LEGAL PRINCIPLE: BANKING LAW — Banker-Customer Relationship — Duty of Care — Contractual Nature
PRINCIPLE STATEMENT
The relationship between a bank and its customer is contractual, described as that of debtor and creditor and principal and agent, and the bank owes a duty of care to the customer.
RATIO DECIDENDI (SOURCE)
Per Ogundare, JSC, in Haston (Nigeria) Limited v. African Continental Bank Plc (2002) NLC-1091998(SC) at pp. 17–18; Paras A–B.
"This is so because the defendant owed the plaintiff a duty of care. Their relationship is contractual and has been described as that of debtor and creditor and principal and agent- see Yesufu v. A.C.B (1981) 1 SC 74, 98-99; Balogun v. N.B.N (1978) 3 SC 155, 163-164."
EXPLANATION / SCOPE
The banker-customer relationship is contractual. The bank is a debtor for deposits and a creditor for loans. The bank also acts as an agent for the customer in certain transactions. The bank owes a duty of care in performing its functions. The principle applies to all banking operations. The customer may sue for breach of contract or negligence. The duty includes exercising reasonable care in honouring cheques, providing statements, and following instructions. The rule is well-established in Nigerian law. The bank may be liable for losses caused by its negligence. The principle protects customers from bank errors. The standard of care is that of a reasonable banker.