This posting addresses check fraud and losses

Heat Oil has a checking account with the Bank of Stern for its payroll expenses. One day Garnett, who has a checking account at Jordan Bank, breaks into Heat Oil’s office and steals the company’s checkbook. He makes out a check to himself for $200, and indorses the check to Best Buy for the purchase of an iPod. Best Buy deposits the check into its own account with Jordan Bank. The Bank of Stern pays the check. Garnett takes his iPod and boards a flight to Los Angeles.

(1) What party is likely to absorb the loss and why?

 

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