Topic: Article 4 – Uniform Commercial Code
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May a bank adopt a policy of not checking for multiple signatures on checks?
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The risk in adopting a policy of not checking for multiple signatures is that customers may have rights to reimbursement under the UCC if you pay fraudulent checks that have only one signature (and customers might also sue for breach of contract unless your deposit agreements state that you will not check for multiple signatures).…
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Under Illinois law, what is the order in which banks should pay checks?
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Section 4-303(b) of the Uniform Commercial Code (UCC) permits banks to pay checks in any order: “items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.” 810 ILCS 5/4-303(b). The Illinois Appellate Court for the First District has held this to be true even if the order…
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A customer placed a stop payment order on a check that later was cashed by a currency exchange. Our bank dishonored the check, and now the currency exchange is claiming through its lawyer that the bank is liable for payment under the “holder in due course” rule. Does a stop payment order on a check trump the “holder in due course” rule? And, is the answer the same for a cashier’s check?
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Yes. If your customer (the “drawer”) has properly stopped payment of a check drawn on his or her account, you should not pay the check even if a holder in due course presents the check for payment. Notwithstanding the general rule that a holder in due course takes a negotiable instrument free from all contrary…