Use the fact situation above to answer the question. When Albert advised the bank that the cheque was lost and put the stop payment on it,he then asked the bank to replace it with another certified cheque.The bank responded by telling Albert that it would only replace the cheque if Albert entered into an indemnity agreement with the bank indemnifying the bank in the event the cheque was found and presented for payment.In this case
A)the bank can refuse to replace the lost certified cheque because it always has the right to refuse to honour any negotiable instrument.
B)the bank can refuse to replace the lost certified cheque unless Albert agrees to give it the indemnity agreement.
C)the bank cannot refuse to replace the lost certified cheque with another one because Albert is the original drawer.
D)the bank cannot refuse to replace the lost certified cheque because the stop payment is effective to protect the bank if the original certified cheque is presented for payment.
E)none of the above

Question

Quizplus · Accepted Answer

The bank is entitled to require an indemnity agreement as a condition for replacement of a lost certified cheque. This is a common practice among banks to protect themselves against potential fraudulent or double payments. Therefore, option B is the correct answer. Option A is incorrect because while the bank does have the right to refuse to honour any negotiable instrument, this is not directly related to the situation at hand. Option C is incorrect because being the original drawer does not automatically entitle Albert to a replacement cheque without providing the required indemnity agreement. Option D is incorrect because the stop payment only ensures that the original cheque will not be honoured if it is presented, but it does not absolve Albert of his responsibility to indemnify the bank in case the original cheque is found and presented for payment.

Use the Fact Situation Above to Answer the Question