Business Law, 8e: Chapter 24

Chapter 24
Bank-Customer Relations/Electronic Funds Transfers:

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1. The Colonial Bank v. R.D. Patterson case involved a wrongful dishonor of a check.: a. True
b. False

2. A bank cannot be liable for failure to stop payment on a check.: a. True
b. False

3. A "stale" check is more than three months old and has not been certified.: a. True
b. False

4. A bank customer has a duty to examine and reconcile bank statements within a reasonable time, not to exceed sixty days.: a. True
b. False

5. A bank may not pay a check that creates an overdraft without the permission of the customer.: a. True
b. False

7. A bank's liability to the drawer of a check for wrongfully dishonoring a check is based largely on contract law.: a. True
b. False

8. A bank is always liable to the depositor on a forged check that the bank has paid.: a. True
b. False

9. The Trustmark Insurance Co. v. Bank One, Arizona, N.A. case involved the failure to honor a properly presented check.: a. True
b. False

10. Maria wrote her PIN number on her ATM card. After making a deposit at an ATM machine, Maria left her card in the ATM machine. Carlos found Maria's card and withdrew $300. On her way home, Maria realized that she had forgotten her ATM card and immediately called the bank on her cell phone. She was too late. The $300 had already been withdrawn. Maria is liable for the $300 because her negligence allowed Carlos to withdraw the money.: a. True
b. False

11. Sam arranged for his bank to wire $50 on the first of each month to the YMCA. The money was to pay for his membership. In April, the bank wired $50 to Youngstown Machine Corporation of America instead of the YMCA. Which statement is correct?: a. The prior Bank is liable for the full amount of the payment.
b. Sam and the bank share liability for the amount of the payment.
c. Sam, the originator, is liable for the amount of the payment.
d. The Bank is liable for the full amount of the payment.

12. Which of the following statements is correct concerning stale checks?: a. A check is stale when dated more than six months before presentation to the bank, but the bank may in good faith pay the check.
b. A check is stale when dated more than one year before presentation to the bank.
c. A check is stale when dated more than six months before presentation to the bank, and the bank is required to pay it.
d. Certified checks are stale after three months.

13. Larry issues a check to Hernandez Motors for $2,500 but goes to the bank and issues a written stop payment later that day when he discovers the odomoter mileage is a fraud. Hernandez cashes the check at Larry's bank three weeks later. The Bank is:: a. Not liable because written stop payments expire in 60 days.
b. liable because written stop payments expire in 6 months.
c. liable because written stop payments expire in 14 days.
d. liable because written stop payments expire in 30 days.

14. A bank will not be liable for payment of a check on which the drawer's signature has been forged if:: a. the bank could not have detected the forgery on a reasonable investigation.
b. there are more than two prior indorsers of the check.
c. the bank gives a cashier's check in payment of the depositor's check.
d. the drawer's negligence contributed substantially to the forging of the signature.

15. An oral stop-payment order is valid for:: a. fourteen days after receipt by the bank.
b. fourteen days after the date of the check.
c. six months after receipt by the bank.
d. six months after the date of the check.