LEGAL PRINCIPLE: COMMERCIAL LAW — Bank Drafts — Condition Precedent — Presentation in Breach of Condition — Right to Stop Payment
PRINCIPLE STATEMENT
A bank has the right to stop payment on a bank draft if the customer fails to comply with conditions precedent, such as funding the account as promised.
RATIO DECIDENDI (SOURCE)
Per Musdapher, JSC, in First African Trust Bank Ltd v. Partnership Investment Company Ltd (2003) NLC-2932001(SC) at pp. 37–38; Paras D–A.
"There is no doubt under the circumstances, the appellant has the right to protect itself against any fraud against it by its customer Alhaji Ladan. The appellant had the undoubted right to stop the cheque until funds were made available as promised by its customer."
EXPLANATION / SCOPE
A bank may stop payment on a draft if conditions are not met. The principle applies to banking law. The bank has a right to protect itself from fraud. The rule protects the bank’s interests. The customer must comply with conditions. The principle is well-established.
