Question 186.— A cheque endorsed by the payee to a third party is presented by the latter to the bank on which it was drawn and duly honoured. It subsequently transpires that the drawer's name has been forged by the payee.

Would the bank have any recourse against the endorsee who was ignorant of the forgery when he obtained payment from the bank?

Answer.—The law is quite clear that a bank is bound to know the signature of its own customer, and that it pays a forged cheque at its own peril. In the case stated, the bank would have no recourse whatever against the innocent party to whom it paid the money. The position of the bank is analogous to that of the acceptor of a bill, who by section 54 of the Bills of Exchange Act, is precluded from denying the genuineness of the drawer's signature.