Jasmin Mrongo, an accounts clerk at Cautious Company Ltd., prepared a cheque for Peter Kraft’s signature. Peter Kraft was not a duly authorised signatory of Cautious Company Ltd. The amount on the cheque appeared in figures as Sh.5,000 but was not written in words. Peter Kraft signed the cheque and gave it to Jasmin Mrongo who secretly altered the amount to read Sh.95,000 and also wrote “ninety five thousand shillings” in words. Jasmin Mrongo then encashed the cheque at Mzalendo Bank, the company’s bank. Jasmin Mrongo gave Peter Kraft Sh.5,000 and retained Sh.90,000 which she used to purchase a plot. Cautious Company Ltd. has discovered the above facts and intends to sue Mzalendo Bank for negligence. Analyse the legal principles applicable in the above case and advise Cautious Company Ltd.

Legal principles applicable

  • A banker must not pay cheques without a customer’s authority.
  • If such payment is made, the bank will be held liable.
  • The bank failed to notice that the signature on the cheque was not that of a duly authorised signatory.
  • The bank will be held liable for negligence.
  • The bank will be compelled to credit the company’s account with Sh.95, 000.
  • Jasmin Mrongo and Peter Kraft are also liable to be prosecuted for theft and forgery.
  • Catious Company Ltd. Can therefore successfully sue the bank,
  • It can also have Jasmin Mrongo and Peter Kraft prosecuted for the offence of stealing by servant.
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