Term
| Relationship between drawer and drawee |
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Definition
Contractual relationship
Drawer gives money to drawee (who acts as agent for collection) and drawee pays out according to drawer's orders. |
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Term
| Drawee can pay out things that are _____________. |
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Definition
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Term
| Rights and duties of drawee if drawer overdrafts. |
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Definition
Drawee has RIGHT to pay (and collect overdraft charges)
Drawee does not have DUTY to pay. |
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Term
| Rights and duties of drawee in post-dated or stale checks. |
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Definition
Drawee has RIGHT to pay on post-dated checks before the date arises and stale checks.
Drawee does not have DUTY to pay on the date specified (if post-dated) or stale checks. |
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Term
| When a drawer orders the drawee to not pay a check. |
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Definition
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Term
| Drawee's Rights and Duties in Stop Payment Order |
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Definition
Drawee has DUTY to follow the stop payment order
Exceptions:
1. shelter doctrine (for HDC)
2. subrogation (third party takes over right to claim/legal remedy) |
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Term
| When a drawee DOES NOT pay when it should have, drawee is liable to drawer for ____________. |
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Definition
| Wrongful dishonor (breach of contract) |
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Term
| When a drawee pays when it SHOULD NOT HAVE, drawee is liable to drawer for __________. |
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Definition
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Term
| Rights and duties of drawee if drawer is dead and drawee knows it. |
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Definition
Drawee has RIGHT to pay
Drawee does NOT have DUTY to pay |
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Term
| Instances where a drawee SHOULD NOT have paid, but did pay, and drawer CAN SUE for breach of contract. |
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Definition
1. Forgery
2. Forged Indorsement
Because bank has customer's signature. |
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Term
| Instances where a drawee SHOULD NOT have paid, but did pay, and drawer CANNOT SUE for breach of contract. |
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Definition
Drawer negligence in:
1. Fictitious indorsements
2. Drafting
3. Notifying the drawee |
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Term
| Examples of drawer negligence in notes to fictitious indorsers that will prohibit him from recovering for breach of contract (even if drawee paid, but it should not have): |
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Definition
1. Imposter (drawer writes check to fictitious payee)
2. When comptroller (accountant) indorses and steals
3. Payroll padding |
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Term
| Examples of Drafter Negligence in Drafting: |
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Definition
1. Leaves amount line blank or a lot of space
2. Trusts someone else to put in the right amount |
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Term
| Using pencil and leaving blank checks at the top of a table at a restaurant ________ examples of drawer negligence. |
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Definition
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Term
| If drawer learns of fraud or forgery, must notify bank in _________ manner. |
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Definition
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Term
| A drawer who negligently fails to notify the drawee of a forgery in a timely manner can shift ________ back to drawee if can prove that drawee was _____________. |
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Definition
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Term
Limits on the amount of time a drawer has to notify drawee of forgery:
Forged Drawer: _______
Forged Indorsement: ________
Multiple forgeries by SAME person: ________ |
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Definition
Drawer = 1 year
Indorsement = 3 years
Multiple Forgeries by Same Person = 30 days |
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Term
If bank pays on forged drawer's signature = ______________
If bank pays on forged indorsement = __________________ |
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Definition
Drawer's Signature: Payment is FINAL; bank CANNOT recover
Indorsement: Payment is NOT final; bank CAN recover from the party that it paid |
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Term
| Why can bank recover on forged indorsement and not forged drawer's signature? |
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Definition
Because of presentment warranties.
Holder who presents forged indorsement is breaching warranty of title (forged indorser breaks warranty of title).
Holder does not warrant that the signature is the drawer's. |
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