[Check Issues] Kelsey Owns and Operates a Currency Exchange

question 28

Multiple Choice

[Check Issues] Kelsey owns and operates a currency exchange. A regular customer, Rafe, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Kelsey cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Rafe had been stolen. At the time she took the check, Kelsey was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Kelsey decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took Rafe's check, she took a check from another customer, Brett. It was later discovered that the check, which was four months old, was the subject of a dispute between Brett and the issuer of the check for whom Brett had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Brett had stopped payment on the checks. Kelsey claimed that as a holder in due course, she was entitled to payment on both checks.
-What is the effect on Kelsey's status as a holder in due course in taking from the customer the check that was four months old?

• A) There is no effect on her status as a holder in due course because an instrument such as a check is only considered overdue if it is outstanding for 150 days.
• B) There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for 180 days.
• C) There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for one year.
• D) It has no effect because a check is never considered overdue.
• E) She would not be considered a holder in due course because a check is considered overdue 90 days after its date.

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Definitions:

Breach

The act of violating a law, agreement, or code of conduct, often resulting in legal consequences.

Duty of Honesty and Fidelity

An ethical obligation requiring individuals, especially employees or agents, to act truthfully and loyally towards their employers or principals.

Notice-And-Cure Provision

A contractual clause that allows a party in breach of the contract to fix (cure) the breach within a specified time after receiving notice.

Franchisor's Reputation

The image or perception of the corporate brand that licenses its business model and trademark to franchisees.