Question

8. Erb Poultry, Inc., is a distributor of fresh poultry products in Lima, Ohio. CEME, LLC, does business as Bank Shots, a restaurant in Trotwood, Ohio. CEME ordered chicken wings and “dippers” from Erb, which delivered and for which CEME issued a check in payment. A few days later, CEME stopped payment on the check. When contacted by Erb, CEME alleged that the products were beyond the freshness date, mangled, spoiled and the wrong sizes. CEME did not provide any evidence to support the claims or arrange to return the products. Is CEME entitled to a full refund of the amount paid for the chicken? Explain.

Answer 1

Hi,

Here is the answer.

Answer:

Here there are two instances.

(1) instance of Check stop payment and amount not paid by the Bank

(2) Is CEME entitled to a full refund of the amount paid ,(if the check has been paid by the Bank before the Stop Payment was received at the Bank)

Situation and position under each of the above instances are discussed below.

(1) Instance of Stop Payment of Check( §4-403)

Checks can be stopped payment by the drawer(issuer) of the Check where the opposite party (Payee) has not honored the terms of the contract. In legal terms it is known as “breach of contract”

In this case, it is alleged that Erb Poultry Inc., breached the terms of the contract, by supplying the chicken products which were beyond the freshness date, mangled and spoiled and with wrong sizes.

If this were true, then CEME is in order in stopping payment of the Check and allege Erb Poultry Inc., to have breached the terms of contact under US Code ( §6503 )

If the Check was paid by the bank (honored), before the Bank received instructions to stop the Check from being paid, CEME is entitled to receive the payment back from Erb Poultry Inc., subject to, CEME should substantiate their claim that the products delivered were substandard , mangled and spoiled and with wrong sizes, with full documentary evidence, like a photograph, Video clip, Batch # and date of manufacturing, packing slip, Product size, Best before date of use, and produce an evidence to prove their point. They should also have returned the products to Erb Poultry Inc., . They should have called for the inspection of the products by supplier or their appointed agent and take a certificate as an evidence to dishonor the Check.

(1) Is CEME entitled to a full refund of the amount paid?

As CEME did not provide any documentary evidence to support their claims or arrange to return the Products, Erb Poultry Inc., they are not entitled to receive the full refund of the amount paid for the chicken. Another legal issue to this angle would be that of fraud and forgery on a Check. Erb Poultry Inc., can sue CEME LLC., for wrongful dishonor of the check for damages. Erb Poultry Inc., need to file with the court, and provide sufficient proof and evidence that CEME has in fact breached the terms of the contract. For this , Erb Poultry Inc., should produce evidence that they had in fact supplied fresh quality chicken, in correct sizes and they were not mangled, spoiled nor of wrong sizes. Their invoice, packing list, dispatch list, evidencing the manufacturing date, batch #, best before date, etc., should prove the point. Besides, CEME did not produce any evidence to the contrary nor did they return the goods.

Under the Circumstances, CEME is not only not entitled for full refund of the amount paid by the Bank. They may also face legal claims by Erb Poultry Inc., for wrongful dishonor of check and claim damages under section (US Code §6502 and 6503).

Hope this is useful.

All the best,