Clark_11e-AM-Ch26.doc

Clark_11e-AM-Ch26.doc - CHAPTER 26 LIABILITY, DEFENSES, AND...

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207 C HAPTER 26 L IABILITY , D EFENSES , AND D ISCHARGE A NSWERS TO Q UESTIONS AT THE E NDS OF THE C ASES C ASE 26.1—(P AGE 533) T HE E-C OMMERCE D IMENSION How might the principles in this case have been applied if there had never been a paper copy of the check—for example, if Choi’s deposit and withdrawal of funds had occurred entirely online ? If the same court were to apply the same principles to a transaction that occurred entirely in digital media, it is likely that the result would be the same. The court found significant “the uncertainties that the bank has made no effort to dispel” and added that these “counsel against adopting the legal change that [the bank] urges.” The court’s position was that “[r]eform if needed in the light of modern copying technology,” or presumably any digital technology, “should be left to the [National Conference of Commissioners on Uniform State Law] rather than [be] engineered by a federal court.” T HE L EGAL E NVIRONMENT D IMENSION What is the practical basis for the warranty that a check presented for payment has not been altered since its issuance? (Hint: Presentment warranties often shift liability back to the party that was in the best position to prevent the wrongdoing.) The practical basis for this rule is to impose the liability for a loss in this circumstance on the party that most likely could have prevented it at the lowest cost. A presenting bank would be in a better position than a drawee bank to suspect that its depositor was not an intended payee and in as good a position as the drawee bank to spot the check’s alteration. C ASE 26.2—Q UESTIONS (P AGE 536) 1A. If the court had affirmed the judgment in favor of T.E.K., against whom might the Keeslings have had a right of recourse? If an accommodation party pays an instrument, under UCC 3–419(e) he or she has a right of recourse against the party accommodated. The Keeslings were accommodation parties. Heritage/M.G. was the party accommodated. Thus, if the Keeslings had been held liable to T.E.K. in this case and had paid the plaintiff on the note, they could have attempted to collect the amount paid from Heritage/M.G. If Heritage/M/G/ had paid the instrument, however, it could not have collected this amount from the Keeslings, because an accommodated party does not have a right of recourse against the accommodation party.
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208 UNIT FIVE: NEGOTIABLE INSTRUMENTS 2A. What might the parties who executed the second note have done at the time to avoid the outcome in this case? To avoid the result in this case, the parties who executed the second note on behalf of its maker and payee should have avoided its material alteration or have obtained the consent of the Keeslings before its execution. Here, the material alteration consisted of the increase in the second note of the balance due under the original note. The signatories of the second note might have left the balance unchanged to maintain the accommodation parties’ liability. In any circumstance, the signatories of the
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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.

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Clark_11e-AM-Ch26.doc - CHAPTER 26 LIABILITY, DEFENSES, AND...

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