Kelly drew a cheque for $10 000 on her account at the Bank of Sudbury. She used that cheque to buy a widget from Joe. Joe presented the cheque to the Bank of Sudbury and received $10 000 in cash. The Bank now realizes that it made a mistake because the balance in Kelly's account was never more than $2000. The Bank therefore is entitled to recover from Joe the money that it paid to him by mistake.

Question

Quizplus · Accepted Answer

The bank cannot recover the money from Joe because he is a holder in due course, meaning he accepted the cheque in good faith and without knowledge of the insufficient funds. The bank's mistake does not affect Joe's right to the funds.

Kelly Drew a Cheque for $10 000 on Her Account