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?

Question

Quizplus · 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 becomes primarily liable on the check.

Eli Draws a Check for $1,500 on Town Bank