Contract Law Under the UCC (Uniform Commercial

Contract Law

Under the UCC (Uniform Commercial Code) section 3-405 (Employer's Responsibility for Fraudulent Endorsement by Employee) corporate accounts are exposed to a multitude of fraudulent and forgery risks and therefore it has been mandated that the corporate employer as well as the bank are responsible for keeping a check on their account activities. In the above case, Stewart's client may have issued the check on behalf of the corporate employer but the company itself has given no authorization. To properly cash the check Stewart has to first acquire an authorization from the company and endorse it by the signatory or account department of the company. It is only then will Stewart be entitled to the amount owed to him. In a court of law, Stewart cannot sue the bank as the UCC Section 3-405 protects the company from liability to fraudulent individual through these measures (Getty Petroleum Corp. v. American Express Travel Related Servs. Co., as: 90 N.Y.2d 322, June 12, 1997).

The section also protects the bank from liability in the case it encounters endorsement such as those made by Stewart's client. Although Stewart's client might have been genuine in his/her endorsement but the bank has the right to adopt the security measures. The UCC basically focuses on the responsibility of the employee rather than the endorsement itself. The bank furthermore has the right to question Stewart's motive in trying to cash the check and attempt to match that with the corporate employer's business. Once, this information has been satisfactorily proven then, it would be able to allow Stewart to withdraw the cash.

Reference

John Burnett, Forged Endorsement & Section 3-405, BankersOnline.com, February 9, 2004.

Getty Petroleum Corp. v. American Express Travel Related Servs. Co., as: 90 N.Y.2d 322, (June 12, 1997).

2. A quasi-contract is an "implied in law contract." This means that legally a quasi-contract takes into account when one of the parties in the contract is obligated to act upon it in order to avoid injustice (Wikinfo 2004). This definition can be explained thus: when two parties have through verbal or non-verbal act implied the acceptance of a service or product, they enter into an agreement and therefore liable to the terms of a contract. Under the UCC, the court "provides for implied warranties of merchantability and fitness." (Section 2-314-2-315 of the UCC) the parties are liable to pay for services rendered, products sold or payment for damages etc. In the Copeland case, there has been an implied agreement or quasi-contract when both parties agreed to the exchange of the tractor. After eleven days the contract ended when both parties mutually agreed to have the tractor returned and thereby no obligations left to be fulfilled. Yet, Copeland asked for the payment of the tractor for the days used AFTER the contract has been canceled. Copeland in this case does not have the right to ask for the payment as it has been mutually agreed that the terms of the contract have been canceled. However, under the quasi-contract law the Anderson is liable to pay to Copeland because it is understood/implied that the farmer would pay for the usage of the product. This is because a quasi-contract takes into account of the following conditions for restitution: