Asked by astrid truluck on May 20, 2024
Verified
Mendel had his car repaired by Harry's Garage (HG) .He paid by check drawn on ABZ Bank when he collected his car.On the drive home,Mendel realized that the repair had not been made.He immediately called ABZ on his cell phone and told the bank to stop payment on the check.Three days later,HG negotiated the check to Amy,a holder in due course.When Amy went to cash the check,ABZ Bank refused to honor it.What is Mendel's liability on this check?
A) Mendel is not liable to anyone because he stopped the check in time.
B) Mendel is liable to Amy because the stop payment order was made through a phone call.
C) Mendel is not liable to Amy because she took the check from HG.
D) Mendel is liable to Amy because he is the drawer of the check.
Stop Payment
An order given by an account holder to their bank to not pay out or honor a check or payment that has previously been issued from their account.
Holder In Due Course
A party possessing a negotiable instrument, like a check, who has certain rights to payment free from most defenses or claims.
- Gain insight into the accountability and responsibilities banks hold in cases of dishonored checks, predated checks, and stop-payment instructions.
- Acquire insight into the roles of the drawer, drawee, and payee during transactions involving checks.
- Gain insight into the accountabilities and obligations of drawers and endorsers concerning the modification of checks, negligence, and the process of recovering losses.
Verified Answer
JK
Jason KotakisMay 27, 2024
Final Answer :
D
Explanation :
All Mendel has is a personal defense against payment,which is not good against a holder in due course.Amy can therefore come after Mendel on his drawer's liability.So,Mendel must pay Amy and pursue his claim of misrepresentation separately against HG.
Learning Objectives
- Gain insight into the accountability and responsibilities banks hold in cases of dishonored checks, predated checks, and stop-payment instructions.
- Acquire insight into the roles of the drawer, drawee, and payee during transactions involving checks.
- Gain insight into the accountabilities and obligations of drawers and endorsers concerning the modification of checks, negligence, and the process of recovering losses.