University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

453

Pages:

2
Author:

bratrochanter

Key Issues on Susan Williams’ Bank Account Problems and Related Legal Rights 1. Bank’s Duty to Pay and Liability for Wrongful Dishonor: o Scenario: Susan’s bank wrongly refused to honor her check despite sufficient funds, causing reputational harm. o Legal Right: Susan can claim damages from the bank for any actual and consequential losses due to the dishonor. Consequential damages could include reputational damage, fees, and any legal expenses resulting from the store’s complaint, as the UCC mandates banks pay properly drawn checks if sufficient funds are available. 2. Stop-Payment Order and Bank’s Responsibility: o Scenario: Susan placed a stop-payment order on a check to a repair shop, but the bank paid it anyway. o Legal Right: The bank is liable for damages arising from failing to honor the stop-payment order if it was given in time and properly documented. For an oral order, Susan must confirm it in writing within 14 days for extended effect; a written stop-payment is valid for six months and can be renewed. The bank’s failure to honor the stoppayment could entitle Susan to compensation for losses caused by the unauthorized payment. 3. Unauthorized ATM Withdrawal: o Scenario: After Susan’s wallet was stolen, her ATM card was used to withdraw $200 without her consent. o Legal Right and Responsibility: Under the Electronic Funds Transfer Act (EFTA), Susan must promptly report the unauthorized transaction upon discovering it in her statement to limit liability. If she reports within two business days of discovering the loss, her liability is limited to $50; if delayed up to 60 days, it could increase to $500. Prompt reporting ensures her rights to recover the loss from the bank for failing to prevent unauthorized access. 4. Ethics of Writing a Check with Intent to Stop Payment: o Scenario: Stopping payment on a check written for a higher amount than expected by the repair shop after it demands a higher fee than initially quoted. o Ethical Consideration: Intentionally issuing a check with the plan to stop payment can be ethically questionable, as it may be seen as misleading. A more ethical approach may involve negotiating with the repair shop or seeking a fair resolution through formal dispute avenues. Learning Objectives Recap: 1. Bank’s Basic Duty: A bank must honor checks if they are properly drawn and funds are available. 2. Postdated Checks: Banks may honor postdated checks unless notified by the account holder. 3. Stop-Payment Orders: Banks are obligated to follow stop-payment orders if received in time and correctly identified. 4. Check Types: Certified and cashier’s checks differ in bank guarantee levels and are discussed in the context of bank-issued checks. Susan’s scenarios illustrate key customer rights and the bank’s duties under the UCC and EFTA, demonstrating important consumer protections in banking and electronic transfers.