Asked by Pamela Lorraine on May 30, 2024
Verified
In which of the following situations has conversion NOT occurred?
A) When an instrument is paid on a forged indorsement.
B) When a drawee to whom a draft is delivered for acceptance properly returns it upon request.
C) When any person to whom an instrument is delivered for payment refuses on demand to pay or to return it.
D) When a bank pays an instrument containing only one of two required indorsements.
Forged Indorsement
A fraudulent signature, often on the back of a negotiable instrument like a check, intended to transfer its ownership.
Conversion
An unauthorized act that deprives an owner of their property without their approval, often involving theft or misuse of the property.
Required Indorsements
Signatures or stamps mandatory on certain documents to validate them or to transfer rights represented by such documents.
- Elucidate the situations in which one becomes liable for the illicit conversion of an instrument.
Verified Answer
ZK
Zybrea KnightJun 02, 2024
Final Answer :
B
Explanation :
Conversion occurs when there is an unauthorized assumption and exercise of the right of ownership over goods belonging to another, to the exclusion of the owner's rights. In option B, the drawee properly returning a draft upon request does not constitute an unauthorized exercise of ownership, but rather a compliance with a request, hence no conversion has occurred.
Learning Objectives
- Elucidate the situations in which one becomes liable for the illicit conversion of an instrument.