BANKING LAW ā Banker-Customer Relationship ā Duty of Bank to Comply with Customer’s Mandate
Principle Statement
The basis of liability ascribed to the bank is in tort of negligence, not absolute liability. The question is whether the bank exercised due care and diligence in making payments. In this case, there was no evidence of prepayment formalities or signature comparison with the specimen.
Ratio Decidendi (Source)
Per Oguntade, JSC, in Ndoma-Egba v. African Continental Bank Plc (2005) NLC-402001(SC) at pp. 27ā28; Paras CāC.
"The basis of the liability ascribed to the defendant is in the tort of negligence. It is not a case of absolute liability. The question is ā Had the defendant exercised due care and diligence in the procedure it adopted in making payments on exhibits 2, 3 and 4? ā¦ In the instant case however, there was not a shred of evidence on the prepayment formalities done by the defendant by the clerk or official who paid, as to whether the signature of plaintiff on exhibits 2, 3 and 4 was at any stage compared with the plaintiff's specimen signature on exhibit 1."
Explanation / Scope
Banks owe a duty of care to comply with customer mandates and compare signatures before payment. Negligence, not absolute liability, is the standard. The principle applies to banking law. The rule requires banks to exercise due diligence in payment procedures. Failure to show signature comparison evidence indicates negligence. The bank bears responsibility for losses from negligent payment.
