Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 19

Begg made out a check payable to the order of Newwall, a subcontractor, for $32,000 in November to cover work in progress. In January, Begg issued another check to Newwall to cover the entire amount owed to Newwall, including the original $32,000. At the same time, Begg issued a stop-payment order to the drawee bank for the original $32,000. In spite of the stop-payment order, the bank nevertheless honored the check when presented for payment by Newwall. When Begg examined his statement several months later, he discovered that the original check had been paid and therefore requested that the bank recredit his account for $32,000. The bank refused, claiming that Begg did not examine his statement in a timely manner and that, if he had done so, he would have seen that the $32,000 had been paid and therefore not issued the second check for the full amount of the cost of the work. Must the bank recredit Begg's account with $32,000? (J. W. Reynolds Lumber Co. v. Smackover State Bank, 836 S.W.2d 853)