DigiTech Corporation pays its employees every two weeks. Eve gets her paycheck, indorses the back ("Eve Anderson"), and, on her lunch hour, goes to cash it at DigiTech's bank, First State Bank. On the street, in a crowd, she loses the check. Greg Smith finds it. Has the check been negotiated to Greg? Greg signs the back of the check beneath Eve's signature and cashes it. What might Eve have done to avoid this loss?
What will be an ideal response?
Eve's paycheck was negotiated to Greg. Eve's blank indorsement on the back of the check converted it from an order instrument to a bearer instrument. A bearer instrument can be negotiated by delivery alone. Delivery occurred when Greg found the check. To have avoided the loss that Eve suffered, she might have been more careful with the check, or at least not signed it until she was at the bank. Also, her indorsement might have included on the back of the check the words "For deposit only." In that circumstance, Greg would have been unable to legitimately cash the check.
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