Payments Law in a Nutshell
Authors:
Matthews, Mary Beth / Nickles, Steve H.
Edition:
2nd
Copyright Date:
2015
23 chapters
have results for payments law
Chapter 2. Liability on Checks Under Article 3 128 results (showing 5 best matches)
- The main purpose of presentment warranties is to assure the person who pays the instrument that the person presenting the instrument for payment is entitled to the money. Presentment warranties are not insurance that payment was proper by the terms of the contract or other relationship that provides the underlying reason for the payment. There is no warranty against payment beyond these terms, by mistake. Avoiding mistake is within the personal control of the payor and, for reasons of finality, the law is slow to provide any remedy for mistake. On the other hand, the common law of restitution permits recovering mistaken payments in limited (very limited) circumstances. This law has always supplemented the statutory law of negotiable instruments, but Article 3 explicitly codifies a restitution recovery for some mistakes. Restitution from any source is always very limited, however, because the remedy generally cannot reach innocent persons who gave value or who detrimentally relied on...
- (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
- A person who signs an instrument becomes liable to pay it. It is natural, therefore, that her payment of the instrument should end her liability on it. The law confirms and reaches this outcome by way of discharge, by providing that “[t]o the extent of a payment * * * the obligation of the party obliged to pay the instrument is discharged * * *.” 3–602(c). Also, by separate rule, payment of the instrument usually discharges the underlying obligation. 3–310(b–c).
- Three very important limits are built into the rule that payment of an instrument discharges liability on it. First, the discharge is pro tanto only, “to the extent” of payment. Second, the discharge only affects the liability of the party who pays the instrument. For this reason, payment alone does not extinguish the whole instrument or discharge any other party’s liability on it. Former law agreed but also applied a supplemental rule that discharged everybody on the instrument when any party was discharged who herself had no right of recourse on the instrument. 3–601(3)(b) (1989 Official Text). Thus, when a check was paid by the drawee bank for the drawer, an indorser was discharged. The current Article 3 lacks this rule, but the result is the same. An indorser’s liability is conditioned on dishonor. 3–415(a). Because of the drawee’s payment, the indorser’s liability never will mature.
- full-payment check
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Chapter 9. Tying Drafts to Documents of Title 23 results (showing 5 best matches)
- Now that you understand the basic principles of documents of title law, you can better appreciate and more critically evaluate the payment scheme known as “
- If a right to the payment of money is not negotiable under the provisions of Article 3, the consequences are that the writing is not an instrument and Article 3 is altogether inapplicable. Article 7 is different in this regard. It generally applies to both negotiable and non-negotiable documents. Making the distinction is important only in applying particular rules within Article 7, not in deciding whether the statute, as a whole, is the general source of governing law.
- The presenting bank is obligated to present the documentary draft to the buyer-drawee for payment. The bank can, and probably will, make presentment by sending the buyer, who is the drawee, a written or electronic notice that the bank holds the item for payment. See 4–212(a). In this event, the draft is deemed presented when the notice is received by the buyer-drawee. 3–501(b)(1). Upon receiving payment of the draft, the presenting bank is obligated to deliver the documents to the drawee. 4–503(1).
- So far, the discussion of payment against documents has assumed that the goods are covered by a negotiable document. Payment against documents can be structured, however, so that the goods are shipped under a non-negotiable bill of lading. In this event, the seller retains control of the goods by consigning them to herself or her agent so that the carrier is obligated to deliver the goods according to the seller’s instructions. 7–403(a) & 7–102(a)(9). The seller or her agent will instruct the carrier to surrender the goods to the buyer upon the buyer’s payment of the draft.
- The procedure for getting the buyer’s acceptance is basically the same as that involved in getting payment from the buyer when she is to pay against documents. There are only two basic differences, both of which are obvious: First, in credit against documents, the seller draws a time draft, rather than a demand draft, ordering the buyer to pay the instrument following a specified period after acceptance. Second, although the documentary draft is routed to the buyer through banking channels (just as in the case of a draft requiring payment), the presenting bank presents the draft for acceptance rather than for payment. See 4–503(1).
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Chapter 1. Currency 20 results (showing 5 best matches)
- As a payment system, currency raises few issues because it is so simple; but these issues are fundamentally important and shared by other, more complex systems. How the issues are resolved by the different payment systems determines, to a large extent, the organization and substance of payments law and is the focus of the study, practice, and business of payments. Currency sets the base line.
- In the real lives of normal people, everybody wants cash; and in this country and many other places, most people accept American currency as a means of payment. It’s only in law school that we ask: under United States law can somebody ever refuse dollars as payment?
- • Restitution of payments already made is a very, very narrow and rarely applied remedy. Generally speaking, the remedy is available only when payment results from fraud or certain mistake of law or fact, but not including the ordinary mistaken belief by the obligor that she got what she bargained for. See generally Restatement (Third) of Restitution and Unjust Enrichment, ch.1–2 (2011).
- First, the parties to the payment can agree otherwise and thereby require an exclusive, specific means of payment, including cash, stock, real estate, an executory promise, or anything else they decide on. However, what the agreement provides respecting means of payment is a question of contract interpretation. Thus, it’s possible that a contract calling for payment in “cash” can include, for example, payment by check; and a requirement of payment in money, without more specificity, allows payment by any manner current in the ordinary course of business. Restatement (Second) of Contracts § 249 (1981). Also, even if there is no prior agreement as to the means of payment, “payment can be made in any medium which the party obligated offers, and the party to whom payment is due, accepts.”
- The answer is maybe. Federal law says: “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.” 31 U.S.C.A. § 5103. This statute means in part that American cash is a form of payment that can be offered and accepted to satisfy debts, not that cash is the only or default means of acceptable payment.
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Chapter 6. Shifting Check Fraud Losses 29 results (showing 5 best matches)
- Payor banks sometimes argue mistake and rely on restitution law or some other common-law theory to recoup these losses from persons who obtained payment of such items or who otherwise received the proceeds of them. Section 3–418 sanctions the common-law restitution claim in 3–418(b) and, to some extent, codifies restitutionary liability in 3–418(a) which covers the two most common cases of mistaken payment: payment of forged checks and checks on which the drawer has stopped payment. If the case does not fit within (a), however, the bank is then free under (b) to resort to the common law which, rather than 3–418, will determine liability:
- (b) Except as provided in subsection (c), if an instrument has been paid or accepted by mistake and the case is not covered by subsection (a), the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (i) recover the payment from the person to whom or for whose benefit payment was made or (ii) in the case of acceptance, may revoke the acceptance.
- The warranties that run in favor of a payor bank are made by the person who obtains payment and also by every previous transferor. The warranties arise automatically, that is, the warranties are implied by law and are not conditioned on the warrantor expressly making them or even being aware that warranties are made as part of the collection process.
- 3–418(c). It is a defense to any action by any payor to recover payment or escape acceptance made on any instrument without regard to the nature of the error the payor made as to the state of the drawer’s account. So the defense is available whether the loss to the payor was caused by a forged drawer’s signature; an overdraft; payment over a stop order; or any other circumstance giving reason for the payor bank’s complaint. Behind 3–418(c) is the argument for finality of payment, and this argument applies whatever the payor’s reason for avoiding payment or acceptance. Also behind 3–418(c) is the additional reason that the drawee is responsible for knowing the state of the account before acceptance or payment.
- If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:
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Chapter 14. Funds Transfers Which Do Not Debit a Consumer Bank Account 32 results (showing 5 best matches)
- Unless the particular card contract provides a means of reversal or chargeback, payment is likely to be deemed final when value is spent. There will generally be no means for stopping payment or otherwise reversing the transaction. The very stingy, expensive remedy of common-law restitution against the person who received payment is likely to be the only recourse.
- However, payment intermediaries like PayPal are likely to fall within federal or state money transmitter laws.
- Laura H. Brown, Candace M. Davis, Lois S. Woodward, & Ryan S. Stinneford, Current Developments in Deposit Products and Payment Systems, 68 Bus. Law. 603 (Feb. 2013).
- PayPal is Only a Payment Service Provider * * * and is not your agent. * * * If you do hold a Balance, that Balance represents an unsecured claim against PayPal and is not insured by the FDIC. PayPal will combine your Balance with the Balances of other Users and will invest those funds in liquid investments in accordance with State money transmitter laws. PayPal will own the interest or other earnings on pooled Balances.
- Existing payment devices still fail to address the need for person-to-person payments (P2P) between parties lacking the technological structure for traditional cards, or desiring a level of privacy not provided by the traditional networks. Innovations continue to try to fill that gap.
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Chapter 12. Commercial Funds Transfers 70 results (showing 5 best matches)
- For proper cause and in compliance with applicable law, a court may restrain (i) a person from issuing a payment order to initiate a funds transfer, (ii) an originator’s bank from executing the payment order of the originator, or (iii)
- In general, “Article 4A governs a method of payment in which the person making payment (the ‘originator’) directly transmits an instruction to a bank either to make payment to the person receiving the payment (the ‘beneficiary’) or to instruct some other bank to make payment to the beneficiary.” 4A–104 comment 1.
- Rights and obligations under Article 4A arise as a result of “acceptance” of a payment order by the bank to which the order is addressed. 4A–209. In the case of a payment order sent to a receiving bank the beneficiary’s bank, acceptance occurs when the receiving bank “executes” the payment order of the sender by sending a payment order to some other bank intended to carry out the payment order received by the receiving bank. 4A–209(a); 4A–301(a). In the case of a payment order sent to the , acceptance usually occurs when the bank receives payment of the sender’s payment order or when the bank pays the beneficiary or notifies the beneficiary of receipt of the payment order. 4A–209(b)(1) and (2).
- the series of transactions, beginning with the originator’s payment order, made for the purpose of making payment to the beneficiary of the order. The term includes
- A check is a means to effect payment by a bank that also carries rights and liabilities reified in the instrument itself. A payment order is a means to effect payment by a bank but has no efficacy itself apart from its role in the payment process Article 4A provides.
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Chapter 3. Check Collection 74 results (showing 5 best matches)
- Read 3–418 in its entirety. Note that 3–418(a) does not apply here, since payment was not on the mistaken belief that payment had not been stopped or the signature of the drawer was not forged. The mistake involved the amount of funds in the drawer’s account. Section 3–418(b), however, does apply since the check was paid “by mistake and the case is not covered by subsection (a).” Unlike 3–418(a), 3–418(b) does not explicitly provide that Payor Bank can recover “the amount of the draft from the person to whom or for whose benefit payment was made.” Rather, mistaken Payor Bank may “to the extent permitted by the law governing mistake and restitution * * * recover the payment from the person to whom or for whose benefit payment was made.” Thus, Payor Bank must take a trip through 1–103 to other state law to determine whether there is any right to recover. Furthermore, that right may, under 3–418(b), be limited if Payor Bank failed to exercise ordinary care.
- How “final” is final payment under 4–215? The answer is that “final” means “final” under Article 4 and Regulation CC, but that 3–418 provides a limited exception for Payor Bank when payment is made by mistake. There is a statutory right to recover in cases of stop orders and forged checks. 3–418(a). In all other cases, recovery for mistaken payments is determined “by the law governing mistake and restitution.” 3–418(b).
- Under earlier law, a few cases held that final payment was made when the internal process of posting was completed and that an otherwise timely return before the midnight deadline was not effective. This approach required an inquiry into whether that process of posting had been completed. Presently, there is no reference to “process of posting” in 4–215. It is therefore clear that Payor Bank has until its midnight deadline to return the item regardless of any internal payment decisions. In short, final payment does not occur if the item is returned before midnight even though Payor Bank had, at one point, completed the process of posting and decided to pay it. This internal decision does not amount to final payment or limit Payor Bank’s right of return by the midnight deadline under 4–301.
- A payor bank that violates Regulation CC by failing to return a dishonored check expeditiously does not thereby negate the dishonor under Article 4, as long as the rules of Article 4 are satisfied. The consequence of violating Regulation CC in this respect is liability for damages for actual losses under federal law, not a bungled dishonor and final payment under Article 4.
- Most typically, of course, the payor bank pays the check by pushing cash across the counter within minutes of presentment. The delivery of the cash is, in Article 4, “final payment” under 4–215(a)(1), subject to limited, restitution recovery by Payor for payment by mistake set out in 3–418. The effect of final payment is that Payor Bank has satisfied its contractual obligation to Drawer (under the deposit agreement between them), and the obligation of Drawer on the check and on the underlying obligation are discharged. 3–602 & 3–310(a–b).
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Chapter 13. Consumer Funds Transfers 59 results (showing 5 best matches)
- Suppose you are a third-year law student. You seldom attend classes and read very little … saving yourself for the upcoming bar exam. You decide the time is right to move up from the old, reliable bike. Using your signing bonus as a down payment, you buy a new car: a Ford SUV. The payment is $750 a month. (The signing bonus was nice but not too big.)
- As recently recognized by the Federal Reserve Board, “Debit cards now play a prominent role in the U.S. payments system. Debit card payments have grown more than any other form of electronic payment over the past decade, increasing to 37.9 billion transactions in 2009. Debit cards are used in 35 percent of noncash payment transactions, and have eclipsed checks as the most frequently used noncash payment method.” 76 FR 43394–01, 43395 (July 20, 2011).
- initiates either a Direct Deposit or Direct Payment transaction using the ACH Network. ACH transactions can be either debit or credit payments and commonly include Direct Deposit of payroll, government and Social Security benefits, mortgage and bill payments, online banking payments, person-to-person (P2P) and business-to-business (B2B) payments, to name a few.
- The ACH payments system was designed to allow corporations and consumers to reduce or eliminate the use of paper checks to make routine payments. Therefore most of the payments transferred over the ACH network represent recurring credit payments intended for the accounts of the receivers. Typical payments are salaries, consumer and corporate bill payments, interest and dividends, and Social Security and other entitlement programs originated by the U.S. Treasury. However, because of the ACH’s ability to process large volumes of payments efficiently and its ability to allow an originator to debit the banking account of the payer, it increasingly is used for other types of payments, such as insurance premiums, purchases of stock, and consolidation of corporate cash balances.
- Direct Payments (which you may know as “automatic withdrawals”) are created when a consumer gives the originating institution or corporation (Originator) authorization to debit his/her account on a regular basis. Direct Payment can be used to pay utility, mortgage/rent, or automobile loan payments; charitable contributions; insurance premiums; membership dues; tuition payments; and nonprofit organization fees.
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Chapter 11. Credit Cards 76 results (showing 5 best matches)
- The law does not recognize the same, broad right to stop payment for a cardholder who has charged something to her credit card account. The reason is not that the process always works too quickly to accommodate a stop order. Sometimes the time between using a credit card and settling hard debits and credits between participants in the network is longer than the time between writing a check and final payment by the payor bank. The reason for the absence of a stop-payment right for cardholders is
- Let’s start by understanding the relevant common law. Under the common law, and also under UCC Article 9, an assignee stands in the shoes of an assignor. So, if an obligee sells or otherwise assigns to an assignee the obligee’s right to payment from the obligor, the obligor can ordinarily assert against the assignee whatever defenses the obligor has against the obligee-assignor. For example, suppose OR buys goods on credit from EE. The parties sign a simple contract that explains their deal, including OR’s obligation to pay the price to EE. EE then assigns the contract to Bank. Bank notifies OR of the assignment and is free to collect payment from her. It turns out, however, that EE breached some warranty in selling the goods to OR. This breach gives OR a defense to payment or counterclaim under UCC Article 2. Bank is subject to this defense or counterclaim.
- Common-law contract fundamentally governs all of the relationships that are involved in the use of two-party credit cards and bank cards. None of the relationships is governed by a comprehensive, integrated statute of federal or state law. Statutory law most significantly supplements and displaces contracts law in defining the rights and liabilities of cardholders in their relationships with card issuers and, to a lesser extent, the remedial rights of cardholders against merchants when a credit card is used as the means of payment. Special credit card law adds nothing substantive to the main issue between cardholder and merchant, which is the quality of the performance in the underlying transaction between them. This issue is governed by whatever law ordinarily applies to the kind of transaction involved (such as UCC Article 2 in the case of a sale of goods).
- The credibility behind a cardholder’s authorized use of his bank credit card comes from the merchant agreement between the merchant and acquiring bank and also from the agreement among the acquiring bank, issuing bank, and the bankcard association as parties to the association by-laws. Through the merchant agreement the acquiring bank promised, upon certain conditions, to “make payment to the Merchant for sales slips physically presented by the Merchant to the Bank.” By agreeing to the association by-laws the issuer agreed to pay authorized credit card charges by persons holding credit cards the bank issued. Moreover, the association promises member banks that it will indemnify and reimburse them for loss or expense they suffer by reason of any member’s failure properly to honor any credit card charges processed in accordance with association by-laws and regulations.
- Fourthly, the CARD Act restricted a variety of techniques which issuers had used to increase the likelihood of late payment. Issuers cannot treat payments as late unless they have adopted procedures ensuring that statements are mailed 21 days before payment is due [15 U.S.C.A. § 1666b(a)], and are restricted in imposing late fees due to their own changes in handling procedures [15 U.S.C.A. § 1666c(c)]. Furthermore, payments are required to be due on the same day each month [15 U.S.C.A. § 1637(o)(1), and payments received when the issuer is closed may not be treated as late if received the next day [15 U.S.C.A. § 1637(o)(2)].
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Chapter 10. Letters of Credit 20 results (showing 5 best matches)
- The nature of the draft gives rise to an important distinction in credit law: The distinction between
- The buyer is required to reimburse the issuer for paying the letter of credit. In effect, therefore, the buyer is paying for the goods when the bank honors the seller’s demand for payment under the letter of credit. Thus, the buyer must pay for the goods before actually getting them. The buyer, however, gets the next best thing. She gets control of the goods upon payment because the bank will not pay the seller unless the seller transfers documents covering the goods.
- The terms of a letter of credit, including the required documents and whether drafts are presented for payment or acceptance, are really decided by the seller and buyer. They decide how little, or how much, is required of the seller in order to get payment or acceptance of drafts drawn under a credit. The buyer then asks her bank, through an
- Seller and Buyer are negotiating a contract for the sale of goods. Seller is unwilling or unable to commit herself without payment in advance. Buyer does not wish to pay for the goods until she gets them. This impasse can be broken by the buyer having her bank issue the seller an Article 5 letter of credit.
- is “a definite undertaking * * * by an issuer [the buyer’s bank] to a beneficiary [the seller] at the request or for the account of an applicant [the buyer] * * * to honor a documentary presentation by payment or delivery of an item of value.” 5–102(a)(10).
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Chapter 4. Checking Accounts 50 results (showing 5 best matches)
- Other claims for mistaken payment depend upon other law governing mistake and restitution. 3–418(b). Since this other law may be poorly defined or may vary from state to state, its benefit to Payor Bank is marginal at best.
- A wrongful payment is still final payment. But if the payment was mistaken, Payor Bank may have a restitution claim against a person who took the instrument for value but not in good faith or a person who took in good faith but has not “changed position in reliance on the payment.” 3–418(c). Review the related discussion in Chapter 3
- The “customer or any person authorized to draw on the account” may stop payment. 4–403(a). If the signature of “more than one person is required to draw on an account, any of these persons may stop payment.” Id. The payee of a check, therefore, may not stop payment. Id. comment 2.
- Without more, Customer is entitled to have its account re-credited in the amount of $5,000. There was a “wrongful” payment. In addition, Customer is entitled to any damages established under 4–403(c) for the wrongful dishonor of the check issued to Payee #2. 4–403(c). Clearly, the $7,500 check would have been honored if Payor Bank had not improperly paid the $5,000 over the stop payment order. Customer, however, has the “burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a stop-payment order.” 4–403(c).
- Wrongful payment means that the payor bank has paid a check that is not properly payable under the deposit agreement with the customer against whose account the check was drawn. The payment, though wrongful against the customer, is fully effective under Article 4 to make final any settlements and to discharge liabilities under Article 3. The bank, however, is not entitled to charge the customer’s account for the amount of the item. To do so is wrongful against the customer, who is entitled to have her account re-credited and in appropriate circumstances to recover other damages the wrongful payment caused.
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- Payment against documents is fully discussed in Chapter 9 , beginning with a short lesson on some of the law of documents of title. You cannot understand the former until you understand the latter. More fundamentally, understanding payment against documents requires that you know something about ordinary drafts. You know about checks, which are a form of draft. Chapter 8 discusses the major, special concepts and rules that attend drafts that are not checks—ordinary drafts.
- A seller of goods can insure that she is actually paid by not delivering the property until she gets cash, or its equivalent, in hand. Of course, the typical buyer will not wish to pay for the goods in advance of delivery. The answer is a simultaneous exchange of goods for cash. When the seller and buyer are located far apart, this kind of exchange is made possible through the use of a documentary draft and a payment scheme known as “payment against documents.”
- The seller could virtually eliminate these risks by asking the buyer to pay with a cashier’s check. The problem is that this means of payment shifts risks to the buyer, who may therefore refuse the deal or require compensation.
- In this scheme, the seller ships the goods by carrier to the buyer’s city. The carrier gives the seller a receipt for the goods which is known as a bill of lading. A bill of lading is a kind of document of title and, as such, it represents the goods and controls their disposition. The seller attaches this document to a draft drawn by her against the buyer. The set of two writings is called a documentary draft, which is handled for collection by banks. The seller’s bank will take the documentary draft and, as agent for the seller, send it to a bank in the buyer’s city. The latter bank, upon receiving the documentary draft, will present it to the buyer for payment. Upon paying it, the buyer gets the document of title and thereby gets control of the goods. The payment is then sent by the presenting bank to the seller’s bank and deposited in the seller’s account.
- A check is not an entirely reliable means of paying for property or services. A seller who takes the buyer’s check in exchange for property or services is not certain to get payment from the drawee-bank. The check can be dishonored for a variety of reasons (insufficient funds, stop order, etc.) that leave the seller-payee with nothing more than a cause of action against the buyer-drawer. The result is that, although the seller intended a cash deal, she ends up having sold on credit. To make matters worse, this unintended credit is probably unsecured.
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Half Title 1 result
Chapter 7. Bank Checks 23 results (showing 5 best matches)
- • payment is prohibited by law.
- Issues about stopping payment of certified checks arise less often, but the analysis is fundamentally the same. The drawer lacks the right herself to stop payment, and the bank’s right—as acceptor—to assert defenses seems limited to the same extent as the defensive rights of a bank that issues a cashier’s check.
- In a very large number of cases the courts have considered if payment can be stopped on a cashier’s check. This broad concern involves two entirely separate issues. The easier issue is whether the bank that issues the cashier’s check becomes liable to the person who procured it, i.e., the remitter, by refusing to dishonor the instrument upon the remitter’s request. The second and harder issue is whether an issuing bank that refuses payment of its cashier’s check, either on its own or at the request of the remitter, can escape liability to the payee or other holder of the instrument.
- 2. S sold goods to B who paid for them using a cashier’s check issued by Bank. The goods were defective, and B asked Bank to stop payment of the check. Because B was a valued customer, Bank dishonored the cashier’s check when S presented it for payment. S sued Bank on the instrument. Bank should not be allowed to assert B’s breach of contract claim as a defense.
- Even when banks are liable as issuers of cashier’s check, drawers of teller’s checks, or acceptors of certified checks, they retain the power to deny their liability and refuse payment even when they lack the right to do so. This power is held by anybody who is liable on an instrument, but there is more of a problem when the payor is a bank. The expectation of payment is higher when a bank is obligated on an instrument, and it leads to extraordinary reliance equally on cashier’s, teller’s, and certified checks.
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Title Page 3 results
Chapter 8. Ordinary Drafts Under Articles 3 and 4 7 results (showing 5 best matches)
- Instead of ordering Mohammad to pay the draft on demand, Ellen could write the draft ordering Mohammad to pay at a definite future time. In this case Thomas would have to wait until the time for payment before he could present the draft to Mohammad for payment.
- Thomas can reduce his worry by presenting the draft to Mohammad before the time for payment. This earlier presentment, however, is not for payment. It is for acceptance, which means Mohammad signs the draft and becomes liable on it as an acceptor. Then, if Mohammad does not pay the draft when the draft is due, Mohammad is liable to Thomas on the instrument as “acceptor.”
- Thomas takes the draft to his bank which sends the draft to Mohammad’s bank. The purpose is not to present the draft to Mohammad’s bank for payment. Mohammad’s bank is not the drawee. Rather, the purpose of sending the draft to Mohammad’s bank is “for collection.” Mohammad’s bank then presents the draft to Mohammad for payment by him.
- How does Thomas present the draft to Mohammad for payment or acceptance? He could present the draft directly himself—in person or through some form of snail mail.
- Another possibility is presenting through banking channels. Article 4 applies to items, which includes checks but is not limited to them. “ ‘Item’ means an instrument or a promise or order to pay money handled by a bank for collection or payment.” 4–104(a)(9).
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Outline 42 results (showing 5 best matches)
Part II. Paying by Check 6 results (showing 5 best matches)
- You are not alone in putting your money in a bank account and paying for stuff using checks written against the account. Although the number of payments by debit card in 2012 more than doubled the number of payments by check, there are still huge numbers of checks written. An estimated 32.8 billion checks were paid in the United States in 1979, 49.5 billion in 1995, but only 18.3 billion in 2012. The use of checks peaked sometime in the mid-1990s, as retail electronic payments and other means of retail payment gained ground. The number of checks paid actually declined 6.6 percent per year from 2000 to 2012.
- There are six general areas of concern with respect to checks as a means of payment:
- The 2013 Federal Reserve Payments Study—Recent and Long-Term Trends in the United States: 2000–2012, 15 (Exhibit 2), available at http://www.frbservices.org/files/communications/pdf/general/2013_fed_res_paymt_study_detailed_rpt.pdf.
- How do checks work as a payment system? Basically you swap the money you deposit for debt the bank owes you. The bank does not keep your money in a bag with your name on it. The money you deposit belongs to the bank, and you get—in return for your deposit—a credit balance to your checking account. The bank then reduces the debt it owes you, i.e., your account balance, by paying the bank’s money to people whom you order the bank to pay. You give these orders by writing checks against your account.
- When you give someone a check the person does not immediately turn around and tell you to pay it. The whole idea is that the person will take it to your bank and your bank will pay it for you. The process of getting the check to your bank for payment is known as the check collection process, which is governed by UCC Article 4. Most important, Article 4 defines the process of how and when a check is dishonored or paid, and so Article 4 determines the state of your liability on the check and the underlying obligation for which the check was given and taken.
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Chapter 5. Check Fraud—Allocating Risk and Loss Between Payor Bank and Customer 30 results (showing 5 best matches)
- Typically, a bank sends its checking-account customer a statement of account that shows payment of items from the customer’s account, either by mail or electronically. In so doing the bank returns or whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly
- Whether or not the bank can prove a loss, the customer is precluded from asserting her unauthorized signature or an alteration by the same wrongdoer on any item paid in good faith by the bank “if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.” 4–406(d)(2). This language covers the case of a string of forgeries or alterations by the same wrongdoer. The bank need not establish that it suffered a loss because, in this kind of case, the law presumes loss.
- would complain against the payor bank for charging the item to her account. S’s loss is obvious. Where is B’s loss? It turns out that because of the employee’s lack of authority to indorse for S, payment by the drawee was improper because payment was not made to a person entitled to enforce the instrument. As a result, B was not discharged on the instrument, see 3–602(c) (discharge requires payment to a person entitled to enforce à la 3–301); so she was not discharged on the underlying obligation. 3–310(b). B thus remains liable to the payee. If this liability to the payee is enforced, B effectively will “pay” twice, inasmuch as her account has already been debited for the amount of the check. There is the loss to B. (The fuller truth, however, is that S usually enjoys additional actions against other people and often shifts the loss to them instead of B. These other actions are considered in the next chapter.)
- Employee to produce any resolution of the corporation’s board or other evidence of authorization of Employee to act for GM. In due course, the check is presented for payment; Depositary Bank receives payment; and Employee is allowed to withdraw the credit by wire transfer to a foreign bank.
- The duty on the customer is not imposed unless the bank either (1) returns or makes available the checks paid or (2) provides information sufficient to allow the customer to identify them. 4–406(a). Which course the bank follows is a matter of bank-customer agreement; but if their agreement requires the bank only to provide identifying information, the duty on the customer requires adequate information—“sufficient to allow the customer reasonably to identify the items paid.” 4–406(a). Images of the items will do but are not required. It is sufficient that the bank describes the checks by item numbers, amount, and dates of payment. 4–406 comment 1. It is not necessary for the bank to identify the payee of each item and the item’s date. The customer should be able to determine these two pieces of information from her own records based on the number of the check, its amount and date of payment supplied by the bank.
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Index 27 results (showing 5 best matches)
Table of Cases 1 result
- The usual name is “electronic fund transfers” (EFTs). This name is unnecessarily confusing. What is being transferred are funds, i.e., monetary value; and the funds are not any more electronic here than sitting in your checking account. The electronic part that is important with this payment system is causing the movement of funds electronically. So, this book alternately uses the name “electronic transfers of funds.”
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Advisory Board 10 results (showing 5 best matches)
- Professor of Law, Michael E. Moritz College of Law,
- Professor of Law Emeritus, University of San Diego Professor of Law Emeritus, University of Michigan
- Professor of Law, Chancellor and Dean Emeritus, Hastings College of the Law
- Professor of Law, Yale Law School
- Professor of Law, Pepperdine University Professor of Law Emeritus, University of California, Los Angeles
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- Publication Date: January 6th, 2015
- ISBN: 9780314290311
- Subject: Commercial Law
- Series: Nutshells
- Type: Overviews
- Description: This text summarizes and explains the fundamental law applicable to a broad variety of current payment systems. Coverage includes issues of liability, transfer, holder in due course status, and check collection applicable to negotiable instruments (checks, notes, drafts) governed by UCC Articles 3 and 4, as well as letters of credit and documents of title governed by UCC Articles 5 and 7. The text further examines the rights, obligations, and federal protection applicable to credit and debit cards. Finally, this title addresses recent legal developments in regard to a variety of electronic fund transfers, prepaid cards and digital currencies.