Question

While walking in the shopping center, Sami’s wife fell for a beautiful watch
adorned with precious stones. The seller offers an exceptional reduction of
10% and manage to convince Sami of the opportunity to acquire this
beautiful and rare watch. To please his wife, Sami signs a check for the
whole amount, when he does not have this amount on his account. The seller
promised Sami not to present the check to the bank before 10 days in order
to give him time to provide the money.
In the evening, Sami visits his friend Adam and asks him to lend him the sum of the
check. Adam is going through financial difficulties on his side and cannot lend money
to his friend. Reflecting, and to get out of this difficulty, Adam advises Sami to object
its payment due to theft or loss, while waiting to find the sum and add funds to his
account. The next day, the seller had already endorsed the check to a third party who
endorsed it too to Karim. Few days later, after presenting the check to the bank
Karim found the lack of sufficient provision.
a. What do you think of Adam’s advice to his friend Sami?
b. What about the seller? Is he responsible? Can he endorse the check?
c. Can the check be endorsed many times?
d. Explain the rights of the last holder and how the money will be collected.

Answer 1

a. What do you think of Adam’s advice to his friend Sami?

As per the details provided,  Adam advises Sami to object payment due to theft or loss, while waiting to find the sum and add funds to his account. Which means Adam suggested Sami to go and block the cheque with the bank saying he has lost the cheque leaf. Also in the mean time arrnge for funds to be depossited in account for making payments in future. Adam did not had money with him and gave a way out which was not correct. He should have told Sami to arrange funds and deposit in account, or if sami was not able to arrange funds to return the watch and tell the shop keeper about difficulty of honouring the cheque.

b. What about the seller? Is he responsible? Can he endorse the check?

Seller in greed of getting more money for the watch, sold it at original value by acceepting cheque. He took the risk of accepting cheque without knowing the issuer. Seller will not be direclty resposible as karim has represented cheq for clearing. Seller can endorse cheque if it is blank endorsement,

c. Can the check be endorsed many times?

yes by by writing “pay to …………….” on the reverse of the cheque and signing.

d. Explain the rights of the last holder and how the money will be collected.

The last holder of the cheque karim has got the cheque of sami logically by multiple endorsements which was accepted. Karim will have to raise legal course of action against third party who had endorsed the cheque. Money caan be recoverd through action filing suit in case or through mutual settlement with the parties.