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Unformatted text preview: 199 C HAPTER 25 T RANSFERABILITY AND H OLDER IN D UE C OURSE A NSWERS TO Q UESTIONS AT THE E NDS OF THE C ASES C ASE 25.1—Q UESTIONS (P AGE 511) 1A. Other than negotiation, what is the significance of the UCC provision at issue in this case? This section also determines who can enforce an instrument and whose rights are discharged. In other words, if an instrument is payable in the alternative, it may be negotiated, enforced, or discharged accordingly. 2A. If an instrument made payable to two persons without specifying and or or (a stacked payee designation) was considered unambiguous and payable jointly before the amendment of this provision of the UCC, should that same payee designation be considered unambiguous after the amendment? Explain. Not accord- ing to the court in the Hyatt case, which found “this position untenable because it ignores the shift in presumption brought about by the UCC revision. With the statutory presumption removed, the same stacked payee designation that was unambiguous and payable jointly [before] is now ambiguous and payable in the alternative.” C ASE 25.2—(P AGE 512) T HE E THICAL D IMENSION Does a drawer who acts as Westport did—consulting with, and delivering the first two checks to, the Graveses—create an ethical obligation with respect to the delivery of the third check? Why or why not? Yes, because the Graveses depended on Westport, with whom they came to terms about the cost of the reconstruction, to reliably tender payment for it. The company should have verified the Johnsons’ sharing of the final payment with the Graveses. No, because the legal, ethical, and any other duty of an insurer is to its insured—in this case, the Johnsons—who procured and paid for the insurance policy, not an incidental third party. T HE L EGAL E NVIRONMENT D IMENSION Is there a method, other than payment, that would have discharged Westport’s obligation as the drawer of the check? Explain. Yes, payment or certification of a check results in discharge of the obligation to the extent of the amount of the check. 200 UNIT FIVE: NEGOTIABLE INSTRUMENTS C ASE 25.3—(P AGE 515) W HAT I F THE F ACTS W ERE D IFFERENT ? Suppose that Forsgard’s account at Mid Wisconsin already had been overdrawn when the check was deposited. How might the result in this case have been different? Under the court’s reasoning, whether the account was overdrawn at the time of the deposit should not have affected the determination of the bank’s good faith. The court explained that “a depository bank may properly charge an account by honoring a check drawn by a depositor even though it creates an overdraft. It would be anomalous for a bank to lose its status as a holder in due course merely because it has notice that the account of its depositor is overdrawn.” T HE L EGAL E NVIRONMENT D IMENSION Should the court have given more weight to the fact that Forsgard’s account had been overdrawn twenty-four times? According to the court, “it does not matter whether,...
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This note was uploaded on 10/11/2010 for the course MGT 301 taught by Professor Pederson during the Fall '10 term at SUNY Stony Brook.
- Fall '10
- Business Law