Banking · Negotiable Instruments Act
At 10:30 AM, a bank receives a phone call from a corporate client to stop payment on a lost cheque leaf, but no written confirmation is sent. At 11:15 AM, the cheque is presented at the counter. The signature matches and the cashier, unaware of the call, pays the amount. At 12:00 PM, the formal stop-payment email is received. The company demands a reversal. Analyze the bank's position.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank is liable only if the caller can prove the identity of the official who took the call.
- 2The bank is not liable if it can prove the payment was made in due course before the written notice was received.✓
- 3The bank is not liable because a stop payment is only legally binding once received in writing.
- 4The bank is liable because a verbal instruction constitutes a valid stop payment notice.
Correct answer
The bank is not liable if it can prove the payment was made in due course before the written notice was received.
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