Question 1

When a bank receives a properly drawn and payable check and there are sufficient funds to cover the check,if the bank wrongfully dishonors the check,the bank _____.

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 2

On August 1,1990,Lisa wrote a check for $100 payable to the order of Marcia,her sister.Marcia misplaced the check and found it in May 1991,and attempted to cash it.Under these circumstances,_____.

Accepted Answer

A 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. However, the bank acting in good faith may pay a check that is more than six months old and charge it to the drawer-depositor's account. In this scenario, the bank may, in good faith, pay the check and charge it to Lisa's account.

Question 3

Which of the following sources governs the relationship between the depositor and the drawee bank?

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 Uniform Commercial Code (UCC).

Question 4

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

Accepted Answer

This is generally true. Most banks have a policy of not honoring checks that are more than six months old, as they are considered stale-dated. However, it is always best to check with your bank for their specific policies and procedures.

Question 5

Similar to the Fair Credit Billing Act,the Electronic Funds Transfer Act gives operators a maximum of 90 working days to investigate errors or provisionally recredit the consumer's account.

Accepted Answer

The Electronic Funds Transfer Act requires financial institutions to investigate errors and resolve them within 45 days, not 90 days.

Question 6

Which of the following is an actual damage that a bank would be liable for when a bank wrongfully dishonors a check?

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. Actual damages may include charges imposed by retailers for returned checks, as well as damages for arrest or prosecution to the customer.

Question 7

A bank is primarily liable on a cashier's check.

Accepted Answer

A cashier's check is a type of check that is guaranteed by the issuing bank, which means that the bank is primarily liable for payment. This means that if the check is not paid, the bank is responsible for making the payment or reimbursing the purchaser of the check.

Question 8

Any person authorized to sign a check may stop payment on it,even if he or she did not sign the check in question.

Accepted Answer

Any authorized person, such as the account holder or a representative of the account holder, may request a stop payment on a check regardless of whether they signed the check.

Question 9

Generally,a drawee bank is obligated to certify a check.

Accepted Answer

A drawee bank is not obligated to certify a check. It is at the discretion of the bank and usually requires a fee to be paid by the account holder.

Question 10

When a person deposits money in an account at a bank,the bank no longer considers that person the owner of the money; instead,he is a creditor of the bank.

Accepted Answer

When a person deposits money in a bank, it becomes the property of the bank, and the depositor becomes a creditor of the bank. This is because the bank is obligated to repay the depositor's funds upon request or demand.

Question 11

A bank may pay a postdated check unless it has received notice from the customer not to pay until the date on the check.

Accepted Answer

A bank may pay a postdated check unless the customer has provided notice to the bank to hold the check until the specified date. However, it is important to note that some banks may have policies in place to not honor postdated checks or charge a fee for doing so.

Question 12

Which of the following best describes a stale check?

Accepted Answer

A bank does not owe a duty to its customer to pay any checks out of an account that are more than six months old. Such checks are called stale checks. However, the bank acting in good faith may pay a check that is more than six months old and charge it to the drawer-depositor's account.

Question 13

Even if the drawer is negligent and contributes to the alteration of a check,he cannot be barred from claiming it as the reason that a particular check should not be charged to his account.

Accepted Answer

If the drawer's negligence contributes to the alteration of a check, they may be barred from claiming it as a reason for not charging the check to their account, as they have a responsibility to prevent such alterations.

Question 14

When issuing a stop-payment order,banks claim that the "reasonable certainty" with which customers must describe the check in question should have the dollar amount exact to the penny because the computers they program require such precision.

Accepted Answer

Banks require precise information, including the exact dollar amount, to accurately identify and process stop-payment orders using their computerized systems.

Question 15

A cashier's check is same as a certified check.

Accepted Answer

A cashier's check is different from a certified check. A cashier's check is issued by a bank and is guaranteed by the bank, while a certified check is issued by an individual and is guaranteed by their own account.

Question 16

While a stop-payment order is in effect,a drawee bank is responsible for establishing the fact and amount of the loss.

Accepted Answer

The answer of While a stop-payment order is in effect,a...

Question 17

A drawee bank does not have the right to charge a payable check to a drawer's account if this will create an overdraft in the account.

Accepted Answer

A drawee bank can charge a payable check to a drawer's account even if it results in an overdraft, as long as the bank has agreed to provide overdraft protection or the account terms allow for it.

Question 18

If the drawer of a check orders the drawee bank not to pay the check,the drawee bank generally owes the drawer a duty not to certify the check.

Accepted Answer

When the drawer of a check orders the drawee bank not to pay the check, it is referred to as a stop payment order. In such cases, the drawee bank has a duty not to pay or certify the check, unless the stop payment order is revoked or lifted by the drawer.

Question 19

Revised Article 3 of the Uniform Commercial Code recognizes the modern bank practice of retaining checks,and permits the bank to supply only a statement showing the item number,amount,and date of payment.

Accepted Answer

Revised Article 3 of the Uniform Commercial Code indeed recognizes the modern bank practice of retaining checks and permits the bank to supply only a statement showing the item number, amount, and date of payment.

Question 20

During a radical truncation,the drawee bank keeps the original checks.

Accepted Answer

In a radical truncation, the drawee bank does not keep the original checks; instead, they are converted into electronic form for processing.

Quiz 41: Checks and Electronic Fund Transfers-Part Eight Credit Transactions