Contractual Relationship The Bank And The Customers example essay topic

The relationship between a bank and its customer goes beyond that of creditor / debtor relationship. It is basically a contract agreement between the bank and its customer. This contractual relationship start from the date the bank accepts instructions from the customers. The most common starting point is when the customer instructs the bank to open an account. In this contractual relationship the bank and the customers have a number of duties and obligations. These duties and obligations were identified in Joachim son vs. Swiss Bank Corporation (1921).

It is pertinent to note that later cases have added further important duties and obligations. We are going to dwell on the bank's duty of secrecy. Banking has a tradition of maintaining secrecy about the affairs of their customers. All bank staff are required to sign an undertaking that they will not reveal any information about customers to unauthorized people. The bank must ensure that staff does not give away information by telephone unless they have obtained positive identification in some way.

Where a staff gives away confidential information about a customer; the customer can sue the bank for breach of contract. The duty of secrecy owed by a bank to its customer was considered in the leading case of Tournier vs. National Provincial and Union Bank of England (1924) 1. K.B. 61. In this case a manager of the bank revealed to Tournier's employer the details of Tournier's account including the fact that the account was overdrawn and that cheques had been written to bookmakers. It was decided that the bank was liable for damages to Tournier. Bankers L. J submitted that "the duty is a legal one arising out of contract... it is not absolute but qualified.

It is not possible to frame any exhaustive definition of the duty. The most that can be done is to classify the qualifications and indicate its limits". The importance of the Tournier's case arises from the fact that the judge did give a clear list of the reasons upon which a bank can give away information about customer without risk of a claim for breach of contract. These circumstances include: "u Under compulsion of law.

This refers to information given out by the bank in order to comply with the law. This will include court order (Failed Bank Tribunal, Police Investigation etc) or legislative requirements (Income Tax Act 1952, Bankers' Books Evidence Act 1879, etc). "u Through public duty. Where it is reasonably necessary for protecting the bank or persons integrated or the public against fraud or crime or a bank having evidences of a customer acting as a spy for a foreign government. "u In the interest of the bank Where a legal proceeding is taken to recover a debt, by going to court the amount owed is made public-Sunderland vs. Barclays Bank Ltd. "u With the customer's consent Where the customer gives an express or implied consent to the bank disclosing information to a third party. This will include banker's reference, audit enquiries, status enquiries, etc. It may even be during a meeting between a customer, his accountant and the bank official where the accountant (a third party) may be able to learn about the customer's bank transactions by being involved in the decision. There is today a well-established practice whereby banks gives references concerning customers at the request of other banks without asking on each occasion for the consent of the customer.

It is submitted that when opening an account the customer implied consented to such references being given by his bank. Conclusively, it is pertinent to observe that the duty of secrecy goes beyond the state of the account. It extends at least to the transaction that passes through the customer account. It also extends to information obtained from other sources if the occasion upon which the information was obtained arose out of the banking relations of the bank and its customer. Adem ola A bass-O lisa.