ch. 28 Flashcards
If a bank does not dishonor an “on-us” item by the opening of the second banking day following its receipt, the check is considered paid.
True
Boris can write checks on his account at City Bank. Demi steals the checks, forges Boris’s signature, and cashes the checks at City Bank. The bank is excused from any liability if, after receipt of the first forged check, Boris fails to report the forgeries within
one year.
Nick steals two checks from Pauline—a blank check and a check payable to the order of Retail Outlets Company, drawn on Pauline’s account with State Bank. Nick forges Pauline’s signature on the blank check and makes it payable to himself. Nick forges Retail Outlets’ indorsement on the back of the check payable to Retail Outlets, and adds, “Pay to the order of Nick.” At United Credit Union, Nick indorses the back of both checks with his own name and gives them to United for cash. United does not know about the theft or the forged signatures and presents the checks to State Bank, which pays them. Pauline, who was not negligent, discovers the forgeries and asks State Bank to recredit her account. Who suffers the loss on each check?
The bank is at fault for both checks, because they were not properly checked for authenticity. However Pauline should report this fraudulent charge immediately just in case her bank has timeline on dispute claims.
Dill issues a check drawn on Eagle Bank to Farm Supply Store to pay for a rototiller. Later, Dill discovers a defect in the device and orders the bank to stop payment on the check. Dill does not renew the order, and the bank clears the check eight months later. The bank
none of the choices.
Smith & Jones P.A. is a business customer of Tri-State Bank. Under federal law, Smith & Jones cannot demand
the return of its original checks with its monthly statements.
With a joint checking account, the bank can hold any joint-account owner liable for payment of an overdraft even if that owner did not sign the check or benefit from its proceeds.
False
A bank is not obligated to pay an uncertified check presented for payment more than six months from its date.
True
Mara has a checking account at North Bank. Mara signs a check “payable to Ovid” drawn on Mara’s account. North Bank is
the drawee.
A bank may contractually shift to its customer the risk of forged checks created electronically or otherwise by the use non-manual signatures.
True
When processing a check, Platinum Bank encodes information, such as the amount of the check, on the item. Platinum thereby warrants to any subsequent bank or payor
the encoded information is correct.
When a customer makes a deposit into a checking account, the customer becomes a debtor, and the bank a creditor, for the amount deposited.
False
Electronic banking has reduced the number of possibilities for tampering with a person’s private banking information.
False
Dana draws a check on Equity Bank, and asks the bank to agree in advance to accept the check by setting aside sufficient funds to cover the amount. If Equity agrees, the check will be considered
certified.
When a bank draws a check on itself, the check is a negotiable instrument at the moment it is issued.
True
If a check is dishonored for insufficient funds, the bank on which the check is drawn is liable to the payee or to the holder in a civil suit.
False
Daisy signs a check “pay to the order of Ewan” drawn on Daisy’s account in Finance Bank. Graham forges Ewan’s indorsement. Finance Bank pays the check. Most likely
Finance Bank will have to recredit Daisy’s account.
Dallas presents an uncertified check for payment more than six months after its date. The check was drawn by Emma on her account in First Bank. If the bank follows the usual banking practice in such a case, it will
consult Emma.
If only a bank’s drive-through facility is open, a check deposited on Saturday will not trigger the bank’s midnight deadline until the following Monday.
True
Riley signs a check “pay to the order of State University” drawn on his account at Town Bank to pay tuition and fees. Like most checks, this check is
a special type of draft.
Allys writes a check to Beri on Allys’ account at Community Bank. The bank dishonors the check even though Allys has sufficient funds in her account. The bank is liable to
Allys.
A bank must re-credit a customer’s account when the bank pays a check on which the drawer’s signature is forged.
True
Bok buys an espresso machine from Coffee Gadgets, which bills him for $100. He writes out a check drawn on Dios Bank, but later, believing that the machine is defective, issues a stop-payment order. Dios
must stop payment if the bank has a reasonable time to act.
Brady forges Cal’s signature on a check “payable to the order of Brady” drawn on Cal’s account in Downtown Bank. Cal’s forged signature is
not effective.
To avoid liability for negligence, a customer must examine monthly bank statements and canceled checks promptly and with reasonable care, and report any forged signatures to the bank.
True
