Question 1

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

Accepted Answer

False

Question 2

A check orders a bank to pay a fixed amount of money on demand.

Accepted Answer

A check is a written order to a bank to pay a specified amount of money to the person or entity named on the check on demand.

Question 3

When a bank pays a check on which the drawer's signature is forged,generally the customer suffers the loss.

Accepted Answer

False

Question 4

A forged signature has no legal effect as the signature of a drawer.

Accepted Answer

A signature must be genuine to be legally binding. A forged signature is not genuine and thus has no legal effect as the signature of a drawer.

Question 5

To transfer checkbook dollars among different banks,each bank acts as an agent of collection for its customer.

Accepted Answer

When a customer wants to transfer checkbook dollars from one bank to another, they would typically write a check from their account at Bank A and deposit it into their account at Bank B. Bank A would act as the agent of collection for their customer, and would credit their account once the check clears. Bank B would then credit their customer's account once they receive the funds from Bank A.

Question 6

A bank is subject to a civil suit if its customer writes a bad check.

Accepted Answer

A bank is not responsible for the actions of its customers unless it can be proven that the bank was negligent in some way. Therefore, a bank cannot be sued for a bad check written by its customer.

Question 7

A drawer is liable to the holder of a check that is not honored.

Accepted Answer

According to the Uniform Commercial Code (UCC), the drawer of a check (the person who wrote and signed the check) is responsible for ensuring that the funds are available in the account when the check is presented for payment. If the check bounces or is returned unpaid, the drawer is liable to the holder (the person or entity that was supposed to receive the funds) for the amount of the check.

Question 8

A bank that has certified a check is under no obligation to accept it.

Accepted Answer

The answer of A bank that has certified a check...

Question 9

A bank's duty to honor its customers' checks is absolute.

Accepted Answer

A bank has the right to refuse to honor a check if there are insufficient funds in the customer's account, if the check appears to be altered or fraudulent, or if there is a legal order restricting the customer's ability to withdraw funds.

Question 10

A stale check is one that has been outstanding for longer than six months.

Accepted Answer

A stale check is one that has been outstanding for longer than six months. After six months, the bank may refuse to cash the check or may require the issuer to obtain a new check.

Question 11

Under the UCC,a bank is "a person engaged in the business of banking."

Accepted Answer

According to Section 104 of the Uniform Commercial Code (UCC), a bank is defined as "a person engaged in the business of banking."

Question 12

A bank is never liable for failing to honor a customer's stop-payment order.

Accepted Answer

Banks may be liable for failing to honor a customer's stop-payment order in certain circumstances, such as if the bank accepted the payment after the stop-payment order was given or if the bank was negligent in processing the order. However, there may be limitations and specific procedures that the customer must follow in order to hold the bank liable.

Question 13

A drawee bank may be liable to its drawer customer if the bank refuses to honor the drawer's check when there are sufficient funds in the account.

Accepted Answer

A drawee bank has a responsibility to honor its customer's check as long as there are sufficient funds in the account. If the bank refuses to do so, it may be held liable for damages suffered by the drawer. This is because the bank's refusal to honor the check constitutes a breach of its obligation to its customer.

Question 14

An oral stop payment order is valid for fourteen days.

Accepted Answer

An oral stop payment order is valid for fourteen days from the date it is given. After fourteen days, the order must be confirmed in writing to continue to be valid.

Question 15

Generally,a bank has no obligation to pay a customer's overdrafts.

Accepted Answer

Banks are not obligated to pay a customer's overdrafts, but they may choose to do so as a courtesy or as part of an overdraft protection program. However, customers may be subject to fees and interest charges for overdrafts.

Question 16

A cashier's check is an instrument in which a bank draws a check on itself.

Accepted Answer

A cashier's check is a check that is guaranteed by a bank. In other words, the bank draws the check on itself and guarantees the funds, making it a secure form of payment.

Question 17

Once a check "bounces," a holder cannot resubmit it for payment.

Accepted Answer

A holder can resubmit a bounced check for payment, but they may incur additional fees and penalties. However, there may be limitations on the number of times a check can be resubmitted depending on bank and state regulations.

Question 18

When a bank certifies a check,it immediately charges the drawer's account.

Accepted Answer

When a bank certifies a check, it guarantees payment and establishes that the funds are available in the drawer's account. Therefore, the bank immediately charges the drawer's account for the amount of the certified check.

Question 19

A person who writes a bad check is subject to a civil suit only.

Accepted Answer

A person who writes a bad check can be subject to both civil and criminal actions. Writing a bad check is considered a form of theft, and thus can result in criminal charges in addition to the possibility of being sued in civil court for the amount of the check and any associated fees.

Question 20

Banks are required to constantly verify the life and competence of their drawers.

Accepted Answer

Banks are required to verify the identity and signature of their customers (drawers) during account opening and periodically thereafter, but they are not required to verify their life and competence on a regular basis.

Quiz 19: Checks and Banking in the Digital Age