Question
Betty, a dishonest bookkeeper of ABC Company, had a practice of drawing checks payable to people who did not exist. She had the authority to
Betty, a dishonest bookkeeper of ABC Company, had a practice of drawing checks payable to people who did not exist. She had the authority to sign the checks on behalf of the employer and did so. Betty then took the checks, indorsed them in the name of the payees, presented them for payment at Big Bank using fake identification, and kept the money. After this had gone on for several months, Bob, the president of ABC Company was looking through records received from the bank, discovered the payments to nonexistent people, and, after investigation, discovered Bettys indiscretions. By the time Bob discovered the indiscretions, Betty had left the company and could not be found. Assuming that Big Bank acted in good faith and used ordinary care, which of the following is true regarding the rights of ABC Company, if any, as to Big Bank?
Multiple Choice
Big Bank must reimburse ABC Company for one half of the amounts of the checks wrongfully cashed by Betty because losses would be equally allocated between Big Bank and ABC Company.
Big Bank does not have to reimburse ABC Company for any amounts.
Big Bank must reimburse ABC Company for the amounts of the checks wrongfully cashed by Betty only if ABC Company had an account with Big Bank; otherwise, Big Bank does not have to reimburse ABC Company for any amounts.
Big Bank must reimburse ABC Company for the amounts of the checks wrongfully cashed by Betty because Big Bank should have been more careful.
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