A bank owes the customer the duty to pay on an instrument drawn by the latter. However» mere receipt of an instrument does not obligate the bank. The bank’s obligation arises when it formally accepts the instrument by certifying. When the drawer has a check certified, such a certification merely acts as additional security and does not relieve the drawer of any liability. On the other hand, when the holder of a check secures certification by the drawee bank, he accepts the bank as the only party liable thereon.

Certification of a check at the request of a holder is not the obligation of the bank. A bank owes its customer the duty to pay on order but not a duty to certify checks that are drawn on it. Therefore» a bank,s refusal to certify a check is not a dishonor.

If honoring a check creates an overdraft, the customer is indebted to the bank for the overdraft and impliedly promises to reimburse the bank.1 By the same logic, if in the check collection process the depositary bank has allowed the depositor to draw against the provisional credit，it has the right to charge back on the customer’s account.

A customer has the right to stop payment on checks drawn on his account. To be effective ,a stop-payment order must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it. If a check has been certified, the customer can not stop payment on it.

Failure of the bank to obey an effective stop payment order subjects the bank to liability for any loss the customer has incurred. But the burden is on the customer to prove the amount of his loss. If a purchaser pays with a check and then stops payment on it，he has to prove that he has suffered a loss as a result of the purchase. Otherwise he can not recover from the bank who makes final payment on the check in spite of the stop payment order.

Banks make available to their customers a regular statement of account. Cancelled checks are returned to the customer with the statement.

A customer does not have to pay on an instrument he did not sign. This means that if the bank pays a check which has a forged drawer's signature, the bank bears the loss. But the customer has the duty to do due diligence. If the bank can establish that it suffered a loss because of the customer’s failure to give prompt notification of the forgery, the customer may be prevented from asserting the forgery against the bank. If both are at fault, the bank’s fault will prevent it from asserting defenses against the customer.

A customer can not assert a forged signature or alteration on a check after one year from the time the check and statement was made avialable to him. Forged indorsements must be reported within three years.

If a depositor is also a borrower of a bank，the bank is a debtor as well as a creditor of the customer. This dual relationship gives the bank a right of setoff > under which it can seize the customer's bank deposits in the event of the latter^ bankruptcy or insolvency.

A bank is liable for damages to its customer if it wrongfully dishonors a check. If the wrongful dishonor occurs by mistake，in contrast to malicious or willful dishonor, liability is limited to the actual damages proved. Consequential damages are sometimes provided for and may include damages for arrest or prosecution of the customer. However，the UCC provides that a merchant can not recover damages on the basis of defamation—because the wrongful dishonor reflects adversely on his credit, and he is therefore limited to actual damages.

If a bank pays a raised check in good faith, it has the right to charge the account of its customer only according to the original amount of the check. However, if a person signs his name to an incomplete check, and it is thereafter completed and presented to the bank for payment, the bank can charge the customer’s account for the full amount if it pays in good faith and has no knowledge of the incompletion.

Answer the following questions :
1. When does the bank,s obligation arise on an instrument ?
2. What is a certified check?
3. What is the difference between a check certified at the request of the drawer and one certified at the request of a holder?
4. How does the law interpret the relationship between the customer and the bank with regard to an overdraft?
5. A buys a computer from B with a check of $ 1,000. He later finds the computer defective and stops payment on the check. The bank {ails to obey the SPO. What will be the result?
6. What is the consequence of the bank’s failure to obey the stop-payment order?
7. What are the defenses of the bank with regard to checks with forged drawer's signatures?
8. What is the liability of the bank that pays a raised check?
9. What is the liability of the bank that pays a check completed by persons other than the drawer?
10. Can you explain why the law treats raised checks and incomplete checks differently?
11. What are the defenses of the customer against the bank which pays an imcomplete check that has later been completed by others?
12. What is the legal consequence of a wrongful dishonor of a check by the payor bank?