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Laws and Regulations of a Contract

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Q: Multi-Tek issued check number 896 in the face amount of $1,844.98, drawn on Multi-Tek's account at Fidelity and made payable to Multilayer Computer Circuits. However, 10 days later, Multi-Tek's president telephone Fidelity and placed a stop-payment order on the check. One of Fidelity's employee received and simultaneously recorded the order. This recordation contained the following information: the name of the account, the account number, the check number, the date of the check, the date and hour the stop-payment order was received, and the amount of the check as $1,844.48. This recordation was correct in most respects, except for a 50-cent difference between the face amount ($1,844.98) and the amount listed in the stop-payment order ($1,844.48).

Subsequently, Fidelity mailed a confirmation notice that contained, among other things, the following information:
PAYEE: MULTILAYER COMPUTER CIRCUITS AMOUNT: $1,844.48
CK: No -896
DATE: 02/27/96

The instructions in this confirmation notice concluded with: PLEASE ENSURE AMOUNT IS CORRECT. Multi-Tek's president signed this confirmation notice and returned it to Fidelity.

Fidelity had programmed its computer to pull checks only if all of the digits on the stop-payment order agreed with those on the check. As a result, Fidelity honored check number 896 and charged it to Multi-Tek's account. Multi-Tek then brought suit against Fidelity to recover $1844.98 because the check was paid over the stop-payment order. There is not question the stop-payment order was timely placed. What result?

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Solution Preview

The answer to the above question involves looking at the idea of a contract and the laws and regulations regulating that contract. When Multi-Tek opened their account with Fidelity, Multi-Tek entered into a contract with Fidelity and Fidelity entered into a contract with Multi-Tek. The rules, laws, and specifics of this contract would have been spelled out in the contract agreement that was signed when the account was opened. The financial account action known as a Stop Payment is ...

Solution Summary

The solution discusses the laws and regulations of a contract.

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