Commercial Law II: Banker and Customer Relationship

Flashcards covering the legal framework, duties, and case law defining the Banker and Customer relationship in Commercial Law.

Bank

A body corporate which is issued with a licence in accordance with the Banking Act, to carry on the business of banking per Section $90$ of the Banking Act, $2004$ (Act $673$).

Banking Business

Accepting deposits of money repayable on demand, financing trade, industry, or agriculture through loans, and any other business recognized by the Bank of Ghana.

Permissible Activities of a Bank

Includes accepting deposits, lending, financial leasing, investments in securities, money transmission, and issuing means of payment like credit cards.

Customer (Common Law)

A person who has an account with a bank, as established in La cave & co vrs Credit Lyonnais, or someone about to open an account per Woods vrs Martins Bank.

Great Western Railway Co. vrs London & County Banking Co. Ltd.

Established that the bank rendering services to a person does not make them a customer in the absence of an account.

Legal Basis of Banker/Customer Relationship

The relationship can be categorized as Contractual, Debtor/Creditor, Principal/Agent, Bailor/Bailee, Trustee/Beneficiary, Adviser/Client, and Mortgagor/Mortgagee.

Joachimson vrs Swiss Bank Corporation

A landmark case defining implied terms of the contractual relationship, such as the bank's duty to receive money and the customer's duty to exercise care in drawing cheques.

Tournier Vrs National Provincial & Union Bank of England

The leading case on the bank's duty of secrecy and the four common law exceptions to that duty.

Common Law Exceptions to Secrecy

Disclosure under compulsion of law, public interest, bank's interest, or with the consent of the customer.

Statutory Exceptions to Confidentiality (Act 738)

Includes default on credit cards, customer bankruptcy, death of the customer, civil proceedings with the bank, or court orders.

Tai Hing Cotton Mill Ltd vrs Lui Chong Hing Bank

Held that a customer is not legally obliged to examine their statement of account furnished by a Bank.

London Joint Stock Bank Ltd vrs McMillan & Arthur

Establishes the customer's duty to exercise reasonable care in writing cheques so as not to facilitate fraud.

Greenwood v Martins Bank

Establishes that a customer must advise the Bank immediately upon discovering their signature has been forged or cheque book stolen.

Spencer vrs Wakefield

Ruled that customer acquiescence is sufficient basis for a bank to charge for services even in the absence of express agreement on rates.

Bankers’ Opinion (Status Enquiry)

Statements given by a bank regarding the financial position of a customer, usually in response to a request from another bank.

Appropriation of Payments

Arises when a customer owes multiple debts and pays money that cannot cover all; the customer has the primary right to select which debt the payment applies to.

Rule in Clayton’s Case

In a running account, in the absence of specific appropriation, earlier payments-in are applied to debits in strict chronological order.

Bankers’ Set Off

The right of a bank to combine or consolidate different accounts of the same customer to determine their net financial position.

Conditions for Set Off

The sums must be certain, the accounts must be between the same parties, and the accounts must be held in the same right (categorization).

Banker’s Lien

The right of the bank to hold on to a customer's property currently in its possession until the customer's obligations to the bank are satisfied.

Garnishee Order

A court order that attaches money in a customer's account as a statutory exception to the duty of confidentiality.

Termination Factors

The banker/customer relationship terminates via closure of account, death, mental incapacity, bankruptcy, or winding up of the bank or corporate customer.