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 if he was a bona fide holder for value without notice of Kelly's insufficient funds. The mistake was on the part of the bank for not verifying Kelly's account balance before cashing the cheque.

Kelly Drew a Cheque for $10 000 on Her Account