Article 3 of Commercial Code Case
Not what you're looking for?
A bank holds two promissory notes, Note A has 5,000 balence and note B has a 10,000 balence owed. The debtor on both notes pays 7,000 and a clerk in bank sends back both notes marked '' paid'' by mistake with a letter thanking customer. Six months later the bank demands the 8,000 balence on Note B and the debtor produces the ''paid'' notes. The bank proves the clerk was not a bank officer and had no authority to cancel notes. The debtor admits only 7,000 was paid, but still claims both notes were cancelled.
Was note cancelled? Why/Why not?
Will Bank get 8,000? Why/Why not?
Refer to cases/rulings to back up answer.
Purchase this Solution
Solution Summary
Article 3 of Commercial Code Case is exemplified.
Solution Preview
Hi there -
Interesting dilemma here! I believe that the most likely outcome is that the notes are not cancelled and the bank will be paid the balance. Here's why:
Courts have manipulated U.C.C. § 36-3-605(1)(b) to require that surrender of the instrument be accompanied by an intent to discharge the party. A cancellation made unintentionally or under a mistake, or without the authority of the holder, as in the situation here, is inoperative. Hence, an unintentional or mistaken cancellation of an instrument or a signature does not discharge it. Where notes are held by a bank for collection, and the notes, without the intent of the maker, owner, or purchaser, are stamped "paid" through error of a teller, such error does not have the legal effect of canceling the debt or discharging the instrument. The unauthorized act of the cashier of a ...
Purchase this Solution
Free BrainMass Quizzes
Contract Requirments
How much do you know about the legal requirements for a contract? Find out with this quiz!
Criminal Defenses Review
Test your knowledge of the basics of criminal law and defenses with this quiz.
Title VII Laws
Learn the basics of the laws under Title VII.
Title VII
This Quiz pertains to the spectrum of Human Rights through Title VII
Evidence
Do you know your evidence objections? Find out with this quiz!