The Bank Always Loses

James Steven Rogers

in The End of Negotiable Instruments

Published in print December 2011 | ISBN: 9780199856220
Published online January 2012 | e-ISBN: 9780199919574 | DOI:
The Bank Always Loses

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Lawyers commonly assume that the bank always wins disputes over unauthorized check transactions. That assumption is backwards. The baseline rule is that banks, as the providers of the check payment system, bear the risk of loss from forgeries. The origins of the “bank always wins” notion are found in an early-twentieth century dispute about the effect of bank failure on collection of checks. Modern deposit insurance and bank regulation have rendered that dispute moot. The rhetoric produced by that dispute, however, still distorts the profession’s sense of the law on matters that remain significant. Indeed, courts have decided cases that are inexplicable but for the implicit assumption that the baseline rule is that the bank always wins.

Keywords: negotiable instrument; check; anachronism; forgery; bank failure; check collection

Chapter.  11846 words.  Illustrated.

Subjects: Company and Commercial Law

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