XYZ Bank pays a check that contains a restrictive indorsement "for collection." This indicates that:
A)the bank has paid the check illegally.
B)the bank has not acted in good faith.
C)the bank was negligent with the payment of the check.
D)the bank has converted the check.

Question

Quizplus · Accepted Answer

As is true under the original version of Article 3 of the UCC,if a check contains a restrictive indorsement (such as "for deposit" or "for collection")that shows a purpose of having the check collected for the benefit of a particular account,then any person who purchases the check or any depositary bank or payor bank that takes it for immediate payment converts the check unless the indorser receives the proceeds or the bank applies them consistent with the indorsement.

XYZ Bank Pays a Check That Contains a Restrictive Indorsement