Terri goes to Wal-Mart and carelessly leaves her checkbook in her cart. Her chec

Question

Terri goes to Wal-Mart and carelessly leaves her checkbook in her cart. Her checkbook, containing two blank checks, is stolen by Raven. On March 5th, Raven forges Terri’s name on a check for $15 and cashes the check at Terri’s bank, First Bank of Galatia. Terri has not reported the loss of her blank checks to her bank. On April 1st, Terri receives her monthly bank statement and copies of canceled checks from First Bank of Galatia, including the forged check, but she does not examine the canceled checks. On April 20th, Raven forges Terri’s last check. This check is for $1,500 and is cashed at Farmers State Bank, a bank with which Raven has previously done business. Farmers State Bank puts the check through the collection process, and First Bank of Galatia honors it. On May 1st, on receipt of her bank statement and canceled checks covering April transactions, Terri discovers both forgeries and immediately notifies First Bank of Galatia. Raven cannot be found. Terri claims that First Bank of Galatia must re-credit her account for both checks, as her signature was forged. Is that correct? Explain your answer in 115 words or more.

Explanation / Answer

Claim of Terry is not correct as the cheques were misplaced due to her carelessness. Also the loss of cheques should have been reported to the bank immediately, which was also not done. The bank could have been more responsible in checking the signature of account holder, however this could have been overlooked as First Bank of Galatia did not have any knowledge about the theft. Even the theft of $15 was not reported in time so as to avoid the honour of second cheque. The prima facie responsibility to safeguard the cheques lies with the customer and not the banks. Also it is cuatomers responsibility to report and notify the bank of any theft in order to avoid the honour of such misplaced cheques. Since Terrie did not follow these basic banking guidelines, it can not demand the credit for both the cheques.

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