting with a 2 p.m. cutoff hour. If it decides to dishonor the check, it must do so by midnight

Albert buys a surround sound system from his neighbor George at George's garage sale. Albert writes George a check for $250 for the sound system. George is

Hoppy steals two checks from Eagle Retail Stores, Inc.-a blank check and a check payable to the order of General Supplies Company (GSC), drawn on Eagle's account with First National Bank. Hoppy forges Eagle's signature on the blank check and makes it payable to himself. Hoppy forges GSC's indorsement on the back of the check payable to GSC, and adds "Pay to the order of Hoppy." At Friendly Credit, Inc., Hoppy indorses the back of both checks with his own name and gives them to Friendly for cash. Friendly does not know about the theft or the forged signatures and presents the checks to First National, which pays them. Eagle, which was not negligent, discovers the forgeries and asks First National to recredit its account. Who suffers the loss on each check?

Jackie inserts a debit card issued by her bank into a machine and keys in her personal identification number. She is then able to withdraw $500 in cash. Jackie is using

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

A bank has no right to charge a customer's account for the amount of a stale check.

Kris presents an instrument that states "pay to the order of Kris" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is

Commercial banking practices consider a check that has been outstanding for three months to be a stale check.

A certified check is a check that has been signed by a notary public.

The incompetence of a customer revokes a bank's authority to pay an item.

A check is a special type of draft.

Jon writes a check to LocoMotion, Inc., as payment for a golf cart but soon discovers the cart is broken. He goes to Fairway Bank, the drawee, and orally authorizes Lolly, a bank officer, to stop payment on the check. This order is valid for

Jacob writes Phillip an uncertified check for $500 on January 1. Seven months later, Phillip presents the check at the bank. The bank pays the check in good faith without consulting Jacob. The bank

Little Local Bank wrongfully fails to honor a check signed by its customer Andrea. Little Local Bank is