Payments Law In A Nutshell,9780314162762

Payments Law In A Nutshell

by ;
Edition: 1st
ISBN13: 9780314162762
ISBN10: 0314162763
Format: Paperback
Pub. Date: 2005-08-06
Publisher(s): West Academic
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Summary

Explains the fundamentals of negotiable instruments-promissory notes, drafts, checks, and certificates of deposit. Provides an overview of Article 3's requisites of negotiability. Reviews contract liability, secondary liability conditions, and discharge liability. Covers instruments of property, including enforcement, transfer, and negotiation. Discusses warranty, restitution, claims, defenses to instruments, holder in due course, and check collection process. Examines the customer/payor bank relationship and risk allocation.

Table of Contents

Table of Cases
xxv
Table of Statutes and Rules
xxvii
PART I. PAYING WITH CASH
Currency
2(10)
When Must the Obligee Accept Cash as Payment?
3(2)
When is Payment Made?
5(1)
When Can an Obligor Recover Payment Already Made to the Obligee?
6(1)
What Happens When Cash is Lost or Stolen?
7(5)
Digital Cash
12(16)
The Meaning of Digital Cash
12(1)
How Digital Cash Works
13(3)
What and How Law Applies
16(4)
Special Risk of System Integrity (or Solvency of the Issuer)
20(8)
PART II. PAYING BY CHECK
Liability on Checks Under Article 3
28(114)
Importance of Liability Under Article 3
29(1)
Requirements of a Check
30(15)
Writing
34(1)
Signed by Drawer
35(2)
Order a Bank
37(1)
Unconditional
38(1)
Money
39(1)
Fixed Amount
39(1)
Payable on Demand
39(1)
Payable to Order or to Bearer (Words of Negotiability)
40(1)
Payable to Order
41(2)
Payable to Bearer
43(1)
No Other Undertaking or Instruction
44(1)
Signature on a Check Creates Liability
45(5)
Mechanics of Signature
46(1)
Means of Signature: By an Agent or Representative
47(1)
Principal's Liability
47(1)
Agent's Liability
48(1)
Unauthorized Agent
49(1)
Terms and Conditions of Liability
50(7)
Liabilities of Persons Who Normally Sign Checks
51(1)
Drawer
51(2)
Indorser
53(2)
Usual Non-Liability of the Drawee
55(1)
Conditions of Liability: Presentment, Dishonor, and Notice
56(1)
Discharge of Liability on Instruments
57(12)
Meaning and Modes of Discharge
57(2)
Payment of the Instrument
59(1)
Requirements of the Discharge
59(3)
Third-Party Claims
62(2)
Distinguishing Payment of the Underlying Obligation
64(2)
Fraudulent Alteration
66(1)
Meaning of Alteration
66(1)
Rule of Discharge
66(1)
Effect on Holder in Due Course
67(1)
Cancellation or Renunciation
67(1)
Discharge by Agreement or Other Act
68(1)
Article 3 Discharge as a Defense Against Holder in Due Course
68(1)
How an Instrument Affects the Underlying Obligation
69(8)
Typical Case---Suspension and Discharge or Revival
69(3)
When Person Entitled to Enforce the Instrument is Not the Original Obligee
72(1)
When Taking an Instrument Discharges the Obligation
73(1)
Agreement
74(1)
Bank Instruments
74(1)
Accord and Satisfaction
75(2)
Suing on Checks
77(32)
Instruments as Property
77(2)
Persons Entitled to Enforce
79(3)
Holder by Issuance
82(1)
Holder by Negotiation
83(1)
The common requirement: ``Transfer of Possession''
84(1)
Indorsements
85(1)
How an Instrument Becomes Payable to an Identified Person or Bearer and How It is Negotiated
86(1)
Originally Made Payable to Order or to Bearer
86(1)
Thereafter---Blank or Special Indorsement
87(2)
The Grand Importance of No Missing Indorsements
89(3)
Qualified Indorsements
92(1)
Restrictive Indorsements
93(1)
Negotiation by Multiple Payees
94(1)
Nonholder in Possession with Holder's Rights
95(4)
Nonholder without Possession in Exceptional Cases
99(1)
Lost, Destroyed, or Stolen Instruments
99(2)
Instruments Paid by Mistake
101(1)
Indorsers as Other People Who Can Enforce
102(1)
Procedures of Enforcement
102(1)
Plaintiff's Prima Facie Case
102(1)
Establishing That Signature Binds Defendant
103(1)
Proving Plaintiff's Entitlement to Enforce
104(1)
Producing the Instrument
105(1)
Lost, Destroyed or Stolen Checks: 3-309
105(1)
Requirements for Enforcement
106(1)
Proof and Adequate Protection
106(1)
Liability Over
107(1)
Statutes of Limitations
108(1)
Defenses to Liability
109(20)
Real Defenses
112(2)
Other Defenses Good Against Everybody
114(1)
Forgery
114(1)
Alteration
114(1)
Discharge of Which There Is Notice
114(1)
Subsequent Claims and Defenses
115(1)
Claims and Defenses Chargeable to the Holder
116(2)
Ordinary or Personal Defenses
118(1)
Article 3 Defenses
119(2)
Discharge---the Not-a-Defense Defense
121(1)
Defenses of Contract Law
121(1)
Range of Defenses, Especially Including Problems of Consideration
122(3)
Caveat: Defense Must be Chargeable to Plaintiff
125(1)
Recoupment (Defensive Counter-claims)
126(2)
Claims (Property Interests)
128(1)
Holder in Due Course
129(10)
Requirements of Due--Course Status
129(2)
For Value
131(1)
Without Notice
132(2)
Authenticity of the Instrument
134(1)
Good Faith
135(1)
Apart From Certain Unusual Circumstances
136(1)
Payee as Holder in Due Course
137(1)
Taking Through a Holder in Due Course---The Shelter Principle
138(1)
Shifting Loss for Certain Risks---Warranty and Restitution
139(3)
Check Collection
142(49)
Presenting the Check for Payment: Payor Bank as Sole Bank
144(7)
Presentment Over the Counter for Payment in Cash
144(5)
``On Us'' Checks: Payor Bank as Depositary Bank
149(2)
Presenting the Check for Payment: Multiple Banks
151(26)
Forward Collection Process in General
151(4)
Depositing the Check for Collection
155(1)
Indorsement and Transfer to Depositary Bank
155(1)
Crediting the Customer's Account---Provisional Settlement under Article 4
156(1)
Depositary Bank Becomes Collecting Bank and Agent for Collection
157(1)
Duties of Collecting Banks
158(1)
What is a Collecting Bank?
158(1)
Responsibilities of Collecting Bank
158(1)
Methods of Sending and Presenting
159(2)
Truncation
161(2)
Settlements
163(1)
Under Article 4
163(1)
Under Regulation CC
164(3)
Warranties in Forward Collection
167(1)
Transfer and Presentment Warranties
167(1)
Encoding Warranties
168(1)
Action Required of Payor Bank Upon Presentment---Dishonor by Timely Return or Final Payment by Inaction
169(3)
Excuse for Missing Midnight Deadline
172(1)
Regulation CC---Supplemental Rules for Returning Checks
173(2)
Large-Dollar Notice
175(2)
More on Final Payment by Payor Bank
177(5)
Relationship Between Final Payment and Accountability
177(3)
Restitution for Mistaken Payment Despite Final Payment
180(2)
Dishonored Checks
182(9)
Rights and Remedies of the Depositary Bank
182(7)
Rights and Remedies of the Customer
189(1)
When the Check is Dishonored
189(1)
When the Check is Bounced Despite Final Payment
189(2)
Checking Accounts
191(31)
Basic Relationship Between Customer and Bank
192(2)
Defined Mainly by Deposit Agreement
192(1)
``Properly Payable'' Defines Main Duties
193(1)
Wrongful Dishonor in General
194(9)
When is a Dishonor Wrongful?
194(1)
Funds Availability
195(2)
Low-Risk Deposits---Next-Day Availability
197(1)
Local Checks---Second-Day Availability
197(1)
Nonlocal Checks---Fifth-Day Availability
198(1)
Time for Determining Funds Sufficiency
198(2)
Order of Paying Checks Presented at the Same Time
200(1)
Overdrafts
200(1)
Remedies for Wrongful Dishonor
201(1)
Liability to Whom
201(1)
Liability for Damages
202(1)
Wrongful Honor in the Absence of Fraud or Forgery
203(14)
In General
203(2)
Stop Payment Orders: 4-403
205(1)
Elements and Duration
205(1)
Who May Stop Payment
205(1)
Form and Content of Order
205(1)
Time and Manner of Order: Priority Under 4-303(a)
206(2)
Duration
208(1)
Bank and Certified Checks
209(1)
Damages, 4-403(c)
209(1)
Payor Bank's Subrogation Rights, 4-407
210(1)
Order Closing Account
211(1)
Untimely Checks
212(1)
Post-Dated Checks
212(1)
Stale Checks
213(1)
Death or Incompetence of Customer
214(1)
Payor Bank's Remedies Upon Wrongful Honor
215(1)
Warranties
215(1)
Encoding Warranties
215(1)
Presentment Warranties
215(1)
Restitution for Mistaken Payments: 3-418
216(1)
Priority Disputes Involving the Account
217(5)
The ``Four Legals''
217(2)
Priorities Under 4-303
219(3)
Check Fraud---Allocating Risk and Loss Between Payor Bank and Customer
222(35)
Basis of Payor Bank's Liability to its Checking--Account Customer
223(4)
Ineffective Drawer's Signature
223(1)
Ineffective Indorsement
224(1)
What Is the Wrong to the Drawer?
224(1)
Where Is the Loss to the Drawer?
225(1)
Alteration
225(1)
Wrongfully Completed Checks
226(1)
Payor Bank's Defenses
227(30)
Authority
228(1)
The Effect of the Defense---It Undercuts Wrong
228(1)
Rules About Agents Authorized to Sign for Their Principals
228(1)
Ratification
229(1)
Signature Becomes Effective as That of Represented Person
229(1)
Effect on Signer's Liability
230(1)
Preclusion by Estoppel
230(1)
3-406---Negligence
231(1)
The ``Substantially Contributes'' Requirement
231(1)
The Effect of Payor's Culpability
232(1)
4-406(C-D) (Breach of Conditional Duty to Discover and Report Check Fraud)
233(1)
When Duty on Customer Is Triggered
234(1)
Effect of Customer's Breach of the Duty
234(1)
No Coverage of Forged Indorsements
235(1)
Missing Drawer's Signature
235(1)
Bank's Comparative Negligence Dilutes the 4-406(d) Defense
236(1)
Bank's Lack of Good Faith Denies the Defense
237(1)
4-406(f) (One--Year Outside Limit on Customer's Complaints About Customer's Unauthorized Signature or Alteration)
237(1)
Special Rules for Unauthorized Indorsements in Certain Circumstances
238(1)
When Payees are Impersonated or Imagined: Impostor Rule---3--404(a)
239(1)
The Fraud
239(1)
Pre--Code Law
239(1)
The Code Rule When Payee Impersonated
240(1)
Impersonation of an Agent of the Named Payee
241(1)
Rule of the Nominal or Fictitious Payee---3--404(b)
242(1)
The Fraud
242(1)
The Code's Rule Favors the Bank
243(1)
Where Stealing Instrument Is Afterthought
244(1)
Where Actual Drawer Is Not Involved
245(1)
Where Drawer's Signature Is Unauthorized
246(1)
Common Requirements of the Two Rules of 3-404
246(1)
Signature of Someone as Payee Is Required
247(1)
Signature Must Be ``In the Name of the Payee''
247(1)
Whom the Rules Protect
248(1)
Effect of Comparative Fault
248(2)
Same Basic Policy Behind the Rules
250(1)
3-405---When Employees Steal Checks for Which They Are Responsible
251(4)
Comparative Fault
255(2)
Shifting Check Fraud Losses
257(23)
Payor Bank Versus People Upstream in the Collection Chain---Primarily, Presentment Warranties
257(14)
Who Makes Presentment Warranties to the Payor Bank Under 4--208
259(1)
Scope of Presentment Warranty Protection Under 4--208
259(1)
Alteration
260(1)
Unauthorized or Missing Indorsement
260(1)
Unauthorized Drawer's Signature
261(1)
Damages
262(1)
Kinds
262(1)
Disclaimer
262(1)
Major Defenses in Warranty Action
262(1)
Payor Bank's Lack of Good Faith
262(1)
Laches
263(1)
Failure to Assert Defenses Against Customer
263(2)
Forged Signature Not Unauthorized
265(1)
Recovery Over (Passing the Buck) Through 4-207 Transfer Warranties
266(2)
Payor Bank's Restitution Action to Shift Losses Not Covered by Payment Warranties
268(1)
The Claims for Restitution
268(2)
The Defense to Restitution
270(1)
Payee Versus Depositary-Collecting Bank
271(7)
Setting Up and Justifying the Direct Action in the Typical Check Fraud Case
271(3)
Theory of the Direct Action---Conversion
274(1)
Damages for Conversion
274(1)
No Defense of Good Faith to the Direct Action
275(1)
Former Law
275(2)
Change in Law Denies Defense to Depositary Bank
277(1)
Other Direct Action Suits
278(2)
Payee Versus Payor Bank
278(1)
Basis of the Action
278(1)
Inapplicability of the 3--420(c) Defense
278(1)
Drawer Versus Depositary--Collecting Bank
279(1)
Bank Checks
280(18)
Different Types: Certified, Cashier's, and Teller's Checks
281(1)
How They Work---Their Incidents and Effects
282(5)
Certified Checks
282(2)
Cashier's Checks
284(2)
Teller's Checks
286(1)
Stopping Payment
287(4)
Enhanced Liabilities of Banks on Bank Checks, 3-411
291(2)
When Bank Checks are Lost or Stolen
293(5)
PART III. PAYING AGAINST ORDINARY DRAFTS AND DOCUMENTS
Ordinary Drafts Under Articles 3 and 4
298(5)
Simple Demand or Sight Draft
298(2)
Time or Acceptance Draft
300(1)
Collecting Drafts Through Banks
301(2)
Tying Drafts to Documents of Title
303(25)
Documents of Title
303(7)
Distinguishing Negotiable Documents
305(1)
The Test for Negotiability
305(1)
Article 7's Coverage of Non-negotiable Documents
306(1)
How Documents Control Access to the Goods
306(1)
When the Document Is Non-negotiable
307(1)
When the Document Is Negotiable
308(1)
Upon Issuance
309(1)
Subsequent Holders
309(1)
Bailee's Accountability for Non--or Misdelivery
310(1)
How Paying Against Documents Works
310(14)
How the Payment Scheme Works
311(1)
Step One: Creating the Documentary Draft
311(1)
Step Two: Sending the Documentary Draft for Collection
312(2)
Step Three: Presenting the Documentary Draft for Payment
314(1)
Buyer's Protections
315(1)
Exclusive Access to the Goods
315(1)
Title to the Goods
316(1)
Rights Acquired Through Due Negotiation
316(1)
Warranties
316(1)
Upon Issuance of the Document
316(2)
Upon Negotiation of the Document
318(1)
Upon Sale of the Goods
318(1)
Contract Remedies
318(1)
Seller's Protections Upon Breakdowns in the Scheme
319(1)
Buyer Dishonors
319(1)
Procedure Upon Dishonor
319(1)
Seller's Reaction
319(2)
Bailee Misdelivers Goods
321(1)
Presenting Bank Misdelivers Documents
321(1)
Depositary Bank Is Negligent
322(1)
Variations in the Scheme
322(1)
Discounting Documentary Drafts
322(1)
Shipping Under a Non-negotiable Document
323(1)
Trade Acceptances
324(4)
PART IV. PAYING WITH CREDIT
Letters of Credit
328(17)
Defining Basic Terms and Relationships
331(6)
Commercial Credits
331(1)
The Main Players
331(2)
The Relationship Between Issuer and Beneficiary: Duty to Honor
333(2)
The Relationship Between Issuer and Customer: The Right of Subrogation
335(2)
Standby Credits
337(1)
Determining Compliance With the Credit
337(3)
What Determines Compliance
338(1)
Degree of Compliance
339(1)
Timing of Compliance
340(1)
Rightful Dishonor Despite Facial Compliance
340(5)
Reasons Justifying Dishonor Despite Compliance
340(2)
Reasons Not Justifying Dishonor
342(3)
Credit Cards
345(55)
How Bank Cards Work
347(16)
Bank Joins Bankcard Association
348(2)
Bank Issues Cards to Cardholders
350(2)
Merchants Open Accounts at Bank
352(4)
Cardholders Use Cards to Pay for Stuff Merchants Sell
356(2)
Merchants Collect Through Settlements or Interchange Network
358(3)
Interlocking Agreements Provide Credibility
361(2)
What Law Applies
363(6)
State Law and Choice of Law
363(3)
Federal TILA
366(3)
Arbitration
369(1)
Cardholder Right to Payment---``Wrongful Dishonor''
369(4)
Cardholder Securing Payment
373(4)
Cardholder ``Stopping Payment''---Withholding Payment on Basis of Defenses Against Merchant
377(7)
Cardholder Limited Liability for Unauthorized Use
384(7)
Cardholder Rights Against Issuer for ``Billing'' Errors (Including Charges ``Not Properly Payable'')
391(9)
Rights and Process
391(3)
Relationship to Unauthorized Use and Claims Against Merchant
394(1)
Relationship to Issuer Chargeback Against Merchant
395(5)
PART V. PAYING WITH ELECTRONIC TRANSFERS OF FUNDS
Commercial Funds Transfers
400(25)
Scope of Article 4A
401(3)
Electronic Channels for Zapping Funds Between Bank Accounts
404(3)
Stages and Players Involved in an Article 4A Funds Transfer
407(2)
Rights, Duties, and Payment
409(5)
Stopping Payment
414(3)
Unauthorized Payment Orders
417(4)
Mistakes in Payment Orders
421(4)
Erroneous Payment Orders
422(2)
Misdescription of Beneficiary
424(1)
Consumer Funds Transfers
425(46)
Automated Clearing House (ACH) Network
427(9)
What ACH Means
427(3)
How ACH Is Mainly Used-Recurring Payments to and From Consumers
430(3)
How ACH Transactions Work
433(3)
Electronic Fund Transfer Act (EFTA)
436(17)
Scope of Application
437(3)
Major Protections
440(1)
Disclosures
440(1)
Unauthorized Transfers
441(8)
Error Resolution
449(1)
Preauthorized Debits
450(3)
Civil Liability for EFTA Violations
453(4)
EFTA and Checks
457(8)
Article 3 ``Truncated'' Checks
457(1)
Re--Presented Checks
458(1)
Electronically Converted or ``E--Checks''
459(6)
Funds Transfers Beyond EFTA
465(6)
Multi--Purpose Cards Used for Credit
465(3)
Telephone Requests for Transfers
468(1)
Digital Cash
469(2)
Index 471

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