Articles 3&4 Law of Checks and Share Drafts

Question 1

The primary purpose of the Uniform Commercial Code’s Articles 3&4 (the law of checks and drafts) is to?

Answer 1

Encourage commerce (people and businesses) to use and rely on checks

Question 2

1. Provides commerce with recourse against the member-drawer for nonpayment of the check.
2. Incents member-drawers to use and rely upon checking and share draft accounts.
3. Protects the member drawer against alterations, forged indorsements, and forged drawer’s signatures.

Answer 2

The properly payable rule

Question 3

T or F: A check made payable to “John Doe, Jane Doe” without “And” in between the names is payable to either John or Jane?

Answer 3

True

Question 4

What is a post dated check?

Answer 4

A check with a future date

Question 5

T or F: It is illegal to write a post-dated check

Answer 5

False

Question 6

T or F: If you just endorse your name on the back of the check, that endorsement is referred to as a “blank endorsement” and anyone who is in possession of that check is in rightful possession of the check?

Answer 6

True

Question 7

T or F: When the credit union encodes a check, it warrants (promises by law) to all other financial institutions that take the check after it that the check has been encoded correctly?

Answer 7

True

Question 8

T or F: The UCC’s Articles 3&4 require a credit union to return a check that it will not pay by its “midnight deadline”, which means that the check must be returned by midnight of the next banking day after the banking day the check is received?

Answer 8

True

Question 9

Writing “paid in full” on a check to a creditor for an amount less than owed for a debt in the hope that the creditor won’t notice the language will fail to discharge the drawer’s obligation because such payment is not made in good faith?

Answer 9

True

Question 10

When a member loses your cashier’s or teller’s check, once he or she makes a claim for a refund for the lost check, the credit union must immediately give them a replacement check?

Answer 10

No

Question 11

A credit union MUST pay a member’s check that is more than six months old upon presentment?

Answer 11

False

Question 12

Under the UCC 3&4 what is a negotiable instrument?

Answer 12

A check or share draft

Question 13

T or F: The reason it is important to understand the nonpayment and fraud issues under State and Federal check law is because checks for large amounts will continue to be presented for payment & deposit to all credit unions?

Answer 13

True

Question 14

A check is the only form of payment that allows a person (the drawer) to completely control: (3)

Answer 14

1. Who gets paid (the payee)
2. When the payee will get paid (the date)
3. And how much the payee will get paid (the amount)

Question 15

What is the reason that checks are still used as a form of payment?

Answer 15

A check (and an image of a check) is proof of payment forever for a person, as a drawer.