Question 1

Daria writes a check for $100 drawn on Village Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Daria may be prosecuted for

Accepted Answer

Daria may be prosecuted for fraud if the check is not backed by sufficient funds. It is illegal to intentionally write a check with insufficient funds, also known as writing a "bad check."

Question 2

Fact Pattern 22-1 
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 22-1. Capital Bank

Accepted Answer

Capital Bank must stop payment if Echo's stop-payment order is received in time and gives the bank a reasonable opportunity to act on it.

Question 3

Luc writes a check for $1,000 drawn on Ridgetop Bank and presents it to Bianca. Bianca presents the check for payment to Ridgetop Bank, which dis?hon?ors it for insufficient funds. The party most likely liable to Bianca is

Accepted Answer

The party most likely liable to Bianca is Luc in a civil suit because he wrote the check and it bounced due to insufficient funds, rendering him responsible for the debt. Ridgetop Bank does not have a direct liability to Bianca because they are not the original party who wrote the check.

Question 4

Fact Pattern 22-1 
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 22-1. Capital Bank pays the check. Capital

Accepted Answer

Capital Bank is liable for wrongful payment because it paid the check despite Echo issuing a valid stop-payment order. Capital Bank could seek reimbursement from Echo for the amount paid out, but it cannot sue Echo for a wrongful stop-payment order as it was within Echo's rights to do so. Capital Bank cannot sue Fix-It because it has no contractual relationship with the repair shop.

Question 5

Elton presents an uncertified check for payment more than six months after its date. The check was drawn by Dakota on her account in First Community Bank. The usual banking practice in such a case is to

Accepted Answer

The answer of Elton presents an uncertified check for payment...

Question 6

Shakira issues a check drawn on Thrifty Bank to Ranch & Farm Supply to pay for a rototiller. Later, Shakira discovers a defect in the device and orders Thrifty to stop payment on the check. Shakira does not renew the order, and the bank clears the check eight months later. The bank

Accepted Answer

Shakira's order to stop payment on the check was not renewed, therefore the bank is not required to recredit her account. The check was cleared eight months later, meaning the bank properly followed the usual banking regulations and procedures for clearing checks. The responsibility for the defect in the rototiller lies with Ranch & Farm Supply, not Thrifty Bank.

Question 7

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is

Accepted Answer

Forgery is a crime and is not considered a valid signature. Therefore, a signature that has been forged is not effective and the check is not legally valid.

Question 8

Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity Bank. Most likely, if the bank pays the check

Accepted Answer

The answer of Trudy forges Uma's signature on a check...

Question 9

Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. Like most checks, this check is

Accepted Answer

The check signed by Brendan is a special type of draft because it orders Delta Bank to pay City College Bookstore a specific amount of money. It can be transferred to the bookstore's account in Eagle Bank for deposit. It is not a one-party instrument because it involves two parties (Brendan and the bookstore) and it is not a nonnegotiable instrument because it can be transferred to another account. It is also a substitute for cash since it represents a specific amount of money that can be redeemed by the payee.

Question 10

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?

Accepted Answer

The answer of Ellen pays State Bank $500 plus a...

Question 11

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

Accepted Answer

According to the Uniform Commercial Code (UCC), oral stop payment orders are valid for 14 days only. Therefore, choice letter A is the best option. Choice letter B and C are incorrect because they exceed the 14-day limit, and choice letter D does not make sense in this context.

Question 12

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

Accepted Answer

Little Local Bank is liable to Andrea for damages resulting from its refusal to honor a valid check signed by its customer. As a bank, it has a duty to pay out checks drawn on it by its customers unless there is a valid reason not to do so (such as insufficient funds or a stop payment order). By wrongfully refusing to honor Andrea's check, the bank has breached this duty and caused her damages. Therefore, the bank is liable to Andrea for any damages resulting from its refusal to pay.

Question 13

Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15. This is

Accepted Answer

The check is considered stale because it was presented for payment more than six months after the date written on it.

Question 14

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement, First Federal Bank cashes the check, and Vela disappears. United pays First Federal and debits Simon's account. Most likely, the ultimate loss will fall on

Accepted Answer

The answer of Simon signs a check "pay to the...

Question 15

Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car. If there are insufficient funds in Jen's account to cover the amount of the check, but the bank pays it, this creates

Accepted Answer

This creates an overdraft, which means that Jen's account balance is negative and she will be charged fees and/or interest on the amount overdrawn.

Question 16

Martha has a checking account with Homeplace Bank. Martha signs a check "payable to Phillipa" drawn on Martha's account. Homeplace Bank is

Accepted Answer

The answer of Martha has a checking account with Homeplace...

Question 17

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

Accepted Answer

When a check is written, it is a promise to pay the recipient the amount stated on the check. When Phillip presented the check at the bank, they paid it in good faith because they assumed that Jacob had sufficient funds in his account to cover the amount of the check. Since the check was not certified, the bank can debit Jacob's account for the full $500 to cover the payment made to Phillip.

Question 18

Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is

Accepted Answer

This is a cashier's check because Elmo paid a fee to First National Bank to draw a check on itself, which means the bank guarantees the funds are available and will pay the check when it is presented for payment.

Question 19

Julia opens a checking account with Washington Bank and deposits funds into the account. Julia and Washington Bank

Accepted Answer

The answer of Julia opens a checking account with Washington...

Question 20

Mary writes a check drawn on County Bank for $400 "payable to Bill" on May 1. Mary dies on May 3. Bill presents the check to County Bank on May 5. County Bank

Accepted Answer

The answer of Mary writes a check drawn on County...

Quiz 22: Checks and Banking in the Digital Age