Deck 28: Bank Deposits, Collections, and Funds Transfers

Question 1

If a bank receives a check on Tuesday, it must take proper action, such as forwarding or presenting it, by midnight of Wednesday.

Answer 1

True

Question 2

A bank is not liable for nonpayment of an EFT transaction if the terminal has run out of cash.

Answer 2

True

Question 3

Collecting banks give to a transferee the same basic warranties as those given by other parties who transfer commercial paper, except they also may give encoding warranties.

Answer 3

True

Question 4

The relationship between the payor bank and its checking account customer is exclusively governed by statute and leaves no room for contractual modifications.

Question 5

The Electronic Funds Transfer Act is administered by the Board of Governors of the Federal Reserve System.

Question 6

A bank may pay a check after the death of its customer for ten days following the date of his death unless a person claiming an interest in the account orders the bank to stop making such payments.

Question 7

Point-of-sale systems permit customers to charge items to a charge account at a bank.

Question 8

The dollar volume of commercial payments made by checks or credit cards exceeds the dollar amount made by wire transfer.

Question 9

If a depositor in First Bank takes a check written on Valley Bank to First Bank to deposit, it will not normally be credited to his account until collected from the payor bank.

Question 10

The Check Clearing for the 21st Century Act requires banks to accept checks in electronic form.

Question 11

If First Bank receives a check for collection on Friday at 4:30 p.m., it does not have to present the check to the payor bank by midnight Saturday.

Question 12

Article 4 of the UCC, entitled "Bank Deposits and Collections" provides the principal rules governing bank collection practices.

Question 13

When a person deposits a check in his bank, the bank credits the individual's account by the amount of the check.

Question 14

A critical issue in banking law is at what point an item is finally paid.

Question 15

UCC Articles 3 and 8 cover items in the bank collection process.

Question 16

A bank is permitted by statute to remove an original paper check from the check collection process and send instead of it a substitute check.

Question 17

UCC Article 4A is designed to provide a statutory framework for electronic funds transfers by individual consumers.

Question 18

If a bank pays on a check even though it has a "stop payment order," the bank is liable to the customer only if the customer can prove a loss because of the payment.

Question 19

Adjudication of drawer's incompetence will not affect the bank's ability to act with respect to the drawer until the bank knows and has a reasonable opportunity to act on this knowledge.

Question 20

A payor bank is under no obligation to its customer to pay an uncertified check that is more than six months old.

Question 21

David dies an untimely death in a boating accident two days after writing a check to his landlord.When the check is presented to his bank two weeks later, it refuses to pay.The landlord will have to file a claim in any probate proceedings if he wishes to collect on the check.

Question 22

For how long is an oral stop payment order valid?

A)14 calendar days.
B)14 business days.
C)30 calendar days.
D)Six months.

Question 23

D drew a $100 check on ABC Bank payable "to the order of P." P cashed the check at First Bank.First Bank is an agent of P until the drawee bank pays the check.

Question 24

Sylvia draws a check on ABC Bank payable "to the order of Ann Smith." Ann indorses it and deposits it in her account at First Bank.First Bank is a:

A)drawee bank.
B)payee bank.
C)depositary bank.
D)payor bank.

Question 25

A depositary bank is any bank handling an item for payment.

Question 26

For how long is a written stop payment order valid?

A)One month.
B)Six months.
C)One year.
D)Indefinitely.

Question 27

If a drawer files a stop payment order on a check, he is automatically relieved of liability for the obligation.

Question 28

A bank customer may encode its own checks, and if it does, the encoder warrants to any subsequent collecting bank and to the payor that information is properly encoded.

Question 29

A written stop payment order is effective indefinitely.

Question 30

The effect of a bank's acceptance of a payment order depends on whether the payment order was issued to the beneficiary's bank or to a receiving bank other than the beneficiary's bank.

Question 31

If a bank pays a postdated instrument prior to its date, it will be a proper debit to the drawer's account, unless the drawer had timely informed the drawee that the check was postdated.

Question 32

Doug takes a $500 check drawn by Gail to Gail's drawee bank to cash it.Gail has over $10,000 on deposit in her account, but her bank refuses to pay Doug.In this situation:

A)Doug can sue the bank and demand payment.
B)if the check is over 30 days old, the bank has a right to refuse payment.
C)the bank has incurred a liability to Gail for its improper refusal to pay the check.
D)All of the above.

Question 33

Under the Competitive Equality Banking Act, a non-local check must clear in no more than four intervening business days.

Question 34

A payor bank is required to dishonor an uncertified check that is more than six months old.

Question 35

Congress enacted the Truth in Savings Act, which requires all depositary banks to disclose in great detail to consumers the terms and conditions of their deposit accounts.

Question 36

ABC Bank sent Joanne, a depositor, her January statement on January 31.Within what length of time after this date will Joanne have to notify ABC bank of any instruments containing alterations or unauthorized signatures included in her January statement?

A)10 days.
B)A reasonable period of time, not to exceed 30 days.
C)60 days.
D)Three years.

Question 37

An oral stop payment order is binding on the drawee bank for 14 calendar days.

Question 38

The Code imposes certain affirmative duties on bank customers and fixes time limits within which they must assert their rights.

Question 39

An association of banks and other payors whose members settle accounts with each other on a daily basis is a:

A)payor banking group.
B)clearinghouse.
C)provisional reserve.
D)None of the above.

Question 40

Banks like electronic funds transfers, because they eliminate the float time that a drawer enjoys on a checking account and the paperwork involved in processing checks.

Question 41

The duty of care exercised by a collecting bank in handling an item transferred to it for collection does not include:

A)taking care in presenting the item.
B)that it must act within a reasonable time after receipt of the bank item.
C)taking care in routing.
D)taking care in selecting intermediary banks.
E)All of the above are duties of care of collecting banks.

Question 42

Which of the following is true with regard to the federal Electronic Funds Transfer Act?

A)It is primarily a disclosure statute.
B)It gives the same protections to customers that are found in Article 4.
C)It limits a customer's liability for unauthorized transfers to $50 if the consumer notifies the financial institution within two days after learning of the loss or theft.
D)Two of the above, (a) and (c).

Question 43

On April 6, Ellen sends a check out to a magazine publisher and then discovers she has already paid for the subscription.She calls her bank and orders that the bank not make payment.That order will be good until:

A)April 13.
B)October 6.
C)April 20 only if confirmed in writing.
D)October 6 if confirmed in writing.

Question 44

The Competitive Equality Banking Act:

A)allowed intermediary banks to become clearinghouses.
B)includes a requirement that collecting banks give provisional credit to its subagents.
C)has expedited the availability of funds.
D)None of the above.

Question 45

When a payor bank gets an item payable from a customer's account with insufficient funds, the bank:

A)may pay the item and charge it to the customer's account even though an overdraft is created.
B)may dishonor the item and return it.
C)Either (a) or (b).
D)Neither (a) nor (b).

Question 46

A check drawn on a bank is an order to pay a sum of money and an authorization to charge the amount to the drawer's account.The drawer may countermand this order by which of the following?

A)A canceled check.
B)A stop payment order.
C)A banker's acceptance.
D)A time draft.

Question 47

Which of the following is true of a collecting bank?

A)A collecting bank is an agent of the owner of an item until settlement becomes final.
B)The agency relationship between a collecting bank and the owner of an item, once settled, changes to a debtor-creditor relationship.
C)A collecting bank may be a sub-agent of the owner until settlement becomes final.
D)All of the above.
E)None of the above.

Question 48

A check is drawn on Jones Bank by Tamara and made payable to the order of Chris.Chris indorses it "for deposit only, Acct.2275, Chris" and gives it to Plainer Bank for deposit.Plainer stamps "pay any bank" on the check along with its indorsement and negotiates it to Stone Bank.Stone Bank simply stamps "Stone Bank" and negotiates it to SmallTown Bank.If SmallTown wants to negotiate it to the electric company to pay its bill, can it?

A)Yes, because the restrictive indorsement only applied to earlier indorsees.
B)Yes, because the bank was not responsible for checking more than one indorsement.
C)No, because an item restrictively indorsed with words such as "pay any bank" is locked into the bank collection system.
D)No, because the bank must issue its own check for its own bills.

Question 49

Helen deposits a $50 check in her account at First Bank at 4:00 on Friday.The bank is closed on Saturday and Sunday, but opens again on Monday.The midnight deadline for First Bank would be:

A)Midnight Saturday.
B)Midnight Sunday.
C)Midnight Monday.
D)Midnight Tuesday.

Question 50

Barry presents to Wake Bank for deposit in his account a check for $100 made out to him by Richard.Wake Bank provisionally credits Barry's account on Monday.When is payment final?

A)Automatically at the end of the third business day.
B)Midnight Tuesday.
C)When the amount of the check is collected from Richard's bank.
D)When Richard's bank receives the check.

Question 51

Sylvia deposits in her account at First Bank a $50 check drawn on Valley Bank.First Bank transfers the check to Second Bank, which in turn forwards it to Valley Bank, which pays the item.Which of the following is correct?

A)Valley Bank is the payor bank.
B)Valley Bank is the drawee bank.
C)Valley Bank is the collecting bank.
D)Two of the above, (a) and (b), are correct.

Question 52

A system for electronic funds transfers (EFT) in which machines are located in a merchant's store and are activated by the consumer's identification card and code is:

A)POS.
B)RAM.
C)EFTA.
D)DOS.

Question 53

Which of the following is correct with respect to a bank customer's duty to discover and report unauthorized signatures?

A)The customer is required to exercise reasonable care and promptness to examine the bank statement.
B)A customer's duty of examination includes checking the signatures of payees and indorsers.
C)The bank is liable on all items with unauthorized signatures even if these canceled checks were returned to the customer four years prior to the discovery of the alterations.
D)The bank is not required to exercise ordinary care in paying the items.

Question 54

If you lose your wallet along with your ATM card, your liability is:

A)unlimited unless you notify the bank within 30 days.
B)limited to $200 if you notify the bank within two days.
C)limited to $50 if you notify the bank within two days.
D)limited to $500 if you notify the bank within 60 days.

Question 55

An objective of the Check 21 Act is to:

A)require banks to accept checks in electronic form, thereby reducing paperwork.
B)make the check collection process faster by transferring files digitally.
C)enhance fraud detection.
D)All of the above.
E)Both (b) and (c).

Question 56

If Ben Stewart has a checking account at First Bank:

A)the relationship between Ben and his bank is based primarily on their contractual agreement.
B)First Bank is a creditor and Ben is a debtor.
C)Ben is an agent of First Bank.
D)All of the above.

Question 57

The first bank to receive a check for collection is the:

A)depositary bank.
B)drawee bank.
C)payor bank.
D)intermediary bank.

Question 58

The Electronic Funds Transfer Act governs:

A)consumer electronic fund transfers.
B)electronic transfers between financial institutions.
C)electronic transfers between financial institutions and businesses.
D)electronic transfers between businesses.
E)All of the above.

Question 59

A preauthorized electronic transfer from a consumer's account:

A)may be orally authorized at the time the transfer is to be made.
B)must be authorized in writing in advance of the time the transfer is to be made.
C)may be stopped only by written notice to the financial institution at least five business days before the scheduled date of transfer.
D)is limited to an amount of $500 or less.

Question 60

If Margie makes out a check for $27.50 when she has only $10 in her account, her bank may:

A)refuse to pay the check.
B)pay the check.
C)bill Margie for $17.50 and service charge.
D)Any of the above.

Question 61

UCC Article 4A:

A)is designed to overlap coverage of the Electronic Funds Transfer Act.
B)covers both credit and debit transactions.
C)covers wholesale funds transfers.
D)does not allow parties to vary their rights and obligations by agreement.

Question 62

Which warranties does a collecting bank give?

A)Warranty of no alteration only.
B)Good title, genuine signatures, no material alteration, no defense good against it, and no knowledge of insolvency.
C)Only good title and genuine signatures.
D)A collecting bank does not give any warranties.

Question 63

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
certificate of deposit

Question 64

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
drawee

Question 65

What are a payor bank's rights to subrogation upon an improper payment of an instrument?

Question 66

Emma calls her bank to issue an oral stop payment order on a check on March 1st.She then leaves town for two weeks to visit her mother.When she returns, she goes to the bank to sign a written stop payment order, but finds the bank has already paid the check.What recourse does she have? Explain.

Question 67

Despite its efficiency, MICR has created several problems which include:

A)paying a postdated instrument prior to its date.
B)customers miscoding checks.
C)Both of the above.
D)Neither of the above.

Question 68

What is the effect of a payor bank's dishonor of a check?

A)It returns the check.
B)The provisional credits must be reversed.
C)The customer who deposited the item for collection must cover the item and seek recovery from the drawer or indorsers.
D)All of the above will occur.

Question 69

What is an electronic funds transfer? Why do banks like it? What provisions are in the law to protect the customer who uses electronic funds transfer?

Question 70

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
blank indorsement

Question 71

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
negotiability

Question 72

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
drawer

Question 73

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
holder

Question 74

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
draft

Question 75

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
restrictive indorsement

Question 76

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
check

Question 77

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
maker

Question 78

MATCHING
Part V Matching
Match each statement with the correct term below.a.An order to pay a fixed sum of money, signed by a drawer, payable on demand or at a definite time.b.A specialized form of draft; an order to pay money drawn on a bank and payable on demand.c.Legal concept that makes written instruments freely transferable and therefore a readily accepted substitute for money.d.An instrument that is payable to the possessor; a check that is made payable to cash or that is indorsed in blank.e.A person who is in possession of an instrument drawn, issued, or indorsed to him or to his order, or to bearer or in blank.f.An indorsement that specifies no indorsee and may consist of merely the signature of the indorser or her authorized agent.g.Issuer of a promissory note or CD.h.A written acknowledgement by a bank of the receipt of money that it promises to repay; a specialized form of promise to pay money that is given by a bank.i.A person or organization to whom a draft is directed and who is ordered to pay the amount of money specified therein; the bank on which a check is drawn.j.Issuer of a check or draft; the person on whose account a draft is drawn.k.An indorsement that attempts to limit the rights of the indorsee in some fashion.l.Signature that identifies an indorsee to be paid; makes the instrument order paper.m.The person to receive payment by an instrument..n.Defenses to liability on a negotiable instrument which are good against holders unless they are holders in due course.o.An instrument involving two parties, one of whom promises to pay the second a stated sum of money either on demand or at a stated future date.p.Person who signs an instrument to lend her credit to another party to the instrument.q.The transferee of an instrument acquires the same rights in the instrument as the transferor had.r.Acceptance of a check by a bank.s.Drawee which agrees to become primarily liable on a draft.t.An instrument that requires both transfer of its possession and indorsement by the appropriate parties for the transferee to become a holder.u.Defenses good against all holders, including holders in due course.
bearer paper

Question 79

Theresa has just started working for First Bank as a teller.A man comes into the bank with a $100 check that is 8 months old.She goes to the manager to ask whether she should pay it.If you were the manager, what would you advise her? Explain.

Question 80

Mary receives her monthly bank statement on December 30th.She looks at it quickly, then sets it aside.Three days later, she examines it again and discovers a forged check.What must she do to avoid responsibility for the check?