Reference no: EM1338896

Explain Laws and Regulations of a Contract

Q: Multi-Tek issued check number 896 in the face amount of $1,844.98, drawn on Multi-Tek's account at Fidelity and made payable to Multilayer Computer Circuits. However, 10 days later, Multi-Tek's president telephone Fidelity and placed a stop-payment order on the check. One of Fidelity's employee received and simultaneously recorded the order. This recordation contained the following information: the name of the account, the account number, the check number, the date of the check, the date and hour the stop-payment order was received, and the amount of the check as $1,844.48. This recordation was correct in most respects, except for a 50-cent difference between the face amount ($1,844.98) and the amount listed in the stop-payment order ($1,844.48).

Subsequently, Fidelity mailed a confirmation notice that contained, among other things, the following information:
PAYEE: MULTILAYER COMPUTER CIRCUITS AMOUNT: $1,844.48
CK: No -896
DATE: 02/27/96

The instructions in this confirmation notice concluded with: PLEASE ENSURE AMOUNT IS CORRECT. Multi-Tek's president signed this confirmation notice and returned it to Fidelity.

Fidelity had programmed its computer to pull checks only if all of the digits on the stop-payment order agreed with those on the check. As a result, Fidelity honored check number 896 and charged it to Multi-Tek's account. Multi-Tek then brought suit against Fidelity to recover $1844.98 because the check was paid over the stop-payment order. There is not question the stop-payment order was timely placed. What result?