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ENGLISH LAW AFFECTING BANKS AND
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See also:ENGLISH See also:LAW AFFECTING See also:BANKS AND THEIR CUSTOMERS Issue of Notes.—The legislation which culminated in the See also:Bank See also:Charter Acts of 1844 and 1845 secured to the Bank of See also:England the See also:absolute See also:monopoly of the See also:note issue within the See also:city of See also:London and a 3-m. See also:radius. Outside that radius, and within 65 m. of the city, there is a concurrent right in banks, consisting of six or less than six persons, established before 1844, and issuing notes at that date; beyond the 65-m. radius the See also:privilege may be exercised by all banks established before 1844, and then issuing notes, who have not since lost their right to do so by See also:bankruptcy, See also:abandonment of business, or temporary suspension of issue. According to some authorities, the effect of 20 and 21 Vict. cap. 49, sec. 12 [re-enacted Companies Consolidation See also:Act 1908, sec. 286 (d)] was to See also:sanction the increase in the constitution of any bank issuing notes outside the 3-m. and within the 65-m. radius from six to ten persons without affecting the See also:power to issue notes. The See also:rule as formulated above is, however, that enunciated by See also:Bowen J. in See also:Capital and Counties Bank v. Bank of England, 1889; 61 L.T. 516. The increase in the number of See also:joint-stock banks and the See also:gradual absorption of the smaller and older concerns have had the effect of minimizing the output of notes other than those issued by the Bank of England, and, as exemplified by the See also:case of The See also:Attorney-See also:General v. See also:Birkbeck, 12 Q.B.D. 57, it would seem impossible to devise any See also:scheme by349 which the note-issuing power of an absorbed bank could be continued to the new or amalgamated See also:body. But a bank having the right would not necessarily lose it by absorbing other banks (Capital and Counties Bank v. Bank of England). See also:Foreign banks may establish branches in See also:Great See also:Britain on complying with the regulations imposed on them by the Companies Consolidation Act 19o8, but cannot apparently issue notes, even though payable abroad.
See also:Deposit Business.—The See also:term " bank of deposit " gives a mistaken See also:idea of the real relation between banker and customer. So See also:long ago as 148 it was decided by the See also:House of Relation Lords in See also:Foley v. See also: Such a See also:state of affairs, however, is hardly likely to arise, inasmuch as, in the See also:absence of specific See also:appropriation, earlier drawings out are attributed to the earlier payments in, as in the ordinary case of current accounts, and so the items on the See also:credit and debit See also:side See also:cancel each other. An apparent exception to this See also:system of appropriation exists in cases where a man wrongfully pays into his own account moneys held by him in a fiduciary capacity. In such circumstances he is presumed to have See also:drawn out his own moneys rather than those affected by the trust, and so long as the account is in credit, any See also:balance will be attributed to the trust money. As between contending claims to the money, based on different breaches of trust, the ordinary rule of appropriation will apply. It has often been suggested that the only method of with-See also:drawing money from a banker is by See also:cheque, that the presentation of a cheque is a See also:condition precedent to the liability of the banker to repay. This is not so; such Cheques. a view being inconsistent with the cases establishing the effect of the Statute of Limitations on money See also:left in a banker's hands, and with the numerous cases in which a balance at a bank has been attached as a See also:simple and unconditional debt by a garnishee See also:order, as, for instance, in See also:Rogers v. See also:Whiteley, 1892, A.C. 118. The banker's position with regard to cheques is that, superadded to the relation of debtor and creditor, there is an See also:obligation to See also:honour the customer's cheques provided the banker has a sufficient and available balance in his hands for the purpose (Foley v. Hill). If, having such funds in his hands, the banker dishonours a cheque, he is liable to the customer in substantial See also:damages without See also:proof of actual injury having accrued (Rolin Steward, 14 C.B. 595). Where several cheques are presented simultaneously and the available balance is insufficient to pay all, the banker should pay as many as the funds will See also:cover, and is not See also:bound to discriminate between particular cheques. It would seem a legitimate condition that a cheque should be drawn in the ordinary recognized See also:form, not in one raising any question or doubt as to its validity or effect. Cheques drawn to " See also:wages or order," " See also:petty See also:cash or order," or the like, are See also:common, and are sometimes regarded as payable to See also:bearer. Such payees are not, however, " fictitious or non-existent persons," so as to render the cheques payable to the bearer under sec. 7, subs. 3 of the Bills of See also:Exchange Act 1882, nor can such payees endorse. Some banks refuse to pay such cheques, and it is conceived they are justified in so doing. Money paid in so shortly before the presentation of the cheque that there would not have been See also:time to pass it through the books of the bank would not be treated as available for drawing against. If a See also:person have an account at one See also:branch of a bank, he is not entitled to draw cheques on another branch where he has either no account or is overdrawn, but the bank has, as against the customer, the right to combine accounts. at different branches and treat them as one account (See also:Garnet v. Al'Ewen, L.R. 8 Ex. ro), Funds are not available so long as a garnishee order, founded on a See also:judgment against the customer, is pending, since it attaches all moneys on current account irrespective of the amount of the judgment (Rogers v. Whiteley). The very questionable practice of See also:post-dating cheques has been the source of considerable doubt and inconvenience to bankers. The use of such documents enables the drawer to obtain the results of a See also:bill at a fixed future Hate without the expense of a See also:regular bill-See also:stamp. But the Bills of Exchange Act 1882,sec. 13,subs.1, provides that " a bill is not invalid by See also:reason only that it is ante-dated or post-dated, or that it bears date on a See also:Sunday." The banker cannot therefore refuse to pay a cheque presented after the apparent date of its issue on the ground that he knows it to have been post-dated. On the other See also:hand, he is entitled and indeed bound to refuse payment if such a cheque is presented before the apparent date of its issue (See also:Morley v. Culverwell, 7 M. & W. at p. 178). Revocation of authority to pay a cheque must come to the banker's conscious knowledge and be unequivocal both in terms and method of communication. He is not bound to act on an unconfirmed telegram (Curtice v. London City & Midland Bank [1908], 1 K.B. 293). The banker's authority to pay cheques is terminated by the See also:death, See also:insanity or bankruptcy of the customer, or by See also:notice of an available act of bankruptcy committed by him. The banker is bound to observe secrecy with respect to the customer's account, unless See also:good cause exists for disclosure, and the obligation does not cease if the account becomes overdrawn (See also:Hardy v. Veasey, L.R. 3 Ex. 107). In England a cheque is not an See also:assignment of funds in the banker's hands (Bills of 'Exchange Act 1882, sec. 53). The holder of the cheque has therefore no claim on the banker in the event of payment being refused, his remedy being against the drawer and endorser, if any. On this See also:section is also based the See also:custom of English bankers not to pay See also:part of the amount of a cheque where there are funds, though not sufficient to meet the whole amount. The section does not apply to See also:Scotland, where it would seem that the bank is bound to pay over what funds it has towards See also:satisfaction of the cheque. A banker is entitled to hold paid cheques as vouchers until there has been a See also:settlement of account between him and the customer. The entries in a pass-See also:book constitute prima facie See also:evidence against the banker, and when returned by the customer without comment, against him; but the proposition that such return constitutes a settlement of account has been much disputed. Indeed where See also:forgery is the ground of repudiation of a cheque, no dealings or omissions of the customer with regard to the pass-book would seem to preclude him from objecting to being debited and throwing the loss on the banker (Kepitigalla See also:Rubber Co. v. See also:National Bank of See also:India, 25 Times L.R. 402). As against the banker, however, credit entries in the pass-book cannot be disputed if the customer has altered his position in reliance thereon, and cheques drawn against an apparent balance must be honoured (See also: Limited See also:protection in other cases has been extended by legislation to the banker with regard to both payment and collection of cheques, usually on the principle of counterbalancing some particular See also:risk imposed on him by enactments primarily designed to safe-guard the public. By sec, 19 of the Stamp Act 1853, the banker paying a draft or order payable to order on demand, drawn upon him, was relieved from liability in the event of the endorsement having been forged or unauthorized. This enactment was not repealed by the Bills of Exchange Act 1882, and, in London City & See also:Mid-See also:land Bank v. See also:Gordon (1903), A.C. 240, was held to cover the case of drafts drawn by a branch of a bank on its See also:head See also:office. Sec. 6o of the Bills of Exchange Act 1882 extends like protection to the banker in the case of cheques, the See also:definition of which therein as " bills drawn on a banker payable on demand " debars drafts of the above-mentioned description. Such definition, involving the unconditional See also:character of the See also:instrument, also precludes from the protection of this section the documents now frequently issued by corporations and others, which direct bankers to make payments on a specific attached See also:receipt being duly signed (London City & Midland Bank v. Gordon). Sec. 17 of the See also:Revenue Act 1883, however, applies to these documents the crossed cheques sections of the Bills of Exchange Act 1882 (see Bavius, Jr., & See also:Sims v. London & See also:South-Western Bank [19001, i Q.B. 270), while denying them the position of negotiable See also:instruments, and a banker paying one of them crossed, in accordance with the See also:crossing and in the absence of any indication of its having been transferred, could probably claim See also:immunity under sec. 80. The Bills of Exchange Act 1882 contains no direct See also:prohibition against a banker paying a crossed cheque otherwise than in accordance with the crossing, but if he do so he is liable to the true owner for any loss suffered by him in consequence of such payment (sec. 79), and is probably unable to See also:charge his customer with the amount. A banker paying a crossed cheque in accordance with its ostensible See also:tenor obtains protection under sec. 8o and the proviso to sec. 79. Questions have arisen as to the bearing of the crossed cheques sections when a crossed cheque drawn on one branch of a bank is paid in for collection by a customer at another branch; but the transaction is so obviously a legitimate and necessary one that either by the See also:collecting branch maybe regarded as a See also:separate bank for this purpose, or sec. 79 may be ignored as inapplicable (Gordon v. London City & Midland Bank [1902], 1 K.B. 242 C.A.). The collection of crossed cheques for a customer being virtu-ally See also:incumbent on a banker, qualified immunity is accorded him in so doing by sec. 82, a final exposition of which was given by the House of Lords in London City& Midland Bank v. Gordon (1903), A.C. 240. To come within its provisions, the banker must fulfil the following conditions. He must receive the cheque from, and the money for, a customer, i.e. a person with whom he has definite and existing business relations (see Great Western Ry. Co. v. London & See also:County Bank [1901], A.C. 414). He must take the cheque already crossed generally or specially to himself. His own crossing under sec. 77 is absolutely inefficacious in this connexion. He must take the cheque and receive the money good faith and without See also:negligence. Negligence in this relation is the omission to exercise due care in the interest of the true owner, not necessarily the customer. To avoid this disqualification of negligence, the banker must see that the endorsements, where necessary, are ostensibly correct; he must satisfy himself of the authority where an endorsement is per See also:procuration; he must not take for private account a cheque which on its See also:face indicates that the holder is in See also:possession of it as See also:agent, or in an See also:official capacity, or for See also:partnership purposes (Hannan's See also:Lake View Central Ld. v. See also:Armstrong & Co., 16 Times L.R. 236; Bevan v. National Bank, 23 Times L.R. 65); he must not take a cheque marked " account payee " for an account other than that See also:Beaumont [1902], 1 Ch. p. 895). A banker either paying or collecting money on a cheque to which the person tendering it for payment or collection has no See also:title or a defective title is prima facie liable to the true owner for See also:conversion or money had and received, notwithstanding he acted indicated (Bevan v. National Bank). It is further demonstrated by the Gordon case that. the banker only secures protection so long as he is acting strictly as a conduit See also:pipe, or as agent for the customer. If he put himself in the position of owner of the cheque, he no longer fulfils the condition of receiving the money only for the customer. In the Gordon case, See also:adoption of the not uncommon practice of crediting cheques as cash in the bank's books before the money was actually received was held See also:equivalent to taking them as transferee or owner, and to debar the bank from the protection of sec. 82. The anxiety and in-convenience caused to bankers by this unexpected decision was ultimately removed by the Bills of Exchange (Crossed Cheques) Act 1906, which enacts that a banker receives payment of a crossed cheque for a customer within the meaning of sec. 82 of the Bills of Exchange Act 1882, notwithstanding that he credits his customer's account with the amount of the cheque before receiving payment thereof. Apparently the See also:scope of this act must be confined to its immediate See also:object, and it does not affect the relations and rights between the banker and his customer or parties to the cheque arising from such crediting as cash. For instance; the customer, in the absence of agreement to the contrary, may at once draw against cheques so credited, while the banker may still debit the customer with the amount of the cheque if returned unpaid, or See also:sue the drawer or indorser thereon. The protection to the collecting banker is in no way affected by the cheque being crossed " not negotiable," or by the nature of the See also:fraud or See also:crime by which the cheque was obtained by the customer or any previous possessor, although there are dicta which have been interpreted in the contrary sense. Nor does the fact that the customer is overdrawn deprive the banker of the character of a collecting agent, unless the cheque be de-finitely given and taken in reduction of such overdraft. Where the conditions requisite for protection exist, the protection covers not only the receipt of the money, but all operations usual in business and leading up to such receipt, on the basis of the customer's title being unimpeachable. The provisions, of the crossed cheques sections of the Bills of Exchange Act 1882 are extended to See also:dividend warrants by sec. 95 of that act, and to certain orders for payment issued by* customer of a banker by sec. 17 of the Revenue Act 1883, as before stated. But the wording of the Bills of Exchange (Crossed Cheques) Act 1906, specifying as it does cheques alone, appears to exclude documents of both these classes from its operation. With regard to the orders for payment, inasmuch as the same section which brings them within the crossed cheques sections expressly provides that they shall not be negotiable, a banker would probably be protected only in taking them from the specified payee, though this distinction has been ignored in some recently decided cases. Where a banker incurs loss through forgery or fraud in circumstances not covered by statutory protection, his right to See also:relief, Fraud. if any, must depend on general principles. He cannot charge his customer with payments made on.a forgery of that customer's See also:signature, on the ground either that he is presumed to know such signature or that the payment is unauthorized. But if the customer has accredited the forgery, or, having knowledge or reasonable ground for belief that it has been committed, has failed to warn the banker, who has thereby suffered loss or See also:prejudice, the customer will be held estopped from disputing the banker's right to debit him with the amount (Vagliano v. Bank of England [1891], A.C. 107; M'Kenzie v. See also:British See also:Linen Co. 6 A.C. 82; See also:Ewing v. Dominion Bank [1904], A.C. 806). The See also:doctrine of the fictitious person as payee may also exonerate a banker who has paid an order bill to a wrongful possessor. Payment on a forgery to an See also:innocent holder is payment under See also:mistake of fact; but the ordinary right of the payor to recover money so paid is subordinated to the See also:necessity of safe-guarding the characteristics of negotiability. Views differ as to whether the recovery is precluded only where the opportunity of giving notice of dishonour is lost or prejudiced by delay in reclaiming payment, or whether mere possibility of damage is sufficient (cf. London b` See also:River See also:Plate Bank v. Bank of Liverpool[1896], r Q.B. q, and Imperial Bank of See also:Canada v. Bank of See also: The abolition or modification of the practice has frequently been advocated, but it is one of the facilities which competition compels bankers to extend to their customers. On the same basis stands the receipt of a customer's valuables for safe custody. The question of the banker's responsibility for the loss of goods so deposited with him was raised, but not decided, in an See also:action brought by Mrs See also:Langtry against the See also:Union Bank of London in 1896. Certain jewels belonging to her had been delivered up by the bank to an unauthorized person on a forged order. The case was settled; but bankers being desirous to ascertain their real position, many legal opinions were taken on the point, and after See also:consideration of these, the Central Association of Bankers issued a memorandum, in which they stated that the best legal See also:opinion appeared to be that a distinction must be drawn between cases in which valuables were by mistake delivered to the wrong person and cases in which they were destroyed, lost, stolen or fraudulently abstracted, whether by an officer of the bank or some other person. That in the former case the question of negligence did not arise, the case being one of wrongful conversion of the goods by a voluntary act for which the bank was liable apart from any question of negligence. That, in the second case, that of loss or See also:theft, the banker, being a gratuitous bailee, would only be liable if he had failed to use such care as an ordinary prudent man would take of valuables of his own. The latter rule is practically that laid down in Giblin v. MacMullen, L.R. 2 P.C. 318, but in estimating the amount of care to be taken by the banker, the nature of the goods, if known or suspected, and the exceptional means of protection at the disposition of bankers, such as strong-rooms, must be taken into consideration. Methods of obviating both classes of risk by means of See also:special receipts have frequently been suggested, but such receipts do not appear to have come into general use. Theoretically, bankers are supposed to refuse accounts which are either expressedly or are known to be trust accounts. In practice, however, it is by no means uncommon to Trustees. find accounts opened with a definite heading indicating
the fiduciary capacity. In other cases, circumstances exist which affect the banker with notice of that capacity. In either case, however, the obligation to honour the customer's cheque is the predominant See also:factor, and the banker is not bound or entitled-to question the propriety or object of the cheque, unless he has very clear evidence of impending fraud (See also: Other incidents of the ordinary practice of banking are the discounting of bills, the keeping of deposit accounts, properly Bill-dls- so called, and the making of advances to customers, counting. either by way of definite See also:loan or arranged overdraft. So far as the discounting of bills is concerned, there is little to differentiate the position of the banker from that of any ordinary bill-discounter. It has been contended, however, that the See also:peculiar attribute of the banker's See also:lien entitled him to hold funds of the customer against his liability on current discounted bills. This contention was ultimately disposed of by Bowen v. Foreign & Colonial See also:Gas See also:Company, 22 W.R. 740, where it was pointed out that the essential object of a customer's discounting bills with his banker was to feed the current account, and that a possible liability constituted no set-off against an existing debt. Whether a particular bill has been taken for See also:discount or collection is a question of fact. As in the payment of bills, so in the collection of them, there is no statutory protection whatever for the banker; as against third parties he can only rely either on the customer's title or his own as a holder for value, if no forged endorsement intervene and he can establish a consideration. A deposit account, whether at See also:call or on fixed notice, does not constitute any fiduciary relation between the depositor and the banker, but merely a debt due from the latter to the former. It has been suggested that cheques can be drawn against deposit account on call, and, though a banker might safely honour such a cheque, relying, if necessary, on his right of lien or set-off, there appears no legal right in the customer to enforce such payment. Deposit receipts given by bankers are exempt from stamp duty, even though they contain an undertaking with respect to payment of principal and interest. They are clearly not negotiable instruments, but it is difficult to deduce from the cases how far dealings with them may amount to an equitable assignment of the moneys they represent. Probably deliberate definite See also:transfer, coupled with endorsement, would confer an effective title to such moneys. Where, as is not uncommon, the form of deposit note includes a cheque, the banker could not refuse to pay were the cheque presented and any superadded formalities complied with. There is no obligation on a banker to permit his customer to overdraw, apart from agreement See also:express or implied from course of business. Drawing a cheque or accepting a bill payable at the banker's which there are not funds to meet is an implied request for an overdraft, which the banker may or may not comply with. Interest is clearly chargeable on overdrafts whether stipulated for or not. There is no direct authority establishing this right in the banker, and interest is not usually recoverable on mere debts, but the charge is justifiable on the ground of the universal custom of bankers, if not otherwise. The charging of See also:compound interest or interest with periodical rests has been supported where such system of keeping the accounts has been brought to the notice of the customer by means of the pass-book, and not objected to by him, but in the present attitude of the courts towards the pass-book some further recognition would seem necessary. Such system of charging interest, even when fully recognized, only prevails so long as the relation of banker and customer, on which it is founded, continues in force; the taking a See also:mortgage for the existing debt would put an end to it. The See also:main point in which advances made by bankers differ from those made by other See also:people is the exceptional right pos-Lien. sessed by bankers of securing repayment by means of the banker's lien. The banker's lien is part of the law See also:merchant and entitles him, in the absence of agreement express or implied to the contrary, to retain and apply, in discharge of the customer's liability to him, any securities of the customer coming into his possession in his capacity as banker. It includes bills and cheques paid in for collection (See also:Currie v. Misa, r A.C. 564). Either by virtue of it, or his right of set-off, the banker can retain moneys paid in by or received for the credit of the customer, against the customer's debt to him. Goods deposited for safe custody or moneys paid in to meet particular bills are exempt from the lien, the purpose for which they come to the banker's hands being inconsistent with the assertion of the lien. The existence of the banker's lien entitles him to sue all parties to bills or cheques by virtue of sec. 27, subs. 3 of the Bills of Exchange Act, and to the extent of his advances his title is See also:independent of that of the previous holder. Moreover, the banker's lien, though so termed, is really in effect an implied See also:pledge, and confers the rights of realization on See also:default pertaining to that class of See also:bailment. But with regard to the exercise of his lien, as in many other phases of his relation to his customer, the banker's strict rights may be curtailed or circumscribed by limitations arising out of course of business. The principle, based either on general See also:equity or See also:estoppel and independent of definite agreement or consideration, requires that when dealings between banker and customer have for a reasonable space of time proceeded on a recognized footing, the banker shall not suddenly break away from such established order of things and assert his strict legal rights to the detriment of the customer. By the operation of this rule, the banker may be precluded from asserting his lien in particular cases, as for instance for an over-draft on one account against another which had habitually been kept and operated on separately. It equally prevents the dishonouring of cheques in circumstances in which they have hitherto been paid independent of the actual available balance. Restrictions arising from course of business can of course be put an end to by the banker, but only on reasonable notice to the customer and by providing for outstanding liabilities under-taken by the latter in reliance on the continuance of the pre-existing state of affairs (see See also:Buckingham v. London & Midland Bank, 12 Times L.R. 70). As against this, the banker can, in some cases, fortify his position by See also:appeal to the custom of bankers. The validity of such custom, provided it be general and reason-able, has frequently been recognized by the courts. Any person entering on business relations with a banker must be taken to contemplate the existence of such custom and implicitly agree that business shall be conducted in accordance therewith. See also:Practical difficulty has been suggested with regard to proof of any such custom not already recognized in law, as to how far i.. can be established by the evidence of one party, the bankers, unsupported by that of members of the outside public, in most cases impossible to obtain. It is conceived, however, that on the See also:analogy of See also:local custom and the Stock Exchange rules, such outside evidence could be dispensed with, and this is the See also:line apparently indicated with relation to the pass-book by the See also:court of appeal in Vagliano's case (23 Q.B.D. at p. 245). The unquestionable right of the banker to summarily debit his customer's account with a returned cheque, even when unindorsed by the customer and taken by the banker in circumstances constituting him a transferee of the instrument, is probably referable to a custom of this nature. So is the common practice of bankers to refuse payment of a so-called " stale " cheque, that is, one presented an unreasonable time after its ostensible date; although the fact that some banks treat a cheque as stale after six months, others not till after twelve, might be held to militate against the validity of such custom, and See also:lapse of time is not included by the Bills of Exchange Act among the matters working revocation of the banker's duty, and authority to pay his customer's cheque. Indirectly, this particular custom obtains some support from sec. 74 (2) of the Bills of Exchange Act, although the object of that section is different. That section does, however, import the custom of bankers into the reckoning of a reasonable time for the presentation of a cheque, and with other sections clears up any doubts which might have arisen on the common law as to the right of the holder of a cheque, whether crossed or not, to employ his banker for its collection, without imperilling his rights against See also:prior parties in case of dishonour. On dishonour of a cheque paid in for Deposit accounts. Overdrafts and advances. collection, the banker is bound to give notice of dishonour. Being in the position of an agent, he may either give notice to his principal, the customer, or to the parties liable on the bill. The usual practice of bankers has always been to return the cheque to the customer, and sec. 49, subs. 6 of the Bills of Exchange Act is stated to have been passed to validate this custom. Inasmuch as it only provides for the return of the dishonoured bill or cheque to the drawer or an endorser it appears to See also:miss the case of a cheque to bearer or become payable to bearer by See also:blank endorsement prior to the customer's. Where a bank or a banker takes a mortgage, legal or equitable, or a See also:guarantee as cover for advances or overdraft, there is nothing necessarily differentiating the position from that of any other mortgagee or guaranteed party. It has, however, fallen to banks to evoke some leading decisions with respect to the former class of See also:security. In London Joint Stock Bank v. See also:Simmons ([1892], A.C. 201) the House of Lords, professedly explaining their previous decision in See also:Sheffield v. London Joint Stock Bank, 13 A.C. 333, determined that negotiable securities, commercial or otherwise, may safely be taken in pledge for advances, though the person tendering them is, from his known position, likely to be holding them merely as agent for other persons, so long as they are taken honestly and there is nothing tangible, outside the man's position, to arouse suspicion. So again in See also:Lloyd's Bank v. See also:Cooke [1907], r K.B. 194, the bank vindicated the important principle that the common law of estoppel still obtains with regard to bills, notes and cheques, See also:save where distinctly annulled or abrogated by the Bills of Exchange Act, and that therefore a man putting inchoate negotiable instruments into the hands of an agent for the purpose of his raising money thereon is responsible to any one taking them See also:bona fide and for value, although the agent may have fraudulently exceeded and abused his authority and the case does not fall within the provisions of the Bills of Exchange Act. With regard to guarantees, the main incidents peculiarly affecting bankers are the following. The existence of a guarantee does not oblige the banker to any particular system Qaaran- of keeping the account. So long as it is not unfairly See also:tees. manipulated to the detriment of the guarantor, there is no obligation to put moneys paid in, without appropriation, to the guaranteed rather than to the unguaranteed account, and on the termination of a guarantee, the banker may See also:close the account, leaving it to be covered by the guarantee, and open a new one with the customer, to which he may devote payments in, not otherwise appropriated. Where by its nature or terms a continuing guarantee is revocable either summarily or on specified notice, difficult questions may arise on such revocation as to the banker's duty and obligations towards the customer, who has probably incurred liabilities on the strength of the credit afforded by the guarantee. Although the existence of a guarantee does not bind the banker to advance up to the prescribed limit, he could not well, on revocation, immediately shut off all facilities from the customer without notice, while subsequent purely voluntary advances might not be covered by the guarantee. These contingencies should therefore be fully provided for by the guarantee, particularly the See also:crucial See also:period of the pendency of notice. Additional information and CommentsThere are no comments yet for this article.
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