Roger drew a check payable to Mary for $50.Mary cleverly raises the check to $500,and negotiates it to Local Liquor Store.Local Liquor then cashes the check at the drawee bank.Roger learns of the alteration when he receives his bank statement,and complains to the bank within six months of learning about the alteration.Which of the following statements best describes the liabilities of these parties?

Question

Quizplus · Accepted Answer

The bank is liable for paying out on an altered check, but has a right to collect from the party that presented it. In this case, Local Liquor Store presented the check and breached the warranty of presentment by presenting an altered check. Therefore, the bank can collect from Local Liquor Store for breach of warranty. However, the amount of liability for the bank is reduced to $450 as Roger's negligence in not monitoring his account is partially to blame. Roger can still take action against Mary for fraudulently altering the check.

Roger Drew a Check Payable to Mary for $50