If the bank discovers the forgery before it
pays the check, it is obviously not going to pay it. Someone who innocently received the
check in good faith and gave goods or services in return may demand payment, but the bank
can rightfully refuse. The unfortunate holder generally will have to find the thief to
recoup the loss. Because the bank did not honor the check, neither your firm nor your bank
will suffer a loss.If your bank cashes the forged check and charges your firm's
account, you can usually demand a credit for the amount because under the Uniform
Commercial Code, the check should not have been paid. The bank will have to re credit your
firm's account and pursue the other parties (the thief or individuals who dealt with the
thief and presented the check for payment) to recoup its loss. In this situation, the bank
is responsible because it honored a check that did not bear the actual signature of its
customer.
Even though you may suspect that banks do not normally inspect their customer's
signatures on each check presented for payment, this does not relieve the bank of its
obligation to do so. It is responsible for paying only those items that are "properly
drawn" by a customer.
