Reference - Used Car Commission

question 27

Multiple Choice

Reference - Used Car Commission. William promised to sell Helen's car for her, but he wanted a commission of 10%. Helen signed an instrument promising to pay William a 10% commission if he sold her car. William assigned the agreement to Phil. Helen's car was sold and the buyer paid Helen. A dispute ensued between Helen and William regarding whether William found the buyer or the buyer found Helen. When Phil asked Helen for payment on the instrument, Helen refused. William, Helen, and Phil settled their dispute without going to court, and Helen wrote Phil a check for $3,000. Phil endorsed the check on the back planning to take it to the bank the next day. Unfortunately, Phil lost the check which was found by Barry and cashed by the local bank. Barry then left town. Which of the following is the most likely result if Phil attempts to require that the bank reimburse him for the value of the check cashed by Barry?

• A) The check was an order instrument, and the bank must take the loss because it should only have provided funds to Phil.
• B) Because the check was an order instrument, the bank was within its rights to pay Barry because he presented the check; and Phil has no rights against the bank.
• C) Because the check was a bearer instrument, the bank must take the loss because it should only have provided the funds to Phil.
• D) Because the check was a bearer instrument, the bank was authorized to pay Barry; and Phil has no rights against the bank.
• E) Regardless of what type of instrument the check was, the bank had no right to cash the check when presented by Barry unless the bank can establish by a preponderance of the evidence that Barry misrepresented himself as an agent of Phil.

---

Definitions:

Mixing Department

A section within a manufacturing facility where raw materials are combined to produce a product or an intermediate product.

Bottling Department

A section within a manufacturing facility where products, typically beverages, are placed into bottles for distribution and sale.

Process Costing System

A cost accounting system used where similar goods or services are produced in a continuous process, assigning costs to units of output on an average basis.

Homogeneous Product

A product that is uniform and consistent in quality and characteristics, making it indistinguishable from products produced by other manufacturers.