The bank is generally responsible for determining that whether the customer's signature on a check is genuine or not. When the bank makes a payment on a forged check having a forged signature, then it must re credit the customer's account with the amount of which the payment is made.
A customer must regularly examine his/her monthly statements for any cancelled checks and should report any activity of forged signatures promptly. In case a customer fails to do this, then he/she is liable for any losses that the bank incurs.
SM Bank is not liable towards late Mr B or Ms J. Ms J's claim that SM bank's knowledge of Mr B's death revoked its authority to pay is wrong. The reason behind this is that Uniform Civil Code specifically states that the death or incompetence of customer does not revoke an authority on the part of bank to pay. It also states that bank can pay for those checks which were drawn prior to customer's death for ten days after the death of the customer until a proper stop order has been issued by someone claiming interest in that account.
In this case, Ms J did not issue any stop order and therefore SM bank's payment on check, three days after Mr B's death constitutes a proper payment.
Ms J's other claim that the SM bank should not have made payment on the check which was presented after six month of its date is also incorrect. The reason behind this is that a check whose presentment and date are six months apart is considered a stale check and bank can honour this check in good faith without bearing any liability even though it is not obliged to do so. Consultation with the account holder is not necessary in this case and therefore any payment made in good faith is allowed.
Universal commercial code is a set of laws that provides legal rules and regulations that governs commercial or business dealings and transactions. The Universal Commercial code regulates the transfer or sale of personal property, but does not address dealings in real property. This code was published in 1952 and has been revised many times throughout the following years.
It is the bank's responsibility to determine whether the signature on a customer's check is genuine or not. A bank that pays a customer's check bearing a forged signature must re credit the customer's account or be liable to the customer drawer for a breach of contract.
The customer has the duty to report forged checks; the bank is relieved of liability if the customer fails to report the forgery within a three year period after the forged items have been made available to the customer.
The bank has an obligation to assess each check before making a last payment. If the bank fails to perceive an alteration, it is accountable to its customer for the loss because it did not pay as the customer directed. The loss is the difference between the original amount of the check and the amount actually paid.
If a customer is negligent in performing his or her duties, then the bank will reduce its liability for reimbursing the customer's account. The bank reduces its liability if the bank traces its loss on successive altered checks to the customer's failure to understand the initial alterations.