Payment Systems

Question 1

presentment warranties protect…

Answer 1

the rights of drawees on unaccepted drafts and payors of any other instrument or claim

Question 2

a customer who fails to examine her bank statement may not assert the defenses of…

Answer 2

forgery and alteration

• failure to examine bank statements and promptly report a forgery or alteration is a form of negligence
• but if the bank did not act in good faith in paying the check, the bank bears the entire loss

Question 3

if a drawer give a check to an imposter, a transferee may recover the sum of the check from…

Answer 3

either the imposter or the drawer

Question 4

stop payment order

Answer 4

must describe the item with certainty, be written, signed, and dated and is effective for 6 months

Question 5

when processing a check, a bank cannot charge a customer’s account if…

Answer 5

• drawer’s signature is forged (no order by the depositor)
• payee’s signature is forged (pay the wrong person)
• for more than the original order when the check has been altered

Question 6

if the maker of an ordinary note does not pay on the date of presentment, the instrument is considered…

Answer 6

dishonored and the indorser may be held liable

Question 7

real defenses that can be asserted against a HDC

Answer 7

• fraud in the factum

- alteration of an instrument

Question 8

HDC

Answer 8

• takes the instrument free of personal defenses and claims and is subject only to real defenses
• must take the instrument for value, but the value given need not be equivalent to the instrument’s face amount

Question 9

one may qualify as a HDC despite having notice that…

Answer 9

a maker or bearer note has defaulted on its interest payment

Question 10

good faith standard a holder must meet to be a HDC

Answer 10

honesty in fact and reasonable commercial standards of fair dealing

Question 11

one who takes a forged instrument may still be a HDC so long as she did not have notice and…

Answer 11

the instrument did not bear apparent evidence of forgery

- cannot be a HDC if one accepts the instrument despite having notice that it is forged or overdue

Question 12

to be a holder of an instrument one must…

Answer 12

have possession and the right to enforce the instrument, which must be free of forgeries of the names necessary to the chain of title