Chapter 18 - Bank–Depositor Relationships and Cyber-Banking
c. If a bank fails to honor a check because of a mistake on its part, the bank is liable
to the customer for any actual damages the customer suffers.
d. The bank is under no obligation to the holder of a check unless it is certified.
e. A bank has no obligation to honor a stale check although a bank may honor such a
check so long as it acts in good faith.
2. Death or Incompetence of a Customer
a. The drawee bank is not liable for the payment of a check before it has notice of
the death or incompetence of the drawer.
b. Even after notice, a bank may pay or certify checks for ten days after the date of
death of the drawer.
3. Forged and Altered Checks
a. A forgery is the fraudulent making or alteration of a writing.
b. If a bank in good faith pays an altered amount on a check to a holder, it may
deduct from the drawer’s account only the amount of the check as it was
c. The bank is liable to the depositor if it pays any check on which the depositor’s
signature has been forged.
d. Banks may add clauses to contracts with customers providing that the bank is not
liable for forgeries resulting from the use of a facsimile or a non-manual
4. Availability of Funds
a. Regulation CC has required banks to make funds available to depositors
according to a prescribed schedule, and some state laws require even shorter time
periods for banks to make funds available.
b. Regulation CC also requires banks to disclose in advance their policy for making
funds available to depositors.
c. If the payor bank is not the depositary bank, it must settle for an item by midnight
of the banking day of receipt.
d. If the payor bank is also the depositary bank, it must either pay or return the check
or send notice of its dishonor on or before its midnight deadline which, in this
case, is midnight of the next banking day following the banking day on which it
receives the relevant item.
C. The Depositor’s Duties
1. Bad Checks
a. Most states have statutes making it larceny or attempted larceny for a person to
issue a check drawn on a bank in which the person has insufficient funds.
b. State statutes usually give the drawer a certain number of days in which to make a
check good, without fear of prosecution.
2. Duty to Examine Accounts
a. The UCC imposes a duty on depositors to examine bank statements and canceled
checks promptly and with reasonable care.
b. The UCC provides rules on reporting to the bank any forged or altered checks;
and, if they do not do so, depositors cannot hold the bank responsible for losses
due to the bank’s payment of a forged or altered instrument.
3. Antedated and Postdated Checks
a. A check may be antedated or postdated.
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