In: Finance
QUESTION 37 Generally, the person who writes a check is called the Payor. True False
QUESTION 38 When a bank wrongfully dishonors a check, it is liable to the payee for damages. True False
QUESTION 39 One has one year to report a forged indorsement to the bank, or the bank will be relieved of liability to the drawer. True False
QUESTION 40 When a customer deposits a check into her checking account, her bank is called the depository and collecting bank. True False
QUESTION 37 : TRUE
A person who writes a check is known as check writer, he or she can also be referred to as a “Payor”.A payee is the person to whom a check is written out. In most cases, a payee in a check is the one whose name appears in the caption “pay to the order off”. The check writer writes a check to his or her bank ordering the bank to pay the amount written on the check to the payee.
QUESTION 38 : FALSE
When a bank receives funds for deposit in a checking account, the bank impliedly agrees to honor proper orders or checks on the account, as long as the depositor’s account has sufficient funds in it to cover payment. A bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. When the dishonor occurs through mistake liability is limited to actual damages proved. If caused and proved, damages may include damages for an arrest or prosecution of the customer or other consequential damages related to the writing and dishonoring of the check.
QUESTION 39 : FALSE
A negotiable instrument, endorsed in full, cannot be negotiated or endorsed any further except where such endorsement is made by the same person to whom it was originally made payable (or to his order) or where it was endorsed in full in his favour (or to his order). But then, if such instrument is negotiated by endorsement, by forging the signature of such specific payee or endorsee, the endorsee in such cases will not acquire any titile, even in the cases where such endorsee may be the purchaser for value and in good faith. This is so because a forged endorsement is a nullity in the eye of law.
QUESTION 40 : TRUE
A checking account is a deposit account held at a financial institution that allows withdrawals and deposits. Also called demand accounts or transactional accounts, checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. A checking account differs from other bank accounts in that it often allows for numerous withdrawals and unlimited deposits, whereas savings accounts sometimes limit both.