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Business Law Chapter 28 Homework Farrow Could Check Her Unauthorized Users Identity

Page Count
5 pages
Word Count
2505 words
Book Title
Business Law: Text and Cases 14th Edition
Frank B. Cross, Kenneth W. Clarkson, Roger LeRoy Miller
28-1A. Unauthorized fund transfers
The court held that the customers’ failure to notify the bank of the unauthorized electronic trans-
fer of $20, using a bank card that the customers had assumed was destroyed, relieved the bank
of liability for unauthorized transfers totaling $9,020 approximately seven months later. Accord-
ing to the testimony of Yvonne Maloon, one of the bank’s managers, the bank would have can-
celed Kruser’s card if it had been timely notified of the December unauthorized transfer, and the
card could not have been used to accomplish the unauthorized transactions in July and August.
Among other arguments, the Krusers contended that the December withdrawal was “so isolated
in time and minimal in amount” that it could not be considered in connection with the July and
28-2A. Monthly statements
The court agreed with Gerber and held that UCC 4–406 “is not a statute of limitations, which re-
quires a customer to actually file suit against a bank within the one-year period, but is merely a
notice requirement, which must be satisfied in order for a customer to preserve the right to bring
28-3A. Wire transfers
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, de-
lays, omissions or defaults in transmission or receipt of any communication; errors, delays,
28-4A. Stale checks
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 provides 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 au-
tomated check processing . . . to maintain efficiency in the banking industry. . . [T]he [current]
system, upon which the entire banking system relies, provides no basis for detecting a check’s
28-5A. Debit cards
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 re-
tailer’s electronic cash register or an institution’s automatic-teller-machine (ATM) records the
28-6A. Check collection
The court issued a summary judgment in favor of the bank. Check Cashing appealed to a state
intermediate appellate court, which reversed and remanded for a trial on the issue of both par-
ties’ negligence. The bank appealed to the state supreme court, which reinstated the summary
28-7A. Forged signatures
The court denied the bank’s motion for summary judgment, and the bank appealed to a state
port the customer’s unauthorized signature on or any alteration on the face of the item or who
28-8A. Forged signatures
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 exercise the appropriate degree of care. The court upheld the lower court’s decision.
289A. Bank’s duty to honor checks
The general rule is that the forgery of a drawer’s signature does not bind the person whose
name is forged [UCC 3–403]. When a bank pays a check on which the drawer’s signature is
forged, generally the bank must recredit the customer’s account and suffer the loss. The reason
is found in the legal nature of an ordinary checking account. The relationship between a bank
and its customer is one of debtor and creditor: the bank is indebted to the customer and promis-
es to debit his account only at his direction. If the bank pays a check on a forged drawer’s signa-
ture, the bank’s indebtedness to the customer is not reduced. If the bank debits the customer’s
28-10A. Bank’s duty of care
The relationship between a bank and its customer is contractual and depends on the nature of
the transaction. It ordinarily does not impose a fiduciary duty on the bank. A bank is liable for
withdrawals if the bank knows that they constitute a breach of fiduciary duty or that paying

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