Katy\'s Catering Co. places an order with Sharpe\'s Supply House for 100 white linen tableclothes. A week later, Sharpe\'s delivers the order to Kathy\'s in ten boxes. Katy opens up a few boxes, determines that they contain white linen tablecloths, and hands over a check for $1,000 to Sharpe\'s deliveryman. Sharpe\'s Supply then properly negotiates Katy\'s check to its wholesaler, Harper Linens, as payment on Sharpe\'s account. The next day, Katy opens up the reamining boxes and discovers that about a third of the order is messed up. Some of the tablecloths are blue instead of white, some are polyester instead of linen. She immediately calls her back and places a stop-payment order on the check. The next day, Harper\'s deposited Katy\'s check for payment, but of course payment was refused because of the stop-payment order. Harper\'s then files a lawsuit against Katy\'s Catering seeking to collect on the check Will Harper\'s prevail in its lawsuit against Katy\'s? Why or why not? Be sure to describe & define Harper Linen\'s legal status Solution Katy\'s catering co. has the right to stop payment without incurring penalties. This is because, as per law, a cheque\'s payment can be stopped if the debtor has a good faith dispute over the sum of money being paid. Here, Katy\'s catering co. has a reasonable belief of its legal entitlement to withhold payment. Katy\'s had asked for 100 white linen tableclothes and the cheque was drawn as an amount payable for this. However, it received around 33 blue or polyster tableclothes. Hence it has the good faith dispute and Katy cannot be penalized for stopping the payment of the cheque. .