Question 1

A deceased person's heirs have no power to order a bank to stop payment on checks written by the deceased prior to his death.

Accepted Answer

The deceased person's heirs or other persons claiming an interest in the account can order the bank to stop payment.

Question 2

A stop-payment order must be made so a bank is given a reasonable opportunity to act on the order.

Accepted Answer

To be effective,a payor bank must receive the stop-payment order in time to give the bank a reasonable opportunity to act on the order.

Question 3

A drawer can claim alteration as a reason for not charging a particular check to his account,even if the drawer has contributed to the alteration in some way.

Accepted Answer

If the drawer is negligent and contributes to the forgery or alteration,he may be barred from claiming it as the reason that a particular check should not be charged to his account.

Question 4

Lakeland Bank certifies a check that subsequently is cashed by Pine Federal Credit Union.Pine Federal Credit Union is not liable for any damages associated with the check.

Accepted Answer

If the drawee bank certifies a check,then the drawer and any persons who previously indorsed the check are discharged of their liability on the check.

Question 5

If a customer does not discover a forged check and report it to the bank within one year from the time of the statement containing the check,the bank is not obligated to recredit his account for the amount of the forged check.

Accepted Answer

A customer must discover and report to the bank any unauthorized customer's signature or any alteration within one year from the time after the statement or items are made available to him.If the customer does not do so,he cannot require the bank to recredit his account for such items.

Question 6

A drawer whose bank paid checks over a stop-payment order may not be entitled to have his account recredited if he is unable to show he suffered any loss.

Accepted Answer

The drawer-customer has the burden of establishing the fact and amount of the loss.To show a loss,the drawer must establish that the drawee bank paid a person against whom the drawer had a valid defense to payment.To the extent that the drawer has such a defense,he has suffered a loss due to the drawee's failure to honor the stop-payment order.

Question 7

A bank will be liable if it charges a customer for a check that is postdated and the bank was given prior notice of the postdate.

Accepted Answer

If the bank charges the customer's account for a postdated check before the date stated in the notice given to the bank,the bank will be liable for damages.

Question 8

The main difference between a certified check and a cashier's check is that the bank is primarily liable on a certified check,but only secondarily liable on a cashier's check.

Accepted Answer

A cashier's check differs from a certified check.A check on which a bank is both the drawer and the drawee is a cashier's check.The bank is primarily liable on the cashier's check.At the time a bank certifies a check,the bank usually debits the customer's account for the amount of the certified check and shifts the money to a special account at the bank.It also adds its signature to the check to show that it has accepted primary liability for paying it.Therefore,a bank is both primarily liable for a certified check and a cashier's check.

Question 9

An oral stop-payment order normally is good for 14 days.

Accepted Answer

The customer may give a stop-payment order orally to the bank,but it is valid for only 14 days unless the customer confirms it in writing during that time.

Question 10

The relationship between a depositor and a bank is governed by the deposit agreement and Articles 3 and 4 of the UCC.

Accepted Answer

There are two sources that govern the relationship between the depositor and the drawee bank: the deposit agreement and Articles 3 and 4 of the UCC.

Question 11

A teller's check is a check on which a bank is both the drawer and the drawee.

Accepted Answer

A teller's check is a check on which one bank is the drawer and another bank is the drawee.

Question 12

Ben,a Big Bank checking account customer,wrote a check for $1,000 to Mia.At the time that Mia presents the check for payment to Big Bank,Ben has $1,500 in his account.However,the clerk mistakenly refuses to pay the check and stamps it NSF.Mia then goes to the local prosecutor,and Ben is later arrested for writing a bad check.Ben could recover from Big Bank the damages involved in his arrest,such as attorney's fees.

Accepted Answer

When a bank receives a properly drawn and payable check on a person's account and there are sufficient funds to cover the check,the bank is under a duty to pay it.If the person has sufficient funds in the account and the bank refuses to pay,or dishonors,the check,the bank is liable for the actual damages proximately caused by its wrongful dishonor as well as consequential damages.

Question 13

When both the bank and the customer failed to use ordinary care to prevent alteration or forgery of checks then a comparative negligence is used to determine liability for damages.

Accepted Answer

According to the UCC,in a case where both a bank and its customer fail to use ordinary care a comparative negligence standard is used.

Question 14

Boston Bank receives one of their payable checks made to the order of the Same Sex Alliance organization of Massachusetts for $1,000.The check comes from a valid account and there are funds in that account to cover the check.The CEO of Boston Bank does not agree with the mission of the Same Sex Alliance and refuses to honor the check.Boston Bank is within its power as a bank to do this.

Accepted Answer

When a bank receives a properly drawn and payable check on a person's account and there are sufficient funds to cover the check,the bank is under a duty to pay the check.

Question 15

A bank is not authorized to pay a postdated check before the date on the check and charge the amount to the customer's account,unless the customer has given notice to the bank.

Accepted Answer

An otherwise properly payable postdated check that is presented for payment before the date on the check may be paid and charged to the customer's account unless the customer has given notice of it to the bank.

Question 16

Wire transfer is used for transfer of funds across the country or around the world.This service is generally used by large business and financial institutions.

Accepted Answer

For large business and financial institutions,wire transfers of funds are commonly used to move large sums of money very quickly across the country or around the world.

Question 17

"Check 21" is the popular name for a federal law that enables banks to process checks electronically.

Accepted Answer

The Check Clearing for the 21st Century Act,commonly known as "Check 21," a federal law that is designed to enable banks to process checks electronically.

Question 18

Banks are not required to disclose their funds availability policy to all of their customers.

Accepted Answer

Banks are required to disclose their funds availability policy to all of their customers;they may provide different policies to different classes or categories of customers.

Question 19

A bank may,but need not,pay any checks that are more than six months old.

Accepted Answer

The bank does not owe a duty to its customer to pay any checks out of the account that are more than six months old.Such checks are called stale checks.

Question 20

Unlike many other federal consumer protection measures,the Electronic Fund Transfer Act does not require disclosure of important terms to the consumer.

Accepted Answer

The Electronic Fund Transfer Act requires disclosure of the terms and conditions of electronic funds transfers at the time the consumer contracts for the EFT service.

Quiz 34: Checks and Electronic Transfers