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Chapter 27 West Business Law

Terms

undefined, object
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27-1 p. 507 CHECKS

Check(special type of draft that is drawn on a bank, ordering the bank (person engaged in the business of banking, inc. a savings bank, savings and loan association) to pay a fixed amount of money on demand.
Extra info:
-if any other institution handles a check for payment or for collection, the check is not covered by art. 4)
-DRAWER (a person who writes a check who is usually a depositor in the bank on which the check is drawn)
-PAYEE(person to who the check is payable)
-DRAWEE(the bank or financial institution on which the check is drawn)
-An instrument that has already been accepted by the drawee can be a cashier's check, a traveler's check, or a certified check. (avoids problem of effectiveness of check being altered by some event)
27-1 p. 508 1 ?
Cashiers Checks (bank serves both as the drawer and drawee; when a bank draws a check on itself; it becomes a negotiable instrument on issue)
-B/c bank assumes responsibility for paying the check, the check is more readily acceptable in commerce.)
-Sometimes used in business as nearly the equivalent of cash
-If a bank wrongfully dishonors a cashier's check, the holder can recover from the bank all expenses incurred, interest, and cosequential damages<--same with a certified check or teller's check (usually drawn by a bank on another bank; when drawn on a nonbank, it is payable at or through a bank).
27-1 p. 508 (1 ?)
TRAVELER'S CHECKS
-Definition--(an instrument that is payable on demand, drawn on or payable at a bank and designated as a traveler's check.)
-issuing instrument is directly obligated to accept and pay its trav. ck. acc. to ck's terms.
-purchaser req. to sign ck. at time purchased & again at time it is used.
27-1 p. 509 (1?)

CERTIFIED CHECKS (check that has been drawn by a depositer and then accepted by the bank on which it is drawn)
-bank immediately charges drawer's account with amount of check and transfers funds to its own cert. ck. acct.
-certification prevents bank from denying liability.
-it is a promise that sufficient funds are on deposit and have been set aside to cover the check.
-bank does not have to certify a check, but if it does, it should write o the check the amout it will pay; without this, if amt. is changed, bank is obligated only to pay orig. amt.
-certification may be req. by a holder or by the drawer
-upon cert., drawer and any prior indorsers are discharged from liability on the instrument.
27-1 p. 509 (1?)

What happens when a cashier's, teller's, or cert. ck. is lost?
*the remitter(the check's purchaser) or the payee of a cashier's ck. or teller's ck, or the drawer of the certified ck. can get a refund in the amt. of the ck. from the bank by asking for it before the ck. is payed.
-claim becomes enforceable ninety days after the date of the ck.
27-3 p. 510-11 (4?)

Honoring Checks

When a banking institution provides checking services, it agrees to honor the checks written by its customers, with the usual stipulation that suffiecient funds must be available in the account to
-When a drawee bank wrongfully fails to honor a check, it is liable to its customer for damages resulting from its refusal to pay; cust. does not have to prove that the bank breached its contractual commitment, slandered the cust.'s credit, or was negligent.
-customer is liable to payee or holder of a ck. in a civil suit if check is not honored, and if intent to defraud is proved, cust. subj. to criminal prosecution.
-when bank dishonors a ck. for insuff. funds, it has no liability to cust.
27-3 p. 511 (4?)
When a bank receives an item properly payable from its cust. ck. acct. but the acct. contains insuff. funds, the bank has two options: (1) dishonor the item (2) pay the item and charge the customer's acct., thus creating an overdraf
-if ck. bounces-->a holder can resubmit the ck., holder must notify indorser(s) on ck. of 1st dishonor, otherwise they will be discharged from their signature liability.
-if bank accepts overdrafts on cust.'s acct., then the bank can become liable to the customer for damages proimately caused by its wrongful dishonor of overdrafts.
27-3 p. 512 (4?'s)
STALE CHECKS
(A CK. THAT IS PRESENTED FOR PAYMENT MORE THAN 6 MONTHS FROM ITS DATE)
-BANK NOT OBLIG. TO PAY AN UNCERTIFIED CK. if it is presented more than 6 mos. from its date; if bank pays stale ck. without info. cust., the bank can charge the cust. acct.
27-4 p. 512 (4?)
DEATH OR INCOMPETENCE OF A CUSTOMER
-fOR 10 daysafter the dateof death it can pay or certify checks
30-2 p. 583

LIQUIDATION PROCEEDINGS
-oft. ref. to as ordinary or straight bankruptcy; a debtor in a liquidation bankruptcy turns all assets over to a trustee)sells nonexempt assets over to a trustee; sells nonexempt assets and distributes
--With certain except., the remaining debts are then discharged (extinguished) and the debtor is relieved of the obligation to pay the debts.

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