Chapter 19: Types of Checks

Check

Draft drawn by the drawer ordering a drawee to pay a sum of money on demand to a payee

3 Dutires of Banks

Duty to Honor Checks, Duty to Accept Deposits, Duty to Collect

Stop Order Payment

Writing- 6 months Oral- 14 business Days - cannot be made on cashier's check or certified check

Stale Check

a check other than a certified check that is more than 6 months after its date (bank not obligated)

Collecting bank

any bank handling an item for collection

Intermeditary Banks

any bank to which an item is transfered in the course of collection

In event of Drawer's death

bank can pay or certify check drawn on or before the day of death for 10 days following the date of death unless a Stop payment order is given

If a bank pays a check with the drawer's signiture is forged . . .

bank is liable

Payor Bank

bank on which a check is drawn

Cashiers Check

check drawn by the bank on itself

Certified Check

check that has been accepted by the drawee bank prior to presentment - by certifying the check, the bank assumes all liability for failure to pay the check on presentment

Drawee

financial institution (bank)

Depositary Bank

first bank to recieve a check for payment

Traveler's Check

often used as a substitue for cash, does not require the holder to present it to the drawee bank for payment

UCC Article 4

regulates relationships of banks as they process checks, and bank-customer realtionships

Credit-Debtor relationship

when a customer deposits cash into a bank account, they become the creditor of the bank and the bank becomes the debtor for the amount of deposit

Payee

whom the money is owed

Stop-Payment Order: Wrongful Order

will be liable to payee both for the amount of the check amd any consequential damages

Customer Negligance

-every customer has a duty to examine bank statements

If a customer fails to report a forgery within ___ ____ then the bank is no longer liable

3 years