Question 138.— A customer of a bank deposits an unmarked cheque drawn on another bank for credit of his account. This cheque is sent into the bank it is drawn on, through the Clearing House (unmarked) and is then accepted and paid. A month later, the paying bank discovers the cheque was forged, and calls on the bank, from whom they received it, to refund them the money. As acceptors, are they not precluded from denying the genuineness of the cheque ?

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.