General Knowledge · Banking Law and Practice
A bank has a Current Account customer who is a Limited Liability Partnership (LLP). The Resolution of the Governing Body specifies that the account must be operated 'Jointly by Partner A and Partner B'. The bank receives an urgent request from Partner A to stop payment on a cheque, which is signed only by Partner A. Partner B is currently traveling abroad and is unreachable. Which of the following is the legally and operationally mandated course of action for the bank?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank must accept the request and inform the customer that the stop payment will only be effective if Partner A provides an indemnity bond for the liability.
- 2The bank should process the stop payment for 7 days and then automatically lift the instruction if Partner B's confirmation is not received.
- 3The bank must reject the stop payment request because the operational mandate specifies 'Joint' operation for all transactions, including a stop payment instruction.✓
- 4The bank must honour the stop payment request immediately, as a single partner of an LLP has the right to protect the firm's funds.
Correct answer
The bank must reject the stop payment request because the operational mandate specifies 'Joint' operation for all transactions, including a stop payment instruction.
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