Alex is a customer at Pesa Bank. Three days ago, he visited the bank and complained that he had noticed from his bank statement that three unauthorized withdrawals had been made and his account debited. Investigations reveal that the withdrawals were made by Charles. Alex’s office messenger who stole Alex’s cheque book made out the payments and subsequently forged Alex‟s signature.
Explain the legal position of Pesa Bank. (12 marks)
ANSWER
• This problem is based on the obligations of the banker and the customer.
• Whereas the banker is bound to exercise the standard of care and skill of a reasonably competent and careful banker, the customer is bound to notify the banker of any irregularities affecting his account promptly.
• In this case there was a banker and customer relationship between Alex and Pesa Bank and each owed the other the respective duties.
• It is evident that there had been three unauthorized withdrawals from Alex‟s account through the forging of his signature by Charles but the facts do not indicate how long Alex’s cheque book has remained stolen as this would determine whether the bank is liable. Alex does not appear to have reported the loss of his cheque book to the bank having broken his duty to the banker he cannot argue that the bank is liable to reimburse him.
• However, granted that Alex had not discovered the loss of his cheque book, then the bank is liable to credit his account with the total sum withdrawn by charles, as it was presumed to know Alex’s signature.
• It therefore follows that the legal position of Pesa Bank depends on:
o The duration between loss of the cheque and notice of the unauthorized withdrawal to the bank.
o Whether Alex had discovered the loss of cheque book.