1 French courts have discussed the question of the banker's liability in this case. See comment on the decisions of the Court of Paris, of 5 January 1973 and 3 January 1975, in (1973) 26 Revue Trimestrielle de Droit Commercial 310 ff. and (1975) 28 ibid. 151 ff.

2 See, for example, Arab Bank Ltd. v. Barclays Bank (Dominion, Colonial & Overseas) [1954] A.C. 495; [1954] 2 All E.R. 226. See comment on this case by Jennings, R.Y., “Contract — Effect of War on Banking Account” (1954) Camb. L.J. 178 ff.CrossRefGoogle Scholar

3 Concerning confiscation of Jewish funds in Italy, see for example, comments on decisions of the Court of Florence in Santini, “Responsabilità della Banca per la Confisca di Depositi Irregolari Intestati ad Ebrei” (1947) Rivista Trimestrale di Diritto e Procedura Civile 144 ff.Google Scholar; Giannattasio, , “Vent'Anni di Giurisprudenza sui Contratti Bancari (1942–61)” (1962) (I) 25 Banca Borsa e Titoli di Credito 290 ff.Google Scholar Concerning confiscation of bank deposits belonging to Italian citizens in Albania see, for example: the decision of the Court of Rome, of 14 June 1963, in (1964) (II) 27 Banca Borsa … 245 ff.; the decision of the Court of Rome of 14 March 1967, in (1967) 30 Banca Borsa … 277 ff.; the decision of the Court of Rome, of 29 May 1968, in (1968) 31 Banca Borsa … 562 ff.; the decision of the Court of Rome, of 27 May 1969, in (1969) 32 Banca Borsa … 566 ff.

4 See, for example, Weiner v. Pennsylvania Co. for Insurance, etc. Pa Super 320, 51 Atl. 2d 385 (1947). In this case, neither the depositor nor the banker was responsible for the loss resulting from the theft on a cheque signed in blank. The court decided to put the loss on the party who made it possible, i.e. the depositor.

5 According to the theory of ratification, when the banker sends his customer a statement of account and the customer does not analyze it, thus failing to detect an unauthorized payment, it is accepted that the customer is ratifying such a payment. See for example, Arant, , “Forged Checks — The Duty of the Depositor to his Bank” (1922) 31 Yale L.J. 606 ff.CrossRefGoogle Scholar; Barak, , “Forgery in Drawing a Cheque: Aim and Means of Sharing the Risk Between Bank and Customer” (1968) 1 Mishpatim 134 at 146 ff.Google Scholar; Chorley, , Law of Banking (6th ed., 1974) 97.Google Scholar The doctrine of ratification was discussed in some well known judicial decisions. See, for example, Brook v. Hook (1871) L.R. 6 Ex. 89; McKenzie v. British Linen Company (1881) 6 App. Cas. 99; Greenwood v. Martins Bank [1933] A.C. 51, 57.

6 Here, the customer who omits to take the ordinary precaution towards his banker, thereby represents that the payments were authorized, and when the bank relies upon such representation, the customer is estopped from disputing unauthorized payments. See, for example, Arant, op. cit. supra n. 5, at 612 ff.; Barak, op. cit. supra n. 5, at 139 ff.; Paget, , Law of Banking (8th ed., 1972) 470 ff.Google Scholar The doctrine was invoked in various cases, such as, for example: Greenwood v. Martins Bank, Ltd. [1933] A.C. 51, 57, 58; Brown v. Westminister Bank Ltd. (1964) 2 Lloyd's Rep. 187.

7 See Paget, op. cit. in preceding note, at 490–491.

8 Ibid., at 116 ff.

9 See Woodward, , “The Risk of Forgery or Alteration of Negotiable Instruments” (1924) 24 Colum. L.R. 471CrossRefGoogle Scholar; Arant, op. cit. supra n. 5, at 625.

10 See American Jurisprudence (2nd ed.) vol. 10, sec. 603, p. 568.

11 See, for example, London Joint Stock Bank v. Macmillan [1918] A.C. 777, 823.

12 See Corker, , “Risk of Loss from Forged Indorsements” (1951) 4 Stan. L.R. 30, 31Google Scholar; Note, “Allocation of Losses from Check Forgeries under the Law of Negotiable Instruments and the Uniform Commercial Code” (1953) 62 Yale L.J. 417, 435 ff.; Gottesman, , “Forged Indorsements and Banker's Liability” (1972) 7 Is.L.R. 120, 125.Google Scholar

13 See “Allocation of Losses from Check Forgeries under the Law of Negotiable Instruments and the Uniform Commercial Code”, op. cit. in preceding note at 438 ff.; Barak, op. cit. supra n. 5, at 148 ff.

14 This result proceeds from the application of clauses excluding liability, as has been accepted in Civil Law countries. See, for example, Vasseur, and Marin, , Le Chèque (1969) 234, 235.Google Scholar

15 For a general view of the problem see court decisions cited supra n. 3.

16 For comments on the contractual test see Barak, op. cit. supra n. 5, at 137 ff.

17 See Corker, op. cit. supra n. 12, at 31.

18 See Farnsworth, , “Insurance Against Check Forgery” (1960) 60 Colum. L.R. 284 ff.CrossRefGoogle Scholar

19 See “Allocation of Losses from Check Forgeries under the Law of Negotiable Instruments and the Uniform Commercial Code” op. cit. supra n. 12, at 435 ff.; Corker, op. cit. supra n. 12, at 31; Barak, op. cit. supra n. 5, at 135; Calabresi, , “Some Thoughts on Risk Distribution and the Law of Torts” (1961) 70 Yale L.J. 549 ff.CrossRefGoogle Scholar

20 The so-called duties of customers towards their bankers in the use of cheques and controlling the account really amount to onus. The difference between an onus and a duty lies in that a legal duty exists in the interest of others, whereas the aim of an onus lies in protecting the interests of the person on whom it is placed. Consequently, whoever does not fulfil a legal obligation may cause damage to another person, thus becoming liable for compensation; conversely, whoever does not observe an onus simply does not obtain the benefit conferred on him by law and may suffer personal loss. See, for example, Messineo, , Manuale di Diritto Civile e Commerciale (7th ed., 1947) vol. I, p. 118Google Scholar; Palermo, , “Onere” (1965) XI Novissimo Digesto Italiano, 915 ff.Google Scholar Thus when a customer is negligent in keeping his cheques and so permits an improper payment, or fails to detect in the statements of account mistakes to his disadvantage, the only consequence is that he may be precluded from asserting that fault and thus he will bear the loss. Bankers commonly take the initiative of introducing this onus by means of so called “clauses of exclusion of liability”. We shall refer to the principal problems arising from the interpretation of these clauses in the following pages. The exact definition, however, of these “duties of depositors to themselves” must be the task of a legislator. For an example of a list of such duties see “Allocations of Losses…” op. cit. supra n. 12, at 475–476.

21 Problems concerning the banker's liability may arise in a great variety of circumstances, as we have pointed out. We shall, however, concentrate on analyzing the basic principles of liability insofar as the payment of forged cheques is concerned. This is a typically problematic area, one which has frequently called the attention of jurists and the courts, and one in which we may discover the leading principles in this matter.

22 See beginning of article.

23 Concerning the basic régime of banker's liability under the principles of negligence, in England and the United States, see, for example: Arant, op. cit. supra n. 5, at 598, 601; Woodward, op. cit. supra n. 9, at 469, 470, 473; Britton, , “Negligence in the Law of Bills and Notes” (1924) 24 Colum. L.R. 695 ff.CrossRefGoogle Scholar; A.J.S., “Liability of Bankers for Negligence” (1929) 68 L.J. 74, 88, 89Google Scholar; Note in (1935) 33 Mich. L.R. 759 ff.; Note in (1939) 37 Mich. L.R. 1302 ff.; Note in (1951) 100 U. Pa. L.R. 263 ff. See also: Sheldon, , The Practice and Law of Banking (9th ed., 1962) 32 ff.Google Scholar; Chorley, op. cit. supra n. 5, at 74 ff.; 94, 95; Paget, op. cit. supra n. 6, at 285 ff; Michie, , Banks and Banking (1950) vol. 5A, sec. 100, p. 251 ff.Google Scholar In Israel, see Barak, op. cit. supra n. 5, at 157 ff. The principles of negligence were also applied in Stauber Incorp. v. Bank Mizrachi (1968) (I) 22 P.D. 240 and in Tannenbaum v. Bank Le'Umi L'Israel (1977) (III) 31 P.D. 141. In France, see, for example, Mazeaud, and Tune, , Traité Théorique et Pratique de la Responsabilité Civile (6th ed., 1965) vol. I, p. 603 ff.Google Scholar; Vasseur and Marin op. cit. supra n. 14, at 231 ff. In general, the classic principles of negligence are applied in Civil Law systems. See Vasseur and Marin, op. cit. supra n. 14, at 237 ff.

24 See Chorley, op. cit. supra n. 5, at 88–89.

25 Sec. 90 of the Statute states that “a thing is deemed to be done in good faith, within the meaning of this Act, where it is in fact done honestly, whether it is done negligently or not”. See, for example, Raphael v. Bank of England (1855) 17 C.B. 161; Auchteroni and Company v. Midland Bank [1928] 2 K.B. 301.

26 Regarding this concept, see, for example: Bank of England v. Vagliano [1891] A.C. 107; Auchteroni v. Midland Bank [1928] 2 K.B. 302, 303; Carpenter's Company v. British Mutual Banking Co. [1938] 1 K.B. 511. According to Cowen, and Gering, , The Law of Negotiable Instruments in South Africa (4th ed., 1966) 380Google Scholar, the “ordinary course of business” must coincide with the course customary to bankers in the same community. Gottesman, op. cit. supra n. 12, at 90, also refers to “the normal average mean of caution among bankers of the same society”. But Chorley, op. cit. supra n. 5, at 92, holds that the concept must be interpreted according to the “actual practice of the bank in question”.

27 Regarding the concept of due care, see, for example, Lloyds Bank v. Chartered Bank of India [1929] 1 K.B. 40, 69, 73; Bute (Marquess of) v. Barclays Bank Ltd. [1954] 3 W.L.R. 741, 747; Lloyds Bank Ltd. v. E.B. Savory & Co., [1933] A.C. 201, 229. See also sec. 80 of the statute, which while giving protection to the banker who pays a crossed cheque, requires due care. On this point, sec. 60 is similar to sec. 19 of the Stamp Act 1853, where due care is not a requisite of protection.

28 This conclusion is legitimate. Mackinnon, L.J., in Carpenter's Company v. British Mutual Banking Company, [1938] 1 K.B. 511, at 536, 537Google Scholar, holds: “A thing may be done negligently and yet be done in the ordinary course of business”. This opinion is commonly accepted. See, for example, Cowen and Gering, op. cit. supra n. 26, at 381 ff.; Paget, op. cit. supra n. 6, at 286, 287; Gottesman, op. cit. supra n. 12, at 93, 94.

29 Various other countries followed the English system and adopted provisions similar to sec. 60. See a list of those countries in Cowen and Gering, op. cit. supra n. 26, at 549.

30 See the definition of “good faith” in sec. 91 of the Bills of Exchange Ordinance. This section, following sec. 90 of the English statute also states that a thing, although done negligently, may be deemed to be done in good faith. However, if the cheque is crossed, protection is only given to the banker if he pays it “without negligence” (sec. 80 of the Ordinance). Concerning the concept of payment in good faith, see Sussmann, , Linei Shtarot (The Law of Bills of Exchange) (5th ed., 1975) sec. 261, pp. 326, 327.Google Scholar

31 See Sussmann, op. cit. in preceding note, sec. 261, pp. 325, 326.

32 See Barak, , “The Uniform Commercial Code — Commercial Paper. An Outsider's View” (1968) 3 Is.L.R. 191Google Scholar; Gottesman, op. cit. supra n. 12, at 110.

33 Note that the above English and Israeli provisions apply to all indorsements. This means that the bank is also protected when the drawer makes out a cheque to his own order and his signature as payee is forged. See Chorley, op. cit. supra n. 5, at 90; Gottesman, op. cit. supra n. 12, at 87, 88.

34 See Gottesman, op. cit. supra n. 12, at 94.

35 See Barak, op. cit. supra n. 5, at 158.

36 See, for example, Morgan v. United States Mortgage and Trust Co. 208 N.Y. 218, 101 N.E. 871 (1913); Commercial Bank v. Arden 177 Ky 520, 197 S.W. 951 (1917); Marks v. Anchor Sav. Bank 252 Pa 304, 97 A. 399.

³⁷ The above principle is in general accord with the Uniform Commercial Code sec. 4–405 (1), which states:

“(1) When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its customer or otherwise in a reasonable manner makes the statement and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover his unauthorized signature or any alteration on an item and must notify the bank prompty after discovery thereof.

(2) If the bank establishes that the customer failed with respect to an item to comply with the duties imposed on the customer by subsection (1) the customer is precluded from asserting against the bank,

(a) his unauthorized signature or any alteration on the item if the bank also establishes that it suffered a loss by reason of such failure; and

(b) an unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank after the first item and statement was available to the customer for a reasonable period not exceeding fourteen calendar days and before the bank receives notification from the customer of any such unauthorized signature or alteration”.

38 See American Jurisprudence (2nd ed.) vol. 10, sec. 519, p. 490.

39 See Uniform Commercial Code, 4–406 (3), which states: “The preclusion under subsection (2) does not apply if the customer establishes lack of ordinary care of the bank in paying the item(s)”.

40 See, for example, Glassel Development Co. v. Citizen's Nat. Bank 191 Cal. 375, 216 P. 1012, 28 ALR 1427 (1923); First Nat. Bank v. Patty (Tex Civ App) 62 S W 2d 629 (1933); Frankiini v. Bank of America Nat. Trust and Sav. Assoc. 31 Cal App 2d 666, 88 P2d 790 (1939); R.H. Kimball Inc. v. Rhode Island Hospital Nat. Bank 48 A 2d 420 (1946); Herbel v. People's State Bank 170 Kan 620, 228 P 2d 929 (1951); Valley Nat. Bank of Phoenix v. Electrical Dist. No. Four 90 Ariz 306, 367 P 2d 655 (1961).

41 See, for example, Tremont Trust Company v. Burack (1920) 235 Mass. 398, 126 N.E. 782, 9 A.L.R. 1067. In this case the court concluded that “…we are unable to see anything illegal, or anything opposed to public policy, in an agreement which relieves a bank so circumstanced from the results of the mere inattention, carelessness, oversightedness or mistakes of its employees (p. 1069); in Gaita v. Windsor Bank (1929), 251 N.Y. 152, 167 N.E. 203, a stipulation excluding the bank's liability which received the assent of depositor is valid under the rule of “freedom of contract”. The Tremont Trust Co. and the Gaita cases were considered leading authority on this matter (see Annotations in 175 A.L.R. 78 and 1 A.L.R. 2d 1155) and principles of “public policy” and “freedom of contract” where applied in other cases. See, for example, Hodnick v. Fidelity Trust Co. (1932), 96 Ind. App. 342, 183 N.E. 488. See also “The Significance of Comparative Bargaining Power in the Law of Exculpation” (1937) 37 Colum. L. R. 248, 261.

42 See, for example, Hiroschima v. Bank of Italy (1926), 78 Cal. App. 362, 248 P. 947; Speroff v. First Central Trust Co. (1948), 149 Ohio St. 415, 79 N.E. 2d 119, 1 A.L.R. 2d 1150; Reinhardt v. Passaic-Clifton Nat. Bank & Trust Co. (1951), 16 N.J. Super. 430, 84 A. 2d 741; Thomas v. Fist Nat. City Bank of Scranton (1954), 376 Pa. 181, 101 A. 2d 910; The Commercial Bank v. Hall (1957), 266 Ala. 57, 94 So 2d. 198. For the main reasons for invalidating these stipulations see “Stipulations Relieving Banks from Responsibility for Failure to Obey Stop Payment Orders” (1930) 39 Yale L.J. 542 ff. See also sec. 4–103, subsec. 1 of the U.C.C, which prescribes that “… no agreement can disclaim a bank's responsibility for its own lack of good faith or failure to exercise ordinary care or can limit the measure of damages for such lack or failure…”

43 See list of the countries which signed, adhered to, or at least introduced internal provisions in accordance with the Law of Geneva, in Vasseur and Marin, op. cit. supra n. 14, at 22 ff.

44 Concerning indorsed cheques, article 35, in its first draft, stated that a bank making an improper payment was to be released from liability except where payment had been made with fraud or gross negligence. However, the provision was changed: the question of banking liability was not resolved, and banks were only obliged to verify the regularity of indorsements. See Vasseur and Marin, op. cit. supra n. 14, at 228.

45 Ibid., at 237.

46 Ibid., at 239.

47 See my study “Aspectos do Regime Legal do Depósito Bancário” (1971) 25 Revista Bancaria 57 ff.

48 In France, see for example, Bouteron, , Le Chéque (1924) 496 ff.Google Scholar; Cabrillac, , Le Chéque et le Virement (1949) 86, 87Google Scholar; Vasseur and Marin, op. cit. supra n. 14 at 234–235; in Italy, Ruiz, Arangio, “Assegno Bancario” Enciclopedia del Diritto (1958) vol. II, p. 335 ff.Google Scholar In Spain, , Garrigues, , Curso de Derecho Mercantil (1940) vol. II, pp. 41, 42.Google Scholar In Portugal, see my study op. cit. supra n. 47, at 66 ff.

49 See, for example, Robino, , “Les Conventions d'Irresponsabilité dans la Jurisprudence Contemporaine” (1951) 49 Revue Trimestrielle de Droit Civil 1 ff.Google ScholarRipert, and Boulanger, , Traité de Droit Civil (1957) vol. II, p. 316 ff.Google Scholar

50 See, for example, in France, Vasseur and Marin, op. cit. supra n. 14, at 233.

51 See Bouteron, following Planiol, in op. cit. supra n. 48, at 499.

52 See text supra at 167.

53 In the first phase, the fact that the relationship is real — i.e. that parties are now obliged in terms of obligationes propter rem — does not have significant consequences, since real and personal obligations, despite their different origin and nature, have similar contents. Some scholars, however, have indeed emphasized certain peculiarities, namely the special rules of transferability of those obligations. See Aberkane, , Essai d'une Théorie Générale de l'Obligation Propter Rem en Droit Positif Français (1957) 142 ff.Google Scholar; Ascensão, , As Relações Jurídicas Reais (1962) 431 ff.Google Scholar; Levontin, , “Debt and Contract in the Common Law” (1966) 1 Is.L.R. 95Google Scholar, also considers the connection between the “realness” of debt and its transferability.

54 This is particularly clear in condominium, where legal and contractual obligations are imposed on apartment owners in order to ensure proper maintenance and management of the common property. See e.g., the Israeli Land Law, 1969 (23 L.S.I. 283) secs. 58 and 61 ff. On this matter see also the interesting remarks made by Aberkane, op. cit in preceding note, at 198 ff. A similar situation may arise in joint ownership. See sees. 29 and 32 of the Land Law, concerning a joint ownership agreement as to the management and use of the joint property, and consequent expenses. The same rule of stability also underlies, for example, the relationship existing in mortgage. Here, a mortgagee in possession may be liable for bad management and for waste. See Snell's, Principles of Equity (27th ed., 1973) 394.Google Scholar On the other hand, if the res loses its value, the mortgagee may be entitled to request from the mortgagor the enforcement of the guaranty. See Articles 2131 in fine, of the French Civil Code and 701 of the Portuguese Civil Code.

55 It is interesting to point out that legislatures have also recognized the peculiar durability of real relationships. This is basically why, under the French Civil Code (Articles 703, 704 and 706), a servitude is extinguished “when things may no more be used”, although the servitude will arise again when “things are recreated so that they are again capable of being used” and that “a servitude is extinguished in case of non-usage during thirty years”. See also the Israeli Land Law, sec. 96, which states, with regard to an easement, that unless a period has been fixed between the owners of the dominant and servient properties, “an easement shall be for an unlimited period” (23 L.S.I. 283 at 299).

56 On this matter, Ascensão, following Bianchi (in op. cit. supra n. 53 at 411) refers to the negative servitude and emphasizes that when a servient tenement does not fulfil his obligation, then the dominant tenement is entitled to request reestablishment of the situation. For example, if the obligation consisted in not building, then the servient tenement is obliged to destroy what was built. This will probably also be a logical corollary of disregard for sec. 93(a)(2) of the Land Law, 1969, concerning easements. The same principle of re-establishment of a real relationship underlies also sec. 60 (a) of this Law, concerning destruction of a condominium. In this case, where a proper decision by the apartment owners has been adopted, every apartment owner is obliged to participate in the rebuilding or repair of the common property.

57 See op. cit. supra n. 53, at 146–47.

58 See op. cit. supra n. 53, at 411.

59 Ibid. at 414.

60 With regard to the legal definition of the above situation as non-fulfilment of an onus, see our comments supra n. 20.

61 Concerning the application of this principle in France, for example, Cabrillac writes: “The banker is not released in case of force majeure …The reason is that the contract (of deposit) causes the transfer of ownership on generic things to the depositary, who is only obliged to restore things of the same kind. We must impose on the banker the general rule of res perit domino, the banker bearing the risk of loss … Particularly the state of war does not change the banker's obligations”. See “Les Dépôts de Fonds” in Juris-Classeur Commercial Annexes, Banque, fase. 17, p. 10, no. 32.

62 See American Jurisprudence (2nd ed.) vol. 10, sec. 428, p. 401.