Forgery is the production of a replica to as close as possible to the actual object with the intention of deceiving people into accepting it as the original.
Where the forgery consists of the drawer's signature and the banker pays such a cheque, he cannot normally debit his customer's account with the amount so paid out as he has not in actual fact received his customer's mandate to do so.
However, if the customer on discovering the forgery remains silent about it for an unreasonable time by the end of which the banker's ability to recover such payment becomes adversely affected, he is precluded from setting up the forgery and may have to suffer the loss himself: see Greenwood v. Martins Bank Ltd (1933)
An unauthorised signature is one not amounting to a forgery but one placed on an instrument by an agent without or in access of authority. It can be ratified which retrospectively validates the transaction from the time of purported signature. For ratification to be effective, there must exist two (2) essential considerations.
- The Agent must have acted not for himself but on behalf of a principal who was in existence at the time.
- The principal must be aware of all material facts.
This usually applies to accounts operated under mandate or the signatory requirements are specified for varying amounts of cheque drawn.
The banker is not entitled to debit his customer's account for any cheque where the signature is forged or unauthorised.
||Section 24 of Bills of Exchange Act 1949 (Act 204)
Forged or unauthorised signature
24. Subject to the provisions of this Act, where a signature on a bill is forged or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorised signature is wholly inoperative, and no right to retain the bill or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up the forgery or want of authority:
Provided that nothing in this section shall affect the ratification of an unauthorised signature not amounting to a forgery.
Hence, the customer's signature on the cheque must be the same as the specimen. If it differs, the cheque should be returned "Drawer's signature differs".
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