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Bankers Duties and Rights

Banker's duties

under common law

to follow customer's mandate

mandate = instruction

must follow until revoke

to honour cheques as Paying Banker

follow mandate and make payment provided

cheque properly drawn

the customer has not countermand payment

no legal bars to payment

cheque presented during banking hours at branch where account is kept

insufficient funds

pay and claim later.

important to honour cheques

if fail, customer can sue for breach of contract.

countermand of payment

section 75 BEA. given written instructions. banker not liable if payment made before instructions received. send countermand to branch where account is kept. bring countermand to banker's notice; otherwise no liable if pay out. banker's duty and authority end.

collect cheques as collecting banker

collect cheques for customer. present to paying banker. credit to customer's acc.

Duty of Care of Paying & Collecting Banker

paying banker

agent for customer in making payment

must exercise due care and skill

need to make enquires if bank suspect that another agent acting against customer's interest

collecting banker

agent for customer when collecting cheques. when presenting cheque to paying banker and collect payment: must exercise reasonable care and diligence.

Banker's Duty of Secrecy

section 47 BA. case law: Tournier v National Provincial Bank. 3rd Schedule BA. Bank - legal obligation to keep information of customer secret. held: informationthat must be kept secret. obligation extends to even when customer's account closed. Part I: Futher disclosure not prohibited. Part II: Futher disclosure prohibited. state of client's account. all transactions & securities give. information received about client.

Customer's duties

reasonable care and skill in drawing cheques. maintaining sufficient funds to meet liability of cheques. keep cheque book securely. give proper notice of countermand. keep PIN secret.

Banker's Rights

Banker can charge for service. charge interest on loans. to repayment of loans. to use C's money that is deposited provided. expect due care from C. express agreement. implied from course of dealing. where it is reasonable to charge a commission. when makes loan/ advances to customer. usually includes clause on right to vary interest. right to repayment. may include penalty clauses on late payment. money returned when C's withdraws. honour cheques issused by C. when drawing cheques. maintaining cheque book. PIN numbers. express term that commission will be charged. right to commission implied from previous dealings. case law: spencer v wakefield.

Banker's lien

to exercise lien over customer's property. lien - right to possession of property of another until repayment. B has lien over securities deposited with it in ordinary course of business. no lien over. title deeds (unless express agreement). jewellery in safe deposit box.

Account stopped

C dies. mental incapacity. bankruptcy/ winding up. B receives notice. can set off. claim balance from personal representative. notice. declaration. can set off. claim against official assignee.

Account not stopped

2 current accounts. 1 current & 1 saving account. 1 loan & 1 current account. bank not obliged to honour cheques on acc in debit by transferring from account in credit. usual practice: B will set off. cannot set off money in current account. unless agreed.

Banker's right of set off

combine/ set off accounts. set off only when accounts stopped. no set off. against C's future liabilities. express/ implied agreement against set off. account contain trust funds. if account in different names.