- 20 Marks
POB-LAW-AND-PRACTICE-APRIL-2024-L3-Q4 – Stop Payment Instruction on Cheque and Bank’s Liability
Discuss the bank's position after paying a cheque despite a verbal stop instruction, not recorded, and steps to protect interests amid the payee's receivership.
Question
Aggregates Ltd., a large engineering company, has banked with you for ten (10) years. You have supported it with borrowing facilities from time to time, to help to finance work-inprogress, against a legal mortgage over the company’s land and buildings. For the last few months the account has been operating in credit.
A week ago, one of your clerks took a telephone call from the Company Secretary, instructing the bank to stop payment of a cheque for GHC 205,000, drawn in favour of Vacornis Ltd., a building company which was in the course of erecting a new factory on your customer’s land. This cheque was a stage payment under the terms of the contract. Unfortunately, your clerk suffered an accident in the office shortly after taking this call and, as a result, the message was not recorded. On the following day, the cheque was presented in the clearing and was paid. The letter from the company confirming the telephone call has only just been received, and the company mentions that the reason for its stopping the cheque is that Vacornis Ltd. has had a receiver appointed by its bankers.
What is the bank’s position? What steps must now be taken in the best interests of the customer and the bank?
[Total: 20 marks]
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