In Mechanics' and Traders' Bank v. Union Bank, the Supreme Court of the United States was asked to decide whether a bank could be held liable for the acts of its cashier. The Mechanics' and Traders' Bank had loaned money to the Union Bank, and the Union Bank had given the Mechanics' and Traders' Bank a note for the loan. The note was signed by the cashier of the Union Bank. The Mechanics' and Traders' Bank then sued the Union Bank for the money it had loaned. The Union Bank argued that it was not liable for the acts of its cashier, and that the Mechanics' and Traders' Bank should have known that the cashier was not authorized to sign the note. The Supreme Court held that the Union Bank was liable for the acts of its cashier. The Court reasoned that the Union Bank had given the cashier apparent authority to sign the note, and that the Mechanics' and Traders' Bank had relied on that apparent authority in making the loan. The Court also held that the Union Bank was estopped from denying the cashier's authority, because it had accepted the note and had not objected to the cashier's signature. In conclusion, the Supreme Court held that the Union Bank was liable for the acts of its cashier, and that the Mechanics' and Traders' Bank was entitled to recover the money it had loaned.

In Mechanics' and Traders' Bank v. Union Bank, the Supreme Court was tasked with determining whether a bank could be held liable for failing to pay out on a check that had been altered after it left the hands of the drawer. The majority opinion found in favor of Union Bank, holding that they were not responsible for paying out on an altered check as they did not have knowledge or notice of any alteration when it was presented to them by their customer. Justice Field dissented from this decision, arguing that banks should bear responsibility if they fail to exercise reasonable care in examining checks before payment is made. He argued further that banks are expected to use due diligence when dealing with customers’ funds and must take steps such as comparing signatures against known specimens whenever possible in order to protect themselves from fraudulent activity. As such, he concluded that Union Bank should be held liable for its failure to detect alterations on the check at issue here and thus should be required to make restitution accordingly.