1. ABC Corporation pays its employees every two weeks. John, an ABC employee, re
ID: 469193 • Letter: 1
Question
1. ABC Corporation pays its employees every two weeks. John, an ABC employee, receives his paycheck and indorses the back (“John Smith”), but loses the check before cashing it or depositing it. Sam finds it. Has the check been negotiated to Sam? If Sam signs the back of the check beneath John’s signature, can she cash it? If so, what might John have done to avoid the loss?
2. Booth Credit has in its possession an instrument dated May 1, 2014. The instrument is payable to the order of Wholesale Moving Company “on June 1, 2015,” for $5,000. In the upper left corner is an address for ABC Development Corporation—10 Corporate Park Avenue, Lawrenceville, NJ—and in the lower right corner is the signature of “Redrock Investments, Inc., By Tim, President.” In the lower left corner is stamped “ACCEPTED: ABC Development Corporation by Jim, President, May 5, 2014.” On the back is the signature of “Wholesale Moving Company by Sarah, President.” Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument? What type of document is this and is it negotiable; why or why not?
Explanation / Answer
1)
Yes, Sam can encash it by signing the writeing her full name and signing below the John;s signature. This will be considered as third party endorsement.
Johu could have prevented the fraud by writing an additional line in the chq stating "for deposit only". This will ensure that chq is not encashed.
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