Business law Fact Pattern 28-1B Dana takes her car to Efficient Auto Repair Serv

Question

Business law

Fact Pattern 28-1B

Dana takes her car to Efficient Auto Repair Service, which repairs the car and bills Dana for $500. She writes out a check drawn on First Choice Bank, but later, believing that Efficient Auto did not repair the car properly, issues a stop-payment order.

Refer to Fact Pattern 28-1B. If First Choice pays the check, the bank

is liable for Dana’s loss due to the wrongful payment.

is liable to Efficient Auto for the time and trouble to return the payment.

can sue Dana for a wrongful stop-payment order.

can sue Efficient Auto for breach of contract.

Question 9

Refer to Fact Pattern 28-1B. First Choice

need not follow Dana’s order because it was issued after the check.

need not follow Dana’s order unless the check was certified.

is liable to Efficient Auto for the amount of the check.

must stop payment if First Choice has a reasonable time to act.

is liable for Dana’s loss due to the wrongful payment.

is liable to Efficient Auto for the time and trouble to return the payment.

can sue Dana for a wrongful stop-payment order.

can sue Efficient Auto for breach of contract.

Explanation / Answer

If First Choice pays the check, the bank is liable for Dana’s loss due to the wrongful payment

Explanation:

A stop payment order is issued by a customer-drawer to the bank not to pay the certain check and if the bank pays the check in spite of the stop payment order, the bank will be liable for the actual loss suffered by the drawer through wrongful payment. Here Dana is the drawer who issued stop payment order to First Choice bank and hence the bank is liable for Dana’s loss due to the wrongful payment.

9. First Choice must stop payment if First Choice has a reasonable time to act.

Explanation:

For the stop payment order to be effective, the drawer must issue the order within a reasonable time to allow the bank to act on the order. When there is reasonable time given to the bank to act, First Choice must stop payment.

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