BUSINESS LAW QUESTION Answer with a complete IRAC analysis. IRAC is Issue, Rule,

Question

BUSINESS LAW QUESTION

Answer with a complete IRAC analysis. IRAC is Issue, Rule, Analysis, Conclusion.

Issue: Will the bank have to repay the money to Ajax Corporation

Rule: (include every rule of law that applies)

Analysis: (Explain how the rules apply and why)

Conclusion: (Say how the court would rule the problem)

The Mark Trotter, the treasurer of Ajax Corporation was having trouble paying his bills. He prepared all the checks each month for the CEO to sign. In order to pay his credit card bill he made out a check to Visa Corp (his credit card company). He explained to the CEO that the check to Visa Corp was to pay for various shipping charges of goods that were sent to Ajax Corporation. The CEO signed the checks and gave them to the treasurer. Mark took the Visa check and put that into his account by signing that check with a forged signature. This went on for three months before the CEO discovered the fraud. Applying the correct rule(s) of law, will Ajax Corporation’s bank have to repay the money to Ajax Corporation? You may assume the checks were negotiable.

Explanation / Answer

Issue: Will the bank have to repay the money to Ajax Corporation

Rule: (include every rule of law that applies)

Under Section 3 – 403(a) and 4-401(a) ,if it is properly payable bank can change against customer’s account .However if a signature is forced , the corporate account may be liable if one of the following exception applies.

Analysis: (Explain how the rules apply and why) Rule 1 and 2 applies since care was not taken by the CEO and because banks do not need to verify each check so CEO will be held responsible

Conclusion: (Say how the court would rule the problem)- Bank will not be held responsible and not required to pay.

Issue: Will the bank have to repay the money to Ajax Corporation

Rule: (include every rule of law that applies)

Under Section 3 – 403(a) and 4-401(a) ,if it is properly payable bank can change against customer’s account .However if a signature is forced , the corporate account may be liable if one of the following exception applies.

1. Under sec 3 -103 (7) requires ordinary care on part of account holders, if they fail to do so they may be restricted from seeking restitution from the payee bank if their own failures led to forged check signatures
2. Sec 4 -406 requires reconciliation of bank statement to detect unauthorized checks
3. Sec 3 -406(b) and 4 -406€ both bank and customer may be held liable , but since banks are not required to physically examine every check , companies may be held responsible even if the bank did not verify the signature on a fraudulent check

Analysis: (Explain how the rules apply and why) Rule 1 and 2 applies since care was not taken by the CEO and because banks do not need to verify each check so CEO will be held responsible

Conclusion: (Say how the court would rule the problem)- Bank will not be held responsible and not required to pay.

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