B-115
ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 27
CHECKS AND BANKING IN THE DIGITAL AGE
27-1A. Unauthorized fund transfers
(Chapter 27—Pages 536–537)
The court held that the customers’ failure to notify the bank of the unauthorized electronic transfer of
$20, using a bank card that the customers had assumed was destroyed, relieved the bank of liability for
27-2A. Monthly statements
(Chapter 27—Page 528)
The court agreed with Gerber and held that UCC 4–406 “is not a statute of limitations, which requires a
customer to actually file suit against a bank within the one-year period, but is merely a notice require–
ment, which must be satisfied in order for a customer to preserve the right to bring suit against the bank
at a later time.” UCC 4–406 “merely requires a customer to ‘discover and report’ an unauthorized signa-
B-116 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 27
27-3A. Wrongfully dishonored checks
(Chapter 27—Page 522)
No. The appellate court held that Parrett, who had personally guaranteed corporate obligations to the
bank, was a bank “customer” and, as such, had standing to sue the bank for the wrongful dishonor of
27-4A. Consumer versus commercial transfers
(Chapter 27—Pages 536–537)
27-5A. Wire transfers
(Chapter 27—Page 537)
The trial court ruled in favor of Masri, but on appeal, this ruling was reversed. The appellate court
pointed out that Masri signed the wire transfer request, which read, “[FVBC] shall not be responsible for
non-performance or loss or damage by reason of or resulting from: errors, delays, omissions or defaults
in transmission or receipt of any communication; errors, delays, omissions or defaults of our corre-
27-6A. Stale checks
(Chapter 27—Page 523)
The court granted the motion and issued a judgment in favor of Mercantile. The court explained that a
bank’s obligations with respect to the payment of stale checks are governed by UCC 4–404, which pro-
vides that a bank “may charge its customer’s account for a payment made [on a check more than six
months after its date] in good faith.” Good faith is “honesty in fact and the observance of reasonable
commercial standards of fair dealing,” under UCC 3–103(a)(4) and UCC 4–104(c). The court pointed out
that the UCC “explicitly acknowledge[s] the need for automated check processing . . . to maintain effi-
ing a stop-payment order, yet chose not to secure (or at least update) such an order.”
27-7A. Debit cards
(Chapter 27—Pages 536–537)
The steps in a debit card transaction begins with a card issuer, Auburn Bank in this case, providing cards
to its customers, who use their cards to make purchases or obtain cash. A retailer’s electronic cash regis-
ter or an institution’s automatic–teller-machine (ATM) records the amount and the routing number of
the issuing bank. The retailer or institution then submits the recorded data to its bank. This bank for-
B-118 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 27
27-8A. Check collection
(Chapter 27—Pages 530–532 & 534)
The court issued a summary judgment in favor of the bank. Check Cashing appealed to a state interme-
diate appellate court, which reversed and remanded for a trial on the issue of both parties’ negligence.
The bank appealed to the state supreme court, which reinstated the summary judgment. The court ex-
plained that “[i]n the absence of a specific agreement or undertaking by the Bank, or a ‘contact’ clearly
implying that the Bank would respond within a specified period of time earlier than permitted by the
27-9A. Forged signatures
(Chapter 27—Page 528)
The court denied the bank’s motion for summary judgment, and the bank appealed to a state interme-
diate appellate court, which reversed the lower court’s judgment. The appellate court applied “the stat-
27-10A. Forged signatures
(Chapter 27—Pages 526–528)
The court found that the parties’ comparative negligence precluded summary judgment as to the forged
checks. Both parties appealed to a state intermediate appellate court, arguing that each failed to exer-
