Case Analysis: Bank Cheque Essay Examples & Outline
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Case Analysis: Bank Cheque
The case is concerned with the issuance and later cancellation of a cashier’s cheque that was drawn by a Mary Chirstelle as a payment to another party. Mary Christelle bought the cashier’s cheque and later asked Charter One not to pay it. The bank gave the stop-payment order to the payee’s bank, Mid America. Charter One proceeded to refuse making any payments on the cheque after it was presented back to it for payment. The Mid America proceeded to withdraw the amount from the account of the Essential Technology Illinois. After the deduction of the amount, the account balance reduced to a negative figure (Veltri, 1199).
Mid America sought a legal redress against Charter One to recover the entire value of the cheque, the legal fees and the total interests accrued. The suit was filed citing the UCC 810 ILCS 5/3-11. The defendant responded to the compliant by admitting that the issuance of the stop payment order was in accordance with the requirement that the stoppage be made if the cheque was drawn according to the mistake or presence of fraud. The defendant also filed a complaint against Mary Christelle for the damages accrued.
The proceedings indicated that the initial attempt to deposit the cash using a personal cheque was rejected owing to the insufficiency of the funds. Coincidentally, the same amount was deposited using the cashier cheque that was bought at Charter One bank. Mid America bank proceeded to make payments to the payee even when the stop payment odder has been issued. There were no signs of fraud after investigations by ETI. However, few issues are worth noting thus far.
One of the most notable issue is the fact that there had been an attempt to deposit the same amount to Mid American using a personal cheque. However, the attempt did not succeed since the personal account of the depositor had insufficient funds (Veltri, 1199). The relationship between the depositor and the payee also raises issue with the turn out of the events.
The issuance of stop payment orders only occurs when the cheques is lost stolen or destroyed. In this case, none of the above outcomes had manifested. In this case, the bank can seek identification from the people or person that placed the purchase order for the cheque. There is also a need for the issuance of an affidavit in support of the stop payment order. In the case mentioned above, there were insufficient grounds for the issuance of the order since the cheque was not lost and neither was there any damage.
The order was also placed without issuance of an affidavit to that effect. Stoppage of payment on the cashier cheque was also contrary to the universal commercial code of Illinois since the stoppage can only be undertaken if the item is drawn on the account (Veltri, 1199). The cashier’s cheque was not drawn on the account of Mary chrysotile hence it could not be stopped under the code.
Issuance of the stoppage order on payment is not a right to the customers that use the cashiers or teller’s cheques. However, the bank may issue the stoppage orders under the request of the customers as a way of accommodating the customer requests but not as an obligation. Charter One was accommodating Michele when issuing the order. There was no right to ask for stoppage of payment after the delivery of the same to the bank.
Therefore, the stop payment order was not implementable owing to the blatant contradiction of the code. Charter One banks argued that the cashier’s cheque was no longer a cash equivalent hence could not be treated in the same way with cash. Therefore, the stoppage of the cashier’s cheque was allowed. However, the conditions warranting dishonoring of the cheese were no longer applicable in this case.
The banks brought up another conventional issue. One of the notable issue was the fact that the banks asserted that there was a loss of interest during the period when the case was proceeding. The assertion has basis since the bank could have been operating with the cash that it had backed up the cheque with. It could also have continued discounting the cheque to the people on demand (Veltri, 1199). This leads to the assertion that the bank lost the cast that it could have otherwise made when the cash was not issued or when the cheque was discounted. Since the cashier’s cheque is a cash equivalent.
The loss of cash and the associated damages also count in this case. Mid America bank could have used the cash that it used to back up the cheque as collateral for other businesses. It could have also issued the money to the borrowers that come to the bank (Veltri, 1199). However, the loss of the cheque and the period during which the cheque and the court case was in proceeding, the back was not capable of receiving the benefits that it could have attained. Therefore, the interest ought to be paid according to the prevailing interest rates.
Veltri, Stephen C., and Greg Cavanagh. "Payments." Bus. Law. 64 (2008): 1199.