Quiz 22: Banking System and Electronic Financial Transactions

Business

The defendant wins the case. According to the plaintiff, the defendant had breached the agreement by paying on the original cashier's check. Thus, the defendant is refrained from recovering on that agreement. Further, the plaintiff argues it is not relevant whether the bank could ignore his stop payment legally or not because the bank did agree to stop payment in a separate, written document. Since the bank now seeks to enforce the provision for indemnity included in that agreement, the agreement should be rendered fail for lack of consideration. As the bank did not keep its end of the bargain, the plaintiff is not liable to keep his end either. The defendant bank, on the other hand, asserts that paying the amount on check to the plaintiff was sufficient consideration for the agreement. As per the instrument in light, the replacement check is a consideration only for the indemnity agreement, along with the agreement to stop payment. Thus, the bank's payment of the cashier's check cannot be considered breach of the agreement. The nature of a cashier's check states that the bank cannot refuse payment when the check is presented at some other bank by the holder in due course and arrives at the payor bank in regular course of business. Moreover, the "stop payment" agreement is applicable when a check is "lost, stolen or destroyed". However, the check was actually purchased by the plaintiff and presented to the payee in due course of business, and the check was not "lost, stolen or destroyed".

The plaintiff bank wins the case. The banks may provide overdraft service to its customers and pay the check even in case of unavailability of funds in their accounts. An overdraft creates obligation on the customer to pay later in future. In this case, the defendant did not report the loss or theft of the check until the bank finally contacted for paying overdraft. The plaintiff bank could pay the properly presented check even if it created an overdraft. Although it is up to the bank that it may consider the check not to be properly payable and deny paying without risk of liability for wrongful dishonour, it does not prevent the bank from paying the overdraft check alternatively.

The plaintiff bank wins the case. At first it may appear that jury must decide in favor of the defendant since the plaintiff bank wrongfully dishonoured seven checks consecutively. However, it must be considered that the plaintiff bank did not act in bad faith. A bank can be held liable for punitive and consequential damages in case of dishonouring the checks wrongfully only if it does so in bad faith or intentionally. Here, the bank accidently got confused because of same name of two of its customers, and thus cannot be held liable for compensatory damages. Thus, the judgement should be made in favor of the plaintiff bank.

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