Forged cheques
Cheque use in Australia has dropped by 83% over the last 10 years and is dropping by around 20% per annum. Although the use of cheques in Australia is declining rapidly with the alternative (and quicker and easier) payment methods such as EFT, debit and credit cards, PayWave, ApplePay, Stripe etc, Australians still use around 60 million cheques per year, so it is important to know what duties you may owe to your bank in relation to forged cheques.
There are 2 principal duties owed by a customer to a paying bank in relation to cheques:
- a duty to take reasonable care when drawing cheques so as not to mislead the bank or facilitate a forgery; and
- a duty to notify the bank promptly after becoming aware of a forged cheque.
If a customer becomes aware of a forgery but takes no steps to inform the bank and the bank acts to its detriment in paying the cheque, then the customer cannot later deny that the cheque was genuine.
There is no obligation on a customer to examine bank statements to detect forgeries and notify the bank of discrepancies. The customer’s obligations are limited to the above duties. Subject to those duties, the bank bears liability for payment of a cheque drawn without the customer’s authority.
The relationship between a bank and its customers in relation to cheques is a contractual one and the above duties are terms implied into that contract but banks can insert provisions into their terms of service to place the burden of losses from forged cheques on their customers if they so choose, so check the T&Cs of your bank or building society.
Steps to help prevent or detect forged cheques
Not all cheque forgeries can be prevented however, to attempt to prevent forgeries:
- check for watermarks, ‘void’ pantographs, microprinting or other security measures
- check the cheque looks ‘authentic’ – high quality printing, paper, correct spelling, even spacing, no smudges
- don’t pre-sign “blank” cheques or leave cheques partially completed
- cross cheques or mark them as “not negotiable” or “account payee only” so they are unable to be cashed or negotiated and have to be paid to an account
- insert the dollar amount in numbers as close as possible to the ‘$’ sign and cross out any blank space to attempt to prevent other numbers from being inserted
- state the full amount in words without leaving any spaces between or after the words – cross out any blank space
- promptly alert your bank or the police to any suspicious, unexpected or unauthorised account transactions (cheques cant be ‘stopped’ once presented).
FURTHER INFORMATION
For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au
This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.
