bank's carelessness was not responsible for the alteration or the payment, it will be able to recover the excess paid from an innocent holder to whom it paid the raised amount. Recovery is allowed in these cases because the bank is not supposed to warrant the body of the instrument by certifying it, but only the drawer's signature, the sufficiency of the funds, the existence of the payee and his capacity to indorse. In New York and Pennsylvania the bank's certification is a warrant only of the signature and the funds. The bank after certifying a check will be liable to a holder in good faith, even though the funds are insufficient or the signature is forged. It will be liable also to such a holder even though the payee is fictitious or the blanks fraudulently filled. If a certified check has been stolen or lost, even though advertised, a holder in good faith will be able to recover. An overdraft is not usually a criminal offense. If a man draws a check out with intent to defraud and with knowledge that he has no right to draw on the bank for the amount he does, he is guilty of stealing and is punishable accordingly. § 226. Checks as Gifts If a check is given as a present, it will be valid, and subject to the defense of no consideration only as between the donor and donee. A check given as a gift causa mortis if not cashed or certified before the death of the donor, is revoked. REVIEW QUESTIONS 1. Prepare a voucher check which is a negotiable instrument and evidence of the payment of a particular account or obligation. 2. What liability, if any, does a bank assume in paying a check to a holder who claims under a forged indorsement? 3. The maker of a promissory note sends the payee his check for the amount on the day of maturity. The payee has the check certified at the bank, but before it is paid the bank fails. Is the maker relieved of liability on the note by such certification? Give reasons for your answer. 4. A bank certified a check that had been altered by changing the date, name of payee, and raising the amount, and the bank subsequently paid the same to the defendant. Thereafter, the bank sued the defendant for the amount thus paid. Can it recover? Or does its certification of the check amount to a warranty of the genuineness of the body of the check as to payee or amount? Explain. 5. Is a depositing and checking customer of a bank obliged to verify the balance shown by pass-book and vouchers? 6. A retailer received a check for some goods. Before delivering them he telephoned the bank, and was told that the check was good. When he presented it for payment several hours later he found that other checks had been presented in the interval, and that the bank refused to honor his on the ground of insufficient funds in the depositor's account. Could the retailer rely on the telephoned approval of the bank as a certification? 7. How should a check be sent by mail for collection? May the holder of an uncertified check sue the bank? If a bank wrongfully dishonors a check, has the drawer any remedy? 8. What is the liability of the parties to a certified check? If a bank pays a check drawn on it by a depositor, after payment has been stopped, can the depositor recover the amount so paid? 9. In your state what is the statutory limitation to a bank's liability for payment of a forged or raised check after its return to a depositor? Liability of a bank for payment of a check after drawer's death? 10. Drawer of check has it certified, gives it to payee. Next day bank fails. Can payee collect from drawer? II. On the morning of January 5, A gave B a check for $100 on account. On the evening of January 7 the bank suspends payment. B has not yet presented the check. Is A's debt. cancelled? CHAPTER XXXVII $227. The Parties FIRE INSURANCE Insurance is a contract by one or more parties to indemnify another for some loss which he may suffer in the future. If there is no loss, the agreement does not have to be carried out. The consideration is the premium paid. The written contract is called the policy. Insurance is of various kinds. Fire, life, and marine insurance are the oldest forms of insurance. In addition, there have grown up accident insurance, burglary insurance, boiler, plate glass, and tornado insurance, credit, fidelity, title, and liability insurance, and other special forms of insurance too numerous to mention. There are two parties to a contract of fire insurance, the insured and the insurer. The person whose property is insured is called the insured. The person or company who insures it is called the insurer. The insurer may be a single individual, or a corporation, or an unincorporated company; or a group of individuals may get together and insure themselves. This last system of insurance is called mutual insurance. It is quite common in the country districts, where there may be a township mutual insurance. Whenever a fire occurs all the members of the fund are assessed proportionately to pay the loss. In the non-mutual companies a fund is created by the payment of premiums, out of which the insurer pays for the losses which may occur. |