A Banks Duty Of Care

Author : Husham Saeed Alawsi Hasballah
Publisher :
ISBN 13 :
Total Pages : 274 pages
Book Rating : 4.:/5 (957 download)

DOWNLOAD NOW!

Download or read book The Duties of the Bankers in Relation to Forged Cheques written by Husham Saeed Alawsi Hasballah and published by . This book was released on 2012 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt: A bank acts under the customer's mandate in carrying out the instructions of the customer. If they are altered by a third party without the customer's authority, the alteration negates the customer's mandate and a banker who makes a payment is doing so without the customer's mandate. As a general principle, a bank has no authority to pay a customer's cheque or debit the account where the signature has been forged or unauthorized. At the same time, the law imposes a duty on the customer to exercise care when writing out his instruction to the bank so as not to mislead his banker and not to facilitate fraud so that the third party has no opportunity to temper his instruction. It would amount to a breach of duty of care to leave a blank cheque to be filled up by a third party who will alter it in excess of the authority given by the customer. In this case, the customer is liable to his negligence. He would be estopped from asserting the third party was acting without his authority. When a person draws a cheque it must be written in the correct way so that the third party would not be able to alter it easily. The drawer should not leave any blank spaces. A drawer who had signed a cheque written out by his clerk was negligent when he failed to notice that the blank spaces had been left by the clerk. A banker who makes payment on a materially altered cheque does so without the customer's mandate. Therefore, if a cheque is materially altered and the alteration is apparent on the face of the cheque, a banker is put on inquiry as to whether the alteration is authorized. If he proceeds without doing an inquiry, he is said to be committing a breach of duty. A customer of a bank does not owe a duty to the bank to prevent the forging of his signature. While acknowledging that there was a duty on the customer to exercise care in writing out his cheque the court rejected the contention that there was a corresponding duty on the part of the customer to take reasonable precaution to prevent his servant from forging his signature. However the customer is under the duty to inform the bank immediately the moment he is aware that somebody is forging his signature. This duty gives rise to a plea of estoppel by the bank to assert that customer by choosing to remain silence is amounting to a representation by conduct that his account is in order and correct. Thus, it would constitute an estoppel preventing the customer from an action against the bank that his signature is a forgery. The bank may invoke the defence of estoppel if the bank can prove that the customer has knowledge about the forgery but yet did not inform the bank as soon as possible. It is the main aim of this study to examine the extent of banker's duties in relation to forged cheques and to explore the statutory and general defences accorded to the banks when it has committed the act of conversion. It is the hypothesis of the dissertation that in banking law, customer's signature constitutes a mandate to the banker to act on his instruction. Once the signature of the customer has been forged, the bank is said to be prima facie liable. Forged signature of the customer is regarded as wholly inoperative and the bank is deemed to be liable unless the bank can prove that the customer has knowledge about the forgery and he negligently contributes to the forgery of the signature. The methodology used in the study is mainly library-based with the focus on the examination of case law and provisions of the relevant statutes from The Common law jurisdiction mainly Malaysia and England and selected Arab countries such as Jordan, Egypt and United Arab Emirates. The Islamic perspective of the study is limited to the contemporary and modern position in various provisions of the law in the said Arab countries which is representing the Civil law jurisdiction.