Lor-Mar had a business checking account at First Constitution Bank. The agreement between Lor-Mar and the bank allowed checks to be honored if they contained the signature of either Van Middlesworth or Toto, two employees of Lor-Mar.
This agreement was contained in a resolution of Lor Mar's corporate board designating the two employees and in the standard account agreement between the bank and the company. The bank was given samples of their stamped signatures. Five bogus checks, totaling $24,350, were written against the account in one week and were paid by the bank. Lor-Mar saw the problem when reviewing its monthly statement.

1. The appeals court affirmed that the bank was liable for cashing the forged checks. How could the bank have avoided liability?
2. It is common for businesses to use stamped signatures on checks. Anyone can make checks with any numbers on them, so forgery is not difficult.
How could a business best avoid possible losses from such an occurrence?