CHECKS

1
CHECKS

• Article 4

2
Special types of checks

• Certified checks
• Cashiers checks
• Travelers checks

3
BANK - CUSTOMER RELATIONSCUSTOMER

• RESPONSIBILITIES
• Act with care and diligence in
• writing checks
• indorsing checks
• Examine bank statements and promptly report
• unauthorized signature
• material alteration
• repetition of these

4
BANK - CUSTOMER RELATIONSCUSTOMER

• RIGHTS
• Collect damages
• Stop payment

5
BANK - CUSTOMER RELATIONSBANK

• DUTIES
• Honor terms of contract
• - provide services
• - at agreed rates
• - provide bank statements
• Obey agency rules
• - pay checks (if properly drawn)
• - pay overdrafts (if agreed)
• Good faith in commercially reasonable manner in
• - processing account
• - stopping payment
• - both within a reasonable time

6
BANK - CUSTOMER RELATIONSBANK

• RIGHTS
• Charge check to account
• Pay check, even if it is an overdraft
• Pay check, even if it is incomplete
• Refuse stale checks (over 6 months and not
  certified)
• If customer has died or is incompetent
• - bank can pay until it has knowledge and
• has time to act
• Subrogation
• Enforce contract terms

7
HOW ARE THESE HANDLED?

• Stale checks
• Incomplete checks
• Stop payment
• The death or incompetence of drawer

8
FORGED ALTERED INSTRUMENTS

• Forged signature of drawer
• Altered checks
• Customer negligence
• Forged indorsement

9
PROBLEMS

• Bob had a balance in his checking account
  of120.15. On Friday he deposited 900, using a
  blank deposit slip. Accidentally, he wrote his
  account number incorrectly.
• On Tuesday, he wrote a check for 500 to Sam's
  Stereo. Sam's took it to the bank on Wednesday,
  but the bank returned it unpaid due to
  insufficient funds.
• Sam's assessed Bob a 10 service charge and a
  10 interest fee, and filed criminal charges. Bob
  paid 100 in bail to get out of jail after his
  arrest. He paid Sam's the 560 in cash.
• May he successfully seek reimbursement from the
  bank?

10
PROBLEMS

• David drew a check for 20,000 on New
  England Merchants National Bank. It was made
  payable to Peter Peters, and post-dated November
  14.
• On September 17, New England Bank paid the
  check. David discovered the error because another
  check was returned for insufficient funds.
• David demanded that his account be recredited.
  Must New England Bank recredit the account?

11
PROBLEMS

• Frank Forger stole a check from Michael's
  checkbook for his account with First National
  Bank. Frank wrote a check to the campus bookstore
  for 1000.
• Campus bookstore deposited the check in its
  account with Second National Bank. The check was
  forwarded for collection and presentment for
  payment.
• First National Bank failed to detect the forgery
  and paid the item. When Michael discovered the
  forgery, he demanded that the account be
  recredited. What result?