Pulaski brings this suit against TAB/Fort Worth, TAB/Dallas, and TASI alleging their notice of dishonor was not timely relayed to Pulaski. Explain whether Pulaski is correct in its assertion.

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Pulaski brings this suit against TAB/Fort Worth, TAB/Dallas, and TASI alleging their notice of dishonor was not timely relayed to Pulaski. Explain whether Pulaski is correct in its assertion.

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Laboratory Management deposited into its account at Pulaski Bank a check issued by Fairway Farms in the amount of $150,000. The date of deposit was February 5. Pulaski, the depositary bank, initiated the collection process immediately by forwarding the check to Worthen Bank on the sixth. Worthen sent the check on for collection to M Bank Dallas, and M Bank Dallas, still on February 6, delivered the check to M Bank Fort Worth. That same day, M Bank Fort Worth delivered the check to the Fort Worth Clearinghouse. Because TAB/West Side, the drawee/payor bank, was not a clearinghouse member, it had to rely on TAB/Fort Worth for further transmittal of the check. TASI, a processing center used by both TAB/Forth Worth and TAB/West Side, received the check on the sixth and processed it as a reject item because of insufficient funds. On the seventh, TAB/West Side determined to return the check unpaid. TASI gave M Bank Dallas telephone notice of the return on February 7 but physically misrouted the check. Because of this, M Bank Dallas did not physically receive the check until February 19. However, M Bank notified Worthen by telephone on the fifteenth of the dishonor and return of the check. Worthen received the check on the twenty-first and notified Pulaski by telephone on the twenty-second. Pulaski actually received the check from Worthen on the twenty-third. On February 22 and 23, Laboratory Management’s checking account with Pulaski was $46,000. Pulaski did not freeze the account because it considered the return to be too late. The Laboratory Management account was finally frozen on April 30, when it had a balance of $1,400. Pulaski brings this suit against TAB/Fort Worth, TAB/Dallas, and TASI alleging their notice of dishonor was not timely relayed to Pulaski. Explain whether Pulaski is correct in its assertion.

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Here, Bank P's claims can be considered correct in their assertion since Bank W, acting as a transferor bank of Bank WS, notified Bank P late of the dishonor of the check, which delayed the freezing of Company LM's account. The payor bank holds the liability for full amount of the check but the transferor bank holds the liability for full amount minus the losses incurred because of not applying ordinary care by collecting bank. Bank WS had informed its transferor bank on time about the dishonour of the check. The delay in transferring information was from Bank W's end. Bank W should have informed Bank P as soon as the notice of dishonor was received on the phone. So, in this case, Bank W should be held liable for delaying the process of freezing the bank account of Company LM.

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