One of the implied terms of the contract between a bank and a depositor (bank account holder) is that the bank will pay checks drawn by the depositor if he has on deposit sufficient funds to his credit. A wrongful refusal on the part of the bank to pay a depositor’s check will render the bank liable to the depositor for such damages as are the natural and probable consequences of the refusal.

Does a Bank Have an Obligation to Pay a Check Held by Someone Who is Not an Account Holder at a Bank?

Although a bank is obligated to its depositor (account holder), as drawer of a check, to pay it if it is properly payable from the account, a bank has no such obligation to a holder of such a check, particularly if such holder is a non-depositor (not an account holder) at the bank. This means a bank is not obligated to pay a check presented for payment by a non-account holder, even if the drawer’s balance is sufficient and there is no stop-payment order or other reason for nonpayment.

How do Banks Handle Checks Where There is a Dispute whether a Third Party is Entitled to Payment of the Check?

Banks are commonly placed in a bad position when they receive notice of an adverse claim by a third person against the account of a depositor (account holder). Many states deal with such a situation through an "adverse-claim" statute. Such a statute provides that notice to a bank of an adverse claim need not be recognized by the bank unless the claimant either obtains an appropriate court order or furnishes a satisfactory indemnity bond.

Can Banks Accept Post-Dated Checks (Also Known as Future-Dated Checks)?

A person may draw and issue his check bearing a future date, and a check so dated is a valid instrument. Although such a check may validly pass from hand to hand prior to the time of its date, however, it is not payable by the bank on which it is drawn until the time of its date arrives. A bank, therefore, may be held liable for premature payment of a postdated check. If the bank pays such a check prematurely and dishonors other checks of the same depositor because of the premature depletion of the account, the bank may be held liable in damages, including those for wrongful dishonor of such other checks.

What Happens if a Bank Processes a Lost, Stolen, or Fraudulently Obtained Check?

Where a check has been lost by the holder and paid by the drawee bank to the finder or some other person, the liability of the bank depends on the circumstances. If the check is collected on a forged endorsement, the bank cannot, of course, charge it against the drawer’s account. In such a case, however, the bank may recover the amount paid on the check, even from a bona fide taker under the forged endorsement. However, if the check was payable to bearer or endorsed in blank, the bank is protected if it pays in good faith, and the payment is a proper charge against the drawer’s account.