Go to this text’s Web site at academic. cengage.com/blaw/clarkson and select “Chapter 25.” Click on “Video Questions” and view the video titled Negotiability & Transferability: Indorsing Checks. Then answer the following questions.
(a) According to the instructor in the video, what are the two reasons why banks generally require a person to indorse a check that is made out to cash (a bearer instrument), even when the check is signed in the presence of the teller?
(b) Suppose that your friend makes out a check payable to cash, signs it, and hands it to you. You take the check to your bank and indorse the check with your name and the words “without recourse.” What type of indorsement is this? How does this indorsement affect the bank’s rights?
(c) Now suppose that you go to your bank and write a check on your account payable to cash for $500.The teller gives you the cash without asking you to indorse the check. After you leave, the teller slips the check into his pocket. Later, the teller delivers it (without an indorsement) to his friend Carol in payment for a gambling debt. Carol takes your check to her bank, indorses it, and deposits the money.
Discuss whether Carol is a holder in due course.