It destroys negotiability of the instrument. It prevents further transfer of the instrument. The check was drawn on Allston Bank. The landlord misplaced the check and then found it on June 15. On June 16 she endorsed the check and deposited it into her account at Security Bank.
Sterling is discharged from liability on the check.
Allston Bank does not have to honor the check because it is stale. Allston Bank is the depository bank. Allston Bank must honor the check if Sterling's account contains sufficient funds. These are some of the books that may be helpful in preparing for the test, although any standard text in the subject is probably appropriate. South-Western Publishing Co., 1989.