Flatiron Linen received a personal check for $4,100, drawn on an account at First American Bank. Flatiron attempted to deposit the check the same day, but First American returned the check to Flatiron due to insufficient funds in the issuer’s account. The next day, the issuer of the check contacted First American and requested a stop payment order on the dishonored check. Five months later, without knowledge of the stop payment order, Flatiron took the check to a First American branch and presented it for payment once again. The teller verified that the account had sufficient funds to cover the check but failed to notice the stop payment order on the check. In exchange for the personal check, First American issued Flatiron a cashier’s check for $4,100. Flatiron deposited the cashier’s check in its account at Colorado National Bank (CNB) and withdrew the $4,100 in cash. Meanwhile, First American discovered the stop payment order on the original check and informed Flatiron that it intended to dishonor the cashier’s check upon presentment.

CASE QUESTIONS

1. What is Flatiron’s best theory as to why it should prevail under Article 3?

2. Is the cashier’s check an indication that First American is an acceptor? Explain.