If a drawee bank mistakenly paid a check over a stop-payment order, the bank cannot recover if it paid the check to a presenter who had taken the instrument in good faith and for value.

Question

Quizplus · Accepted Answer

This is known as the "holder in due course" rule, which protects someone who takes a negotiable instrument in good faith and for value from defenses that may be raised against the original payee or previous parties.

If a Drawee Bank Mistakenly Paid a Check Over a Stop-Payment