Diesal Corporation pays its employees every two weeks. Ella, a Diesal employee,e

Question

Diesal Corporation pays its employees every two weeks. Ella, a Diesal employee,e paycheck and indorses the back ("Ella Smith"), but loses the check before cashing it or depositing it. George finds it. Has the check been negotiated to George? State the law that supports your answer. Hint: what type of instrument was the check originally and what did it become after Ella indorsed it? If George signs the back of the check beneath Ella's signature, state whether George can the check. (What type of indorsements were involved? If so, what might Ella have done to avoid the loss? a. b. c.

Explanation / Answer

a. Yes, the check has been nogtiated to George. It was an order instrument before Ella indorsed it. After she indorsed it, it became a bearer instrument which can be negotiated by delivery. And delivery occured on George finding the check.

b. If George signs at the back of the check beneath Ella's signature, George can cash the check. It can be considered as special indorsement.

c. To avoid the loss Ella should not have signed at the back of the cheque until she is at the bank to deposit itand if she had signed it she should have been more careful with keeping the check. Also she could mention the words 'for deposit only' at the back along with her signature. In that case anyone who found the check could not cash it.

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