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Circle Redmont, Inc. v. Rasmussen

A-5127-01T2 (N.J. Super. App. Div. 2003) (Unpublished)

UCC; CHECKS; LIABILITY—It doesn’t matter if the writer of a stopped check isn’t the actual buyer; if the buyer’s obligation to pay is valid, the party that wrote the stopped check must make good on it.

A check was sent to a material supplier and then stopped. The check was dishonored and never paid. An underlying dispute was resolved by the lower court in favor of the supplier. The lower court entered a judgment against the company that wrote and stopped the check, even though it was not the actual buyer. “The drawer of a check agrees to be liable for the amount if the check is dishonored. ‘If an unaccepted draft is dishonored, the drawer is obliged to pay the draft according to its terms at the time it was issued… .’” Consequently, as a drawer of the unaccepted check, the liability of the company was primary. On the other hand, the lower court’s award of attorney’s fees and pre-judgment interest against the drawer of the check was overturned. “As strangers to the contract, the contractual provisions for interest and attorney’s fees provide[d] no basis” for such an award against the drawer of the check. The Court also remanded “for findings of fact and conclusions of law” concerning the individual who signed the dishonored check. The Court believed that that individual was a representative of an identified entity and, as such, “as the signer, [was] not liable on the check.”

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