Question 1

Under revised Article 3 of the Uniform Commercial Code,when multiple forgeries are made by the same wrongdoer,the customer generally cannot hold the bank responsible for paying,in good faith,any such checks after an alteration was available to the customer for a reasonable period,not exceeding:

Accepted Answer

Revised Article 3 of the Uniform Commercial Code provides a special rule to govern the situation in which the same wrongdoer makes a series of unauthorized drawer's signatures or alterations. The customer generally cannot hold the bank responsible for paying, in good faith, any such checks after the statement of account or item that contained the first unauthorized customer's signature or an alteration was available to the customer for a reasonable period, not exceeding 30 calendar days.

Question 2

If a bank pays a check that bears a forged signature of the drawer,the transaction will be treated as one in which the bank paid out of:

Accepted Answer

A check that bears a forged signature of the drawer or payee generally is not properly payable from the customer's account because the bank is not following the instructions of the depositor precisely as he gave them. The bank is expected to be familiar with the authorized signature of its depositor. If it pays such a check, Article 4 of the Uniform Commercial Code will treat the transaction as one in which the bank paid out its own funds rather than the depositor's funds.

Question 3

Salim carelessly makes a check for $100 to Abel in a way that makes it possible for someone to easily alter it.Abel alters the check to read $1,000.Under these circumstances,_____.

Accepted Answer

A check that was altered after the drawer made it out-for example, by increasing the amount of the check-generally is not properly payable from the customer's account. However, 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. Under the given circumstances, if the drawee bank pays the check to Abel in good faith, it can charge the $1,100 to Salim's account if Salim's negligence contributed to the alteration.

Question 4

A check on which a bank is both the drawer and the drawee is a:

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 a cashier's check.

Question 5

If a drawer is negligent and contributes to the forgery or alteration of a check,_____.

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 6

The Electronic Funds Transfer Act (EFTA)now addresses many of the issues that arise out of consumer use of EFT systems,while _____ of the Uniform Commercial Code deals with the funds transfers that are outside the overage of EFTA.

Accepted Answer

Article 4A of the Uniform Commercial Code deals with funds transfers that are outside the coverage of EFTA, specifically addressing wholesale transfers between banks and other financial institutions. Regulation E is another name for the Electronic Funds Transfer Act, not a separate part of the Uniform Commercial Code. Article 3 of the Uniform Commercial Code governs negotiable instruments such as promissory notes and checks, but not funds transfers. Therefore, the correct answer is A) Article 4A.

Question 7

Sasha drew a check payable to the order of Janice on First Bank.Janice indorsed the check and sold it to Karl,who took the check to First Bank and requested that the bank certify the check.The bank did so.Later,Karl presented the check for payment,but First Bank refused to pay.In this scenario,which of the following parties may Karl sue for not receiving payment?

Accepted Answer

In the given scenario, Karl can sue First Bank. Normally, a drawee bank is not obligated to certify a check. When a drawee bank does certify a check, it substitutes its undertaking (promise) to pay the check for the drawer's undertaking and becomes obligated to pay the check. It also adds its signature to the check to show that it has accepted primary liability for paying it.

Question 8

Shankar purchased a new car from Friendly Fred's Autos.Fred indorsed the check to Maya for value.Maya presented the check to the bank,and the bank cashed the check.Later,Shankar attempted to place a stop-payment order on the check,because the car he purchased from Fred was defective.Under these circumstances,_____.

Accepted Answer

In the given scenario, Shankar has no remedy against Maya and the bank. Maya qualifies as a holder in due course. If the bank paid the check to Maya over the stop-payment order, Shankar would not be able to have his account recredited because Shankar would not be able to show that he sustained any loss.

Question 9

Which of the following statements is true of an oral stop-payment order given by the customer?

Accepted Answer

The customer may give an oral stop-payment order to the bank, but it is valid for only 14 days unless the customer confirms it in writing during that time. A written stop-payment order is valid for six months, and the customer can extend it for an additional six months by giving the bank instructions in writing to continue the order.

Question 10

A person may stop payment on a check:

Accepted Answer

A stop-payment order is a request made by a customer of a drawee bank instructing it not to pay or certify a specified check. Any person authorized to draw a check may stop payment of it. Thus, any person authorized to sign a check on the account may stop payment even if she did not sign the check in question.

Question 11

If a bank pays a check after it is given a stop-payment order and has to reimburse its customer for the improperly paid check,_____.

Accepted Answer

If a bank pays a check after it has received a stop-payment order and has to reimburse its customer for the improperly paid check, it acquires all the rights of its customer against the person to whom it originally made payment, including rights arising from the transaction on which the check was based.

Question 12

If a drawee bank certifies a check,who among the following is discharged of their liability on the check?

Accepted Answer

Normally a drawee bank is not obligated to certify a check. When a drawee bank does certify a check, it substitutes its undertaking (promise) to pay the check for the drawer's undertaking and becomes obligated to pay the check. 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 13

The time requirements for notice of postdated checks are similar to those required for:

Accepted Answer

A customer must give notice of the postdating of a check to the drawee bank in a way that describes the check with reasonable certainty. It is effective for the same time periods as Article 4 of the Uniform Commercial Code provides for stop-payment orders. The customer must give notice to the bank at such time and in such manner as to give the bank an opportunity to act upon it before the bank takes any action with respect to paying the check.

Question 14

A written stop-payment order:

Accepted Answer

The customer may give an oral stop-payment order to the bank, but it is valid for only 14 days unless the customer confirms it in writing during that time. A written stop-payment order is valid for six months, and the customer can extend it for an additional six months by giving the bank instructions in writing to continue the order.

Question 15

According to the revised Article 4 of the Uniform Commercial Code,which of the following statements is true of a postdated check?

Accepted Answer

Under original Articles 3 and 4 of the Uniform Commercial Code, a postdated check was not properly payable by the drawee bank until the date on the check. The recent amendments to Article 4 change this. Under the revision, 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

Eli draws a check for $1,500 on Town Bank.The check is made payable to the order of Carmen.Carmen endorses and sells the check to Nita.At Nita's request,Town Bank certifies the check.In this scenario,which of the following is a true statement?

Accepted Answer

Normally a drawee bank is not obligated to certify a check. When a drawee bank does certify a check, it substitutes its undertaking (promise) to pay the check for the drawers undertaking and becomes obligated to pay the check. The drawee bank adds its signature to the check to show that it has accepted primary liability for paying it. In the given scenario, Town Bank acquires primary liability on the check.

Question 17

Which of the following is true of the Check 21 Act?

Accepted Answer

The Check Clearing for the 21^st Century Act, commonly known as Check 21, a federal law that is designed to enable banks to collect more checks electronically, became effective on October 28, 2004.

Question 18

A check drawn by a credit union on its account at a bank is an example of a:

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 a cashier's check. A teller's check is similar to a cashier's check in that it is a check on which one bank is the drawer and another bank is the drawee. An example of a teller's check is a check drawn by a credit union on its account at a bank.

Question 19

A bank that knows of a customer's death:

Accepted Answer

A bank has the right to pay the checks of a deceased customer until it has notice of the customer's death. Even if a bank knows of a customer's death, for a period of 10 days after the customer's death, it can pay checks written by the customer prior to his death. However, the deceased person's heirs or other persons claiming an interest in the account can order the bank to stop payment.

Question 20

Check 21 contains a special refund procedure,called "expedited recredit," for a customer who suffers a loss because of:

Accepted Answer

Check 21 authorizes banks to transform information they receive in electronic form back into a paper copy of the check. It grants to paper copies that meet specific standards and so qualify as "substitute checks" legal status that is the equivalent, as against all persons and for all purposes, of the paper check drawn by the drawer. Check 21 contains a special refund procedure, called "expedited recredit," for a customer who suffers a loss because of a "substitute check."

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