[Diamond Earrings] Lena ordered a pair of diamond earrings from Uptown Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Lena found out from a friend of hers that Uptown Jewelry Store was in financial trouble. Lena was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to Uptown Jewelry Store. She gave the bank all of the correct information orally needed to stop payment on the check. The bank, however, did not stop payment on the check. The check was paid, Uptown Jewelry Store went bankrupt, and Lena was unable to get either her money or the earrings from Uptown Jewelry Store. Lena asked the bank manager for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Lena that the bank was a holder in due course, and that Lena is liable for any damages sustained by Uptown Jewelry Store or the bank based upon her attempt to stop payment on the check.
-Which statement is true regarding the bank manager saying that the bank could not incur any liability for damages for the failure to stop payment on a check?

Question

Quizplus · Accepted Answer

The manager is incorrect because under the Uniform Commercial Code (UCC), a bank may be held liable for damages suffered by a customer due to the bank's failure to act on a properly issued stop-payment order, regardless of whether the order was oral or written.

[Diamond Earrings] Lena Ordered a Pair of Diamond Earrings from Uptown