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10 Cards in this Set
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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) |
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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). |
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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. |
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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. |
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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. |
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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 pay each check. |
-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. |
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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 overdraft (so long as cust. has auth. the payment and the payment doesn't violate any bank-cust. agreement) |
-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. |
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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.
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27-4 p. 512 (4?)
DEATH OR INCOMPETENCE OF A CUSTOMER |
-fOR 10 daysafter the dateof death it can pay or certify checks
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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 the proceeds to creditors.` |
--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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