Question

Omar receives a check from Trudy drawn on Shelfari Bank. Shelfari Bank improperly dishonors the check when Omar attempts to cash it. Which of the following is true of this case?

a. Omar is the holder of the check, and hence, has recourse against Trudy, the drawer.
b. Shelfari Bank, the drawee bank, is liable to Omar, the holder, for improperly dishonoring the check.
c. Omar has recourse against both the parties—the drawer, Trudy, and the drawee bank, Shelfari Bank
d. Omar has recourse against Shelfari Bank, in case Trudy does not reimburse Omar.

Answer 1

In the case where Shelfari Bank improperly dishonors a check that Omar tries to cash, Omar can hold the bank liable for the improper dishonor, making option b correct.

Step-by-step explanation:

Omar receives a check from Trudy drawn on Shelfari Bank. Shelfari Bank improperly dishonors the check when Omar attempts to cash it. Which of the following is true of this case: b. Shelfari Bank, the drawee bank, is liable to Omar, the holder, for improperly dishonoring the check.

As a matter of banking law, when a drawee bank improperly dishonors a check, the holder of the check can hold the bank liable for damages incurred as a result of the dishonor. In this case, Omar, being the holder of the check, can assert a claim against Shelfari Bank for the improper dishonor. The liability arises immediately upon the dishonor of the check regardless of whether Trudy, the drawer, has sufficient funds in her account.

It is important to note that Omar's recourse against the drawer, Trudy, may also still exist, but that depends on other factors such as Trudy's intent and the availability of funds in her account.