Payment Systems
L6386, Spring 2006
Prof. Avery Katz

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Last updated: Saturday, 07-Apr-2007 16:31:31 EDT

 


Assignment for the last day of class and announcements for exam week.

On Monday, April 24, I will take as much as the first half of class to answer your review questions on the material.   In the time remaining, we will continue our discussion of various forms of e-cash, including stored value cards and person-to-person systems such as Paypal.   For this discussion, you should read as background the coursepack excerpts by Ronald Mann and by David Friedman and Kerry MacIntosh [the latter taking us full circle to the first week of class and our discussion of Miller v Race.]

Also as announced, I will hold regular office hours on Monday the 24th from 3-4 pm, and extended office hours from 2-5 on Tues the 25th and Wed the 26th.  

Please do take the time to go onto Lawnet and fill out the online evaluation form for this course.  Your comments will be very helpful both to future students and to me and the administration in making curricular decisions.


Assignment for the fourteenth week of class. In the last three class sessions, we will turn to the topic of new and emerging payment systems. The coursepack material on this topic should be read as general background. Given the breadth of the legal and business problems raised by these new arrangements, it will not be possible to discuss all issues thoroughly. Instead, we will cover a sampling of the relevant issues, and will compare the problems that arise in these new settings to problems we have already analyzed with regard to more established payment systems.

On Monday, April 17, we will begin by discussing contractual and policy issues arising out of the bank-depositor relationship, which will serve as an organizing introduction to new payments, much of which is regulated primarily by contract law. For this discussion, you should read pp. 330-344 in the casebook; in class discussion we will focus on Perdue v .Crocker National Bank. Then we will discuss some issues raised by recent innovations in electronic banking. As preparation, you should skip ahead in the coursepack to p. 172, and read Ann Spiotto's article on electronic bill payment and presentment. The Q-Y panel will be on call.

On Wednesday, April 19, we will discuss stored value cards. You should read the article at coursepack p. 141 entitled, "A Commercial Lawyer's Take on the Electronic Purse," part of which you already read in the first week of the course in connection with our discussion of cash transactions. In preparation for class discussion, you will find it useful to go back and review our discussion of cash from the first weeks of class, and to consider how stored-value cards compare with cash in terms of functional risk and transaction cost. No panel will be on call; I will rely on volunteers to the extent possible, and on the class as a whole otherwise.

On Monday, April 24, the last day of class, we will discuss person-to-person payment systems such as PayPal®. You should read Mann's article, "Regulating Internet Payment Intermediaries" as well as Friedman and MacIntosh's article, "The Cash of the Twenty-First Century," which present rather different views of the future of payments law. In preparation for class discussion, you should consider whether and how regulations currently in force in established areas should be extended to these new types of systems. No panel will be on call.

The final exam in this course will be given on Monday, May 1, at 3 pm. Updated administrative information about the exam is now available on the exams page of this website.


Assignment for the thirteenth week of class.

On Monday, April 10, we will discuss the bank-customer contract, with emphasis on the issues of stop payment orders and liability for wrongful dishonor.  You should read up through p. 330 in the casebook. With regard to stop orders, we will discuss focus on the problems at pp. 310-11 (and, if there is time, also at p. 317); and with regard to wrongful dishonor, we will discuss the case of Loucks v. Albuquerque National Bank at p. 320. The F-P panel will be on call.

In considering Loucks, you should keep in mind the following basic principles of partnership law, some of which are mentioned in the court's opinion:

On Wednesday, April 12, , we will have our second in-class quiz, covering material thru this week [basics of bank-depositor relationship].   The format for the quiz will be the same as for the first quiz. As before, the quiz will be held in our usual classroom, from 1:30 to 2:30 pm; and the registrar suggests that you should arrive by 1:20 in order to leave sufficient time for administration.  Please direct any further questions relating to administration of the quiz the Office of Academic Services.  I will answer substantive questions on the course material via e-mail up thru Tuesday evening.


Assignment for the twelfth week of class.

On Monday, April 3, we will complete leftover material from last week, including the material on impostors and fictitious payees, which we will explore through some in-class hypotheticals, and the case of Title Insurance Company of Minnesota v. Comerica Bank- California. We will then turn to the problem of altered instruments, for which you should read through p. 299. On altered instruments, we will discuss the Jefferson Parish School Board case at p. 283. The Q-Y panel will be on call.

On Wednesday, April 5, we will complete our discussion of fraudulent alteration, focusing on the problems on pp. 294 and 298. Then we wll move to a discussion of the bank-customer contract, with emphasis on the issues of stop payment orders and liability for wrongful dishonor.   You should read pp. 300-311, together with relevant sections of Article 4. In class discussion we will focus on the problems at pp. 310-11. The A-D panel will be on call.

 Keep in mind that next Wednesday, April 12, is the date of our second in-class quiz. If you have a conflict on that date, you should contact the registrar's office to arrange an alternate date.


Assignment for the eleventh week of class.  This week we return to Articles 3 and 4 and consider how they deal with the problems of fraud and forgery of negotiable instruments. Major themes in the discussion will be the relative complexity of liability rules in this area, and whether the law of other payment systems should attempt to emulate this approach.

On Monday, March 27, after completing any leftover material on wire transfer, we will discussing the basic problem of forged checks. You should read pp. 234-260, together with §§3-406, 4-406 and the definitions of "ordinary care" in 3-103(a)(7) and 4-103(a).   In class discussion we will focus on the problems at pp. 249-250, and then on National Title Insurance v. First Union National Bank, p. 252. The A-D panel will be on call.

On Wednesday, March 29, after completing leftover material, we will go on to discuss two specific types of fraudsters who are sufficiently common that the UCC deals with them specially: impostors and fictitious payees. You should read up to p. 287, which is a lot of material, but I will cover some of it through lecture. . In class discussion, we will first discuss the problems at pp. 257-258, which will serve as an exercise through which to master §§3-416(a), 3-417(a), and 3-418. [In preparation for these problems, you will find it worthwhile to review §§3-201, 3-203, and 3-301.] Then I will lecture on the conversion materials, and finally we will discuss Title Insurance Company of Minnesota v. Comerica Bank- California at p. 274. The F-P panel will be on call.


Assignment for the tenth week of class.   When we return from spring break, we will move to the topic of wholesale wire transfers under Article 4A.

On Monday, March 20, I will lecture a bit more on ACH transactions at the beginning of class, but will not expect students to be prepared to discuss the ACH material any further. Instead, we will discuss the Article 4A material at pp. 194-214, focusing on the problems at pp. 202-203 and on the Grain Traders case. The F-P panel will be on call.

On Wednesday, March 22, after completing leftover material, we will turn to the material on mistaken and fraudulent payment orders at pp. 214-226. In class discussion we will focus on the problems at p. 215 and p. 220. The Q-Y panel will be on call.


Assignment for the ninth week of class.   As I indicated in class, I am changing the order of the syllabus in order to avoid splitting our discussion of Article 4A over spring break. Instead, after finishing our discussion of credit and debit cards, we will jump ahead to the material dealing with automated clearinghouse transactions, which can be covered in a single class period.

On Monday, March 6, after completing leftover material [the problems at pp. 177-179, together with classroom hypotheticals], we will continue our discussion of credit and debit cards. The assigned reading is the coursepack article by Ronald Mann, Making Sense of Payments Policy in the Information Age. The Q-Y panel will be on call

On Wednesday, March 8, we will discuss ACH transactions. You should read pp. 115-122 in the coursepack, and try to work through the problems at pp. 121 and 122. Relevant provisions of the NACHA operating rules, which you will need to consult in order to solve these problems, are set out at coursepack pp. 123-140. The A-D panel will be on call.


Assignment for the eighth week of class.  

On Monday, February 27, we will discuss electronic presentment, check truncation, and the Check 21 Act.   You should read pp. 163-172 in the casebook, along with pp. 82-93 in the coursepack. Please also have a look at the text of the Check 21 Act, especially §§5001, 5003, 5004 and 5005. In class discussion, we will focus on the problem at p. 159, and then on the problems at p. 93 of the coursepack. The A-D panel will be on call.

On Wednesday, March 1, we will begin discussing the credit and debit card systems. You should read pp. 172-193 in the casebook. In class discussion we will focus on the problems at pp. 177-179, along with some hypothetical variants that are intended to bring out the issues raised by the Minskoff and Izraelewitz cases. The F-P panel will be on call.


Assignment for the seventh week of class.  As I announced in class, I have posted some new materials on the handouts page, including a copy of the HTML version of the UCC that I use in class, and a link to the sound recordings I have made of our classes, in MP3 format. These materials are only for class use and require a CLS password for access.

On Monday, February 20, we will complete our discussion of the check collection system. You should read up to page 163; in class we will start with First National Bank in Harvey, and then turn to a discussion of Regulation CC. The Q-Y panel will be on call.

On Wednesday, February 22, we will have our first in-class quiz, covering material thru this week [check collection].   The quiz will be held in our usual classroom, from 1:30 to 2:30 pm.  The registrar suggests that you should arrive by 1:20 in order to leave sufficient time for administration of the exam.  The exam will be supervised by a proctor supplied by Registration Services, who will provide exam numbers, scantron sheets, and pencils.   Please direct any further questions relating to the administration of the exam to the Office of Academic Services.  I will answer substantive questions on the course material via e-mail up thru Tuesday evening.

Here are sample questions that illustrate the format and coverage of the quiz.


Assignment for the sixth week of class.  This week we will complete our discussion of the basic rules governing negotiable instruments. Given the many statutory sections we have covered, you should try to keep the big picture in mind. Two general questions may be helpful in framing this picture for you: first, what are the major differences between the rules governing negotiable instruments and the rules governing cash? And second, how do the various parties to negotiable instruments stand in priority to each other [i.e., which parties are ultimately responsible for losses incurred, and which only intermediately responsible in the sense that they will bear liability only if the ultimately responsible parties are uncollectible]?

On Monday, February 13th, we will complete our discussion of lost instruments, and then turn to the rights and duties of accommodation parties. With regard to lost instruments, we will finish the problems at pp. 103-04. With regard to accommodation parties, the relevant statutory sections are §§3-116, 3-419, and 3-605. You should read pp. 104-113 and the coursepack excerpt from my article on guarantee contracts at S 75-81; we will focus in class discussion on the problem at p. 106. The A-D panel will be on call.

On Wednesday, February 15th, we will discuss the liability of agents who sign instruments on behalf of their principals. These issues are rather more straightforward and will require less class time to discuss; you should read pp. 113-116, together with §§ 3-402 and 3-403. We will then take up the topic of the check collection system, with special attention to the legal relationships among the various banks that take part in the system. You should read pp. 123150, much of which presents institutional background material that I will summarize in a lecture.  If there is time, we will begin a discussion of First National Bank in Harvey v Colonial Bank, p. 140.   The F-P panel will be on call.


Assignment for the fifth week of class.   This week we will continue our discussion of the rights and duties of parties to negotiable instruments. At this point, many statutory sections become relevant, so I recommend that, instead of trying to read the statutory sections cited in the casebook in full, you should consult them as needed to answer the discussion problems. You will also to want to continue to develop facility in using the statutory table of contents.

On Monday, February 6th, after completing our discussion of the holder in due course, we will turn to the rights and duties of other parties to negotiable instruments, focusing on basic duties of drawers, drawees, and indorsers.  You should review pp. 67-68, and then go on to read pp. 81-88.   After completing the problem on value on p. 68, we will spent most of our time on the problem at pp. 82 [drawers and drawees].  The F-P panel will be on call.

On Wednesday, February 8th, after completing leftover material, we will briefly discuss cashier's and teller's checks, and then turn to problems of lost instruments under §§ 3-309 and 3-312. You should read pp. 88-104, and should look over §§3-408, 3-414, 3-415, 3-416, 3-309, and 3-312, consulting specific provisions of these sections as needed.  In class discussion we will start with the problems at pp. 85-86 [indorsers], and then move to the problems at pp. 100 [lost instruments], and 103-104 [lost cashier's checks]. The Q-Y panel will be on call.


Assignment for the fourth week of class.   I now have a final class list and can assign the discussion panels more evenly. These are: A-D, F-M, and P-Y. But for this Monday only, I will continue with the uneven panels from last week.

On Monday the 30th, after completing our discussion of discharge under §3-206 [see the assignment from last week for details], we will turn to the rights and powers of the holder in due course. The relevant reading on this topic is pp. 23-45, together with §3-302. Our discussion will focus on the problems at pp. 43 and 45, though we will not complete those problems in Monday's class. Students with surnames beginning with the letters S-Y will be on call.

On Wednesday, February 1, we will complete our discussion of the rights and powers of the holder in due course  You should reread pp. 43-45, and then read pp. 45-73. Not all this new material need be read closely; in particular, you can treat pp. 45-60 [consumer transactions] as background reading. Class discussion will focus on the problems at pp. 43, 67, and 68. students with surnames beginning with the letters A-D will be on call.


Assignment for the third week of class.   This week we will begin our discussion of negotiable instruments --- a topic that will also introduce you to principles of statutory analysis under the Uniform Commercial Code. As you begin your study of the Code, you will find that two particular aspects of preparation will be essential to your mastery of the material. First, when individual statutory sections are assigned for study, you will need to read those sections carefully, both the official text and the official comments. Second, you will need to work through the assigned practice problems ahead of time --- not that you need to be sure of the answers, but at least to have grappled with them.

Also, I still don't have a final class list, but my plan is to call on students with surnames beginning with the letters A-E on Monday, and students with surnames beginning with the letters F-R on Wednesday.

On Monday the 23rd, we will take up the topic of negotiability.   You should read pp. 114 in the Warren and Walt casebook, together with UCC §§ 3-301, 3-306, 3-203, and 3-104.  In class discussion we will focus on the problems at pp. 7 and 10.

On Wednesday the 25th, after completing leftover material, we will continue our discussion of basic issues relating to negotiable instruments. You should read up to p. 23 in Warren and Walt, together with UCC §§ 3-602 and 3-305. Note that we will be considering both the current and amended versions of §3-602, so that you may need to consult the appendix in your statute book to find both versions. Class discussion will focus on the problems at p. 12, and on Taylor v. Roeder if there is time. With regard to Taylor, consider whether J. Compton's use of §1-102 in the dissenting opinion is consistent with the underlying purposes of § 3-104.


Assignment for the second week of class.   This week we will continue and complete our discussion of legal and transactional issues arising out of cash payments. Please also note the following administrative items:

On Wednesday the 18th, we will complete our discussion of legal tender, and then turn to the remaining materials on the law of cash [coursepack pages 38-74]. There is a lot of material here and we will pick and choose what to cover in class depending on how the discussion goes, but we will at least touch on the rules governing stolen currency [using Portland v Berry as an example], destruction of currency [Krigel v. US], counterfeiting, and money laundering [US v. Campbell]. We will not discuss in detail the Comptroller of the Currency's "Banker's Guide to Money Laundering" at this point, but it will be very useful to us later on in our discussions of fraud and forgery generally, and the list of recommended precautions at pp. 59-61 is particularly worth your close attention.

In attempting to digest this body of material, it may be helpful to consider the following general policy question: to what extent should responsibility for the various risks associated with cash transactions be borne by the Treasury and society at large, as opposed to the particular person who happens to be in possession when a given risk materializes?


Assignment for the first week of class.   The required texts are Warren and Walt, Payments and Credits, 6th ed. (Foundation Press: 2004), and Baird, Eisenberg and Jackson's Commercial And Debtor-Creditor Law: Selected Statutes, 2005 ed. (West Group: 2005). There is also a short supplementary coursepack, available in hard copy from University Printing Services, Room 401 International Affairs, and also available online to registered students only.

For the first class meeting on Monday, January 9, please read pages 1-13 in the supplementary coursepack; and be prepared to discuss the first case in the coursepack, O’Connor v. Clark.

For Wednesday, January 11, please read pages 13-38 in the coursepack. Much of this material can be read as general background at this stage. For class discussion, you should focus on Miller v. Race (p. 13) and Nemser v. New York City Transit Authority (p. 34).  The factual setting of Miller may seem somewhat obscure to you; the factual setting of Nemser should not.  In considering Miller, accordingly, you may find it helpful to compare its business context to the fact pattern in O'Connor v. Clark.