Business Law 2 Group Problem

BULGL 319

Group Problems Chapter 40

1. Terance Fitzgerald made, signed, and delivered a check for $4,000 payable to Gene Goss, d/b/a New Look Auto Trim. Goss indorsed the check in blank and cashed it at the Cincinnati Central Credit Union, which then deposited $4,000 in Goss’s personal account there.

When the Credit Union presented the check to Fitzgerald’s bank, 1st National (the drawee), the check was dishonored for insufficient funds.

Sketch this scenario out, and then answer the following:

a. At this point, which party is out $4,000?

b. What recourse, if any, does that party have?

c. Is there anything that Goss could have done to cut off his liability?

d. What recourse does Goss have at this point?

1. The Promissory Note which the following question is based on states as follows:

ABC Corporation agrees to pay the sum of $20,000, with interest thereon at the rate of 5%/annum, to the order of John Smith, payable in full by October 1, 2016.

Dated: May 1, 2016

SIGNED: Sam Jones

Smith presented the note for payment to ABC Corporation on October 1, 2016, but was informed that ABC Corporation had filed a Chapter 7 Bankruptcy proceeding, and would not honor the Note.

Smith vaguely remembers something about commercial paper from a Business Law class he was forced to take in college, and thinks he might have another avenue he can pursue to get payment on this Note. He has asked you commercial paper experts to give him some advice here – any ideas as to who Smith could pursue, and under what theory of liability?

1. On December 29, 1999, Charles Peterson, a farmer and rancher, was the maker of a $4,450,000 Note to Crown Financial Corporation that was due on December 29, 2002.

On December 15, 2002, Crown sent Peterson a statement of interest due on the Note ($499,658.85). Peterson paid the interest and executed a new note in the amount of $4,450,000 that was to mature on December 29, 2005. The old note was then marked “canceled” and returned to Peterson.

In 2005 Crown billed Peterson for an additional $363,780 in interest on the 1999 Note that had, mistakenly, not been included in the December 15, 2002, statement for the interest payment.

Peterson claimed that since the 2002 Note had been marked “cancelled” and returned, he was off the hook and did not have to pay the additional interest.

What do you think: Is Peterson liable for additional interest once the Note was marked “cancelled” by the Bank?

1. Smith made out a check drawn on Citizens First Bank payable to Tom Howard. Carson stole the check from Howard, forged Howard’s indorsement, and cashed it at Merchant’s Bank. At this point, Howard realized that the check had been stolen, and contacted Smith, who ordered his bank, Citizens First, to stop payment on the check.

When Merchant’s Bank presented it to the drawee, Citizens First Bank, Citizens Bank refused to honor (pay) the check because of the stop payment order.

Sketch this out, and figure out:

1. Which party is taking the hit at this point?

2. Does this party have any recourse?

3. If so, against whom?