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Case Problem Analysis: Mid-Pacific Tennis Courts (MPTC), a small family-held corporation, hired Leroy Jacob as a salesperson. Jacob devised a scheme to defraud MPTC. Using MPTC customer leads, Jacob entered into contracts with potential customers to build tennis courts without informing MPTC. Jacob accepted checks from potential customers made payable to MPTC. Jacob then deposited those checks in his personal bank account with Peoples Bank & Trust Co. (Peoples Bank) without indorsement or permission by MPTC. Jacob took the money and disappeared. When MPTC learned of the fraud and discovered that the checks were accepted for deposit by Peoples Bank in Jacobs personal account, MPTC sued Peoples Bank to recover the amount of the checks in question. Did Peoples Bank properly accept the checks for deposit?

Identifying the Facts and Issues

The Uniform commercial Code (UCC) has the following requirements for instrument to be negotiable: the instrument must be in writing, the instrument must be payable to order of or to the bearer, the instrument must include an unconditional promise, the instrument must state a fixed amount of money, the instrument must be payable on demand, and ______. A transfer of an order instrument requires the ______ of the payee. An indorsement is a _____ which is typically placed _____. Generally, the purpose of an indorsement on an instrument is to ______. The checks deposited by Jacob _____ indorsed by MPTC. Therefore, Peoples Bank ____ accepted the checks for deposit.

What If the Facts Were Different?

Assume that Jacob convinced the potential customers to write checks out to him personally, rather than MPTC. Jacob then signed the checks and deposited them with Peoples Bank. Peoples Bank had no notice of the fraud.

In this case, _____ is the drawer, and _____ is the payee.

MPTCs name ____ appear on the check. The checks _____ negotiable. Therefore, Peoples Bank ____ accepted the checks for deposit.

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