Bank liabilities for making payment from the account of the customer against a check with forged signature arise, since the banker has a binding duty to know the signature of the customer. The banker must make good the loss to the customer. However, in case the customer’s negligence facilitated the commission of the fraud, the banker may be exonerated from liability.
A holder in due course in good faith for value without any knowledge of the fraud is not liable on the check to the banker or anybody else. As such, the banker can recover the loss from the perpetrator of fraud but never from a holder in good faith for value. The drawee bank must release payment to such holder in due course of check , despite its knowledge of such fraud.
A bank is also liable for making payment of a check that has been materially altered, unless the said material alteration has been duly attested by the drawer.
In case the bank makes payment of a check with forged signature or endorsement, the concerned customer has a duty to notify the bank of the same immediately on discovering it.
Where the collecting bank was negligent in its collection duties and the fraud could have been avoided or stalled with ordinary care and skill, the drawee bank on payment will have a right of recovery from the collecting bank.
A drawee bank is liable for dishonor of a certified check even when there are no funds in the account of the customer, since it has agreed to become absolutely liable on the same to the payee or the holder in due course of the check.
Where a bank pays a check despite stop payment orders from the customer, it is liable to make good such loss suffered by the drawer.
| 
