Mr Fuyo is customer of Bank Zero Berhad. His wife, Mrs Fuyo forges his signature on...

Mr Fuyo is customer of Bank Zero Berhad. His wife, Mrs Fuyo forges his signature on two cheques totalling RM10,000.00. Mrs Fuyo presents the cheques at Bank Zero for payment. Bank Zero’s officer makes payment on the cheques. Mr Fuyo takes an action against Bank Zero and Bank Zero seeks statutory protection. Analyse the arising problems in this case. Answer using IRAC method (Issue, Rule, Analysis, Conclusion). (Banking Law Question)

Expert Solution

Issue: The signature of the bank customer is forged, and the bank makes payment on the cheques. Is that a valid payment?

Rule: The protection of a paying banker is lost when the payment is made by the bank on a cheque bearing the forged signature of its customer. The signature represents the authorization by the customer to the bank to make the payment. If the bank has paid on a cheque on which the signature of the customer is forged, the bank has paid without authorization of the customer. It has been judicially held that a cheque with a forged signature is a nullity, a worthless piece of paper.

Analysis : In the given case, the officer of Bank zero makes payment on the cheques bearing the forged signature of Mr. Fuyo, the customer of the bank. It is the duty of the bank to be acquainted with the signature of its customers. A forgery in signature might be ingeniously done, and an absolute copy, but that does not absolve the bank from its liability.

Conclusion : The bank would be liable to indemnify Mr. Fuyo for his losses.

jeff jeffy answered 1 year ago

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