Asked by Hannah Koldin on May 22, 2024
Verified
Which statement is correct regarding the bank manager saying that the bank was a holder in due course, and that stop-payment orders could not affect the right of a holder in due course to collect?
A) The bank manager is wrong.
B) The bank manager is correct only if he can establish that the bank employee who actually paid the check had no knowledge of the stop-payment order.
C) The bank manager is correct unless Lena can affirmatively prove that the bank employee who actually paid the check had knowledge of the stop-payment order.
D) The bank manager is correct unless Lena can prove fraud in the factum on the part of Uptown Jewelry.
E) The bank manager is correct unless Lena can prove fraud in the factum on the part of Uptown Jewelry and that the bank was aware of the fraud.
Holder in Due Course
A person or entity that has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be used against the original payee.
Stop-Payment Order
An order by a drawer that instructs the drawee bank not to pay an issued check.
UCC
The Uniform Commercial Code (UCC) is a set of laws that provide legal standards and regulations for commercial transactions and dealings across the United States.
- Understand the legal implications of stop-payment orders on checks, including required notices and bank liabilities.
Verified Answer
VA
Valissa AbadiaMay 26, 2024
Final Answer :
A
Explanation :
The bank manager is incorrect because a stop-payment order, even if given orally, is effective for 14 days under the Uniform Commercial Code (UCC), and the bank can be held liable for failing to honor a stop-payment request. Additionally, the bank cannot be considered a holder in due course in this context because it is not taking the check in good faith or without knowledge of the stop-payment order.
Learning Objectives
- Understand the legal implications of stop-payment orders on checks, including required notices and bank liabilities.