Problem Set 12
12.1. Your morning
starts with a meeting with a new client, Josiah Bounderby. He is upset
because of a number of problems that he has had recently with wire
transfers. The first problem deals with a $500,000 payment that he asked
his bank (Cheeryble Brothers) to send to James Harthouse. Bounderby
provides you a printout from his computer of the payment order that he
sent Cheeryble Bros. That order identified Harthouse by name and
indicated that the funds should be sent to Harthouse’s account at
Barclay’s, identified in the order as account number 002131. Promptly
upon receipt of the order, Cheeryble debited Bounderby’s account for the
amount of the order and executed the order by sending a payment order
directly to Barclay’s in Chicago. Barclay’s, in turn, executed the order
by depositing the funds in its account number 002131. Unfortunately,
that account belonged not to James Harthouse but to Thomas Gradgrind.
(a) Can Bounderby recover the funds from Cheeryble? Do you need
to know anything further to answer that question? UCC §§ 4A-207(c),
4A-207 comment 2.
(b) If Bounderby cannot recover the funds from Cheeryble, does he
have any way to recover the money? UCC § 4A-207(d).
(c) How would your answer change if you discovered that Barclay’s
recognized the discrepancy before it accepted the payment order from
Cheeryble? UCC §§ 4A-207, 4A-207 comment 2, 4A-402.
12.2. Ben Darrow from FSB calls
you to discuss a problem with a recent wire transfer the bank sent for
one of Darrow’s customers. Jasmine Ball sent FSB an electronic-mail
message requesting a wire transfer for $100,000 to an account of Carol
Long at the Second National Bank (“SNB”) of Muleshoe. The request was
processed by a novice clerk at FSB, who accidentally duplicated the
transaction and sent two identical $100,000 transfers rather than one.
FSB’s processing system automatically deducted funds from Ball’s account
to cover both orders. Ball called to complain later that day when she
happened to notice the unusually low balance in her account. As soon as
Darrow discovered the problem, he called SNB. SNB told him that it had
received the funds and notified Ms. Long, but that she had not yet
removed the excess money. Darrow has several questions.
(a) First, can Darrow force SNB to send the extra $100,000 back
to FSB? UCC §§ 4A-209(b), 4A-209 comments 4 & 5, 4A-211(c), 4A-211
comments 3 & 4, 4A-402(b), 4A-404(a).
(b) If not, can FSB recover the excess funds from Long? Do you
need to know anything else about the relation between Ball and Long?
What if Ball in fact owes Long $1,000,000? UCC § 4A-303(a) & comment 3.
(c) If FSB has no right to recover the excess funds from SNB
or Long, can FSB retain all of the funds that it debited from Ball’s
account to pay for the orders? UCC §§ 4A-303(a), 4A-303 comments 2 & 3,
4A-402(c) & (d).
12.3. Your old friend Jodi Kay calls to talk to you about a
project she is supervising, which involves producing a new form
funds-transfer agreement for CountryBank. CountryBank’s new computer
system has been plagued with operating shutdowns, so she is particularly
concerned about CountryBank’s liability in cases where it fails to
execute a customer’s order in a timely manner. She wants to have the
customer waive any right to recover from the bank for such an
occurrence: no interest, no incidental expenses, no consequential
damages, no attorney’s fees. After all, she says, computer failures are
endemic and really beyond her control. Moreover, the customer hasn’t
really lost anything if the Bank never sends the money to the wrong
place and eventually sends it to the right place. She wants to know if
such an agreement would be enforceable. If it would not be entirely
enforceable, what things should she include that would be enforceable?
UCC § 4A-305.
12.4. When you see Jeeves walking across the room toward you just
as you start to enjoy your weekly lunch at the Drones Club, you think
back to Problem Set 11 and groan inwardly at the prospect of facing
another one of Bertie Wooster’s problems. Thus, you are not the least
bit surprised when Jeeves asks for a moment of your time to discuss a
problem of Wooster’s. The problem arises out of a wire transfer in the
amount of $500,000 that was made from Wooster’s account thirteen months
ago. Wooster’s bank dutifully mailed a bank statement to Wooster
reflecting that transfer the day after the transfer. Unfortunately, the
notification was lost in the mail and received by Wooster only
yesterday. When Jeeves looked at the notification for Wooster, Jeeves
remembered immediately that Wooster had authorized a transfer for
$50,000, not $500,000. Because the transfer had been shown on the lost
statement, none of the intervening month’s statements showed anything
about the transfer.
If Jeeves is correct in his recollection (and he always is), can Wooster
force the bank to recredit the funds from the transfer? If so, is
Wooster entitled to interest as well? UCC §§ 1-202, 4A-304, 4A-402(d), 4A-505.
12.5. Before he leaves, Jeeves pauses to raise another problem
with you. It appears that even Wooster’s considerable bank balance was
lessened substantially by the incorrect withdrawal of $450,000 discussed
in Problem 12.4. As it happens, Jeeves discovered when he contacted the
bank yesterday afternoon that the bank had dishonored several checks
written by Wooster in the last few weeks. Jeeves has contacted just a
few of the recipients and already has discovered that the bank’s
decision to bounce the checks has caused Wooster a variety of problems,
ranging from bounced-check fees to more serious claims for default under
agreements that Wooster had with the payees of the checks. Jeeves wants
to know whether Wooster can pass the costs of solving those problems
back to the bank as consequences of the bank’s incorrect actions. UCC §§
1-106(1), 4-402(b), 4-402 comment 2, 4A-305, 4A-305 comment 2,
4A-402(d), 4A-402 comment 2.
