The Second National Bank, and the account was closed. Shortly thereafter, The First Bank learned that it had paid an altered check. What are the rights of each of the parties?

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The Second National Bank, and the account was closed. Shortly thereafter, The First Bank learned that it had paid an altered check. What are the rights of each of the parties?

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Jones drew a check for $1,000 on The First Bank and mailed it to the payee, Thrift, Inc. Caldwell stole the check from Thrift, Inc.; chemically erased the name of the payee; and inserted the name of Henderson as payee. Caldwell also increased the amount of the check to $10,000 and, by using the name of Henderson, negotiated the check to Willis. Willis then took the check to The First Bank; obtained its certification on the check; and negotiated the check to Griffin, who deposited the check in The Second National Bank for collection. The Second National Bank forwarded the check to the Detroit Trust Company for collection from The First Bank, which honored the check. Griffin exhausted her account in The Second National Bank, and the account was closed. Shortly thereafter, The First Bank learned that it had paid an altered check. What are the rights of each of the parties?

Explanation & AnswerSolution by a verified expert

Explanation

Explanation for rights of the parties are as follows:
Rights of Individual J:

Individual J has the right to claim amount of difference, which was forged in the check.
Individual J has the right toonly sue Bank F and no other banks.

Rights of Company T:

The check, which is receivable, was stolen so the liability still stands unpaid for Company T and needs to be paid by bank F.

Rights of Bank F:

Bank F has the right to make payment to Company T as per the actual check drawn by Individual J.
Bank F is liable for the breach of contract and payment made to Individual H.
Bank F can recover from Individual C.

 
Rights of Bank S:

Bank S can claim breach of warranty and illegal alterations made in the check from Individual W and Individual C.
Bank S is liable only up to the amount, which is available in Individual G's account to Company T.
Bank S can recover the amount from Individual C as Individual C has indorsed the check.

Rights of Individual W:

Individual W has the right to recover the amount from Individual C. Individual C has forged the document in the name of Individual H. The alterations made by Individual C is a breach of warranty, and hence, Individual C is liable for the breaches.

Rights of Company D

As a collecting agent, Company D is neither liable nor has any right.

Rights of Individual C:
·       Individual C has altered the check in the name of Individual H and the value of the check, which makes Individual C liable for the damages and does not provide any rights
Rights of Bank S:

Bank S can claim breach of warranty and the illegal alterations made in the check from Individual W and Individual C.
Bank S is liable only up to the amount, which is available in Individual G's account to Company T.
Bank S can recover the amount from Individual C as Individual C has indorsed the check.

Rights of Bank F:

Bank F has the right to make payment to Company T with the amount as per the actual check drawn by Individual J.
Bank F is liable for the breach of contract and payment made to Individual H.
Bank F can recover from Individual C.

Rights of Individual W:

Individual W has the right to recover the amount from Individual C. Individual C has forged the document in the name of Individual H. The alterations made by Individual C is a breach of warranty and hence Individual C is liable for the breaches done.

Rights of Company D:

As a collecting agent, Company D is not liable or does not have any right.

Rights of Individual C:

Individual C has altered the check in the name of Individual H and the value of the check, which makes Individual C liable for the damages and does not provide any rights

Sample Response

Rights of the parties are as follows:
Individual J:

The drawer of the check has the right to recover the amount as the forged instrument is certified and settled by the payor bank.

Company T:

Company T can recover the amount receivable from Bank F.

Bank F:

Bank F has breached the contract, which makes bank F liable to Individual F. Recovery can be made from Individual C as a result of forgery.

Bank S:

Bank S forged by Individual W and Individual C so the amount can be claimed from the Individuals W and C.

Individual W:

Individual W is entitled to receive the amount from Individual C as a result of breach of warranty.

Company D:

Company D collecting banks acts as an intermediary so they do not have any rights, however the duty is to check for any defects in the instrument.

Individual C:

The committed forgery makes Individual C liable to the parties who have suffered damages.

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