Bank Duties in Relation to Forged Cheques with Special Reference to Bahrain Law

Abstract

According to the law, it’s the customer’s duty to be careful when writing out a cheque to prevent fraud and forgery. Forgery is an unauthorized alteration of a document. The customer is to inform the bank immediately as soon as he becomes aware of forgery being committed.  The bank can protect itself under section 3-407 of U.C.C – Article 3 – Negotiable Instruments (2002) by claiming that it endorsed the cheque in good faith of the client. The bank can also plead for estoppel, which means that it can assert that the customer, by choosing to remain silent, is amounting to a representation by conduct that his account is in order and correct. Thus, it would prevent the customer from taking an action against the bank due to forgery. The aim of this paper is to examine the extent of banker’s duties in relation to forged cheques and to explore the statutory and general defenses accorded to the banks on endorsing a forged cheque.

Keywords: cheques, banker's duties, forgery, types of forged cheques, statutory protection