Background: You are the head teller in National Bank. Another teller came to you today for advice about several problems presented by some of National’s account holders.
Problem 1: Worthy Autos sold a 2011 Subaru to Ann’s Used Cars for $1000. Ann’s paid for the Subaru with a check made out to Worthy Autos printed on a legal-sized manila folder. Ann’s claimed that the check was printed on the folder because this made it easier to transfer the title and other sales documents. The folder on which Ann’s printed the check contained a bill of sale for the transaction from seller to buyer.
Worthy Autos called for advice from National Bank about whether the check printed on a folder is a valid negotiable instrument.
A. Email Worthy Autos explaining whether the manila folder check constitutes a valid negotiable instrument under the UCC, and explain why or why not.
Scenario: National’s client, Nadine, is the owner of a restaurant.
A restaurant customer gave Nadine’s a check payable to the restaurant for a meal purchased at the restaurant.
A. Write an explanation to Nadine regarding whether her restaurant is a Holder in Due Course (HDC)? Why or why not?
Scenario: Shortly after you responded to the question from Worthy Autos, another bank account holder, Physical Therapy Associates (PTA), emailed you with a problem.
PTA treated a patient, Jan Loretto, five times for a shoulder injury. Following the treatment sessions, PTA sent Jan a bill for $500.
Jan sent PTA the following instrument to pay for the therapy services. The instrument read exactly as follows (including the blank line), in part:
“Sixty days after date, I, or my husband, promises to pay to the order of _________$500.”
Jan later refused to pay on the note. PTA claims that this note is bearer paper and as such is payable to PTA as the holder of the note. Jan claims the note is order paper and therefore payable only to a named payee.
A. Respond to PTA via email explaining whether PTA, as the bearer of the note, can collect on the note, and why or why not.
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