What Are The Duties Of A Banker And A Customer In A Contract?
A contract is an agreement between two parties, in which one party agrees to the terms and conditions of the other party. There are two types of contracts; formal contract; where there is a written agreement, and an informal contract; where there is no written agreement but an oral agreement.
The terms of a contract between the banker and the customer is hardly embodied in a formal document negotiated between the bank and customer.
Creating a bank account is good but being aware of your rights and duties as customer and also as a banker in a banker-customer's contract is very important.
Once a customer opens an account with the banker, a contract exist between the two parties and each party now posses its own rights and duties. The court ensures that each party uphold to their duties and respect the rights of one another.
What Are The Duties Of A Banker To A Customer In A Banking Contract?
Some of the duties of a banker to a customer in a banker-customer's contract include;
Banker's duty of Secrecy:
One of the most important duty of a banker to his customer in a banker-customer's contract, is the duty of secrecy.
The banker has an obligation not to disclosed the amount of moneys in a customer's account. But there are circumstances under which the bank can disclosed the confidential information of the customer. Some of which are;
- Disclosure by composition of Law: This happens when the court orders it to be disclosed. It can take the form of a valid request, by tax officials, etc.
- Disclosure under duty to the public interest: If a customer is being suspected of dealing with the enemy during war times, the banker can disclosed the secret of the customer for the seek of the public interest.
- Disclosure under customer's approval: The customer can ask the banker to disclose his/her account to another customer or an official.
Banker's duty to self gate trusted properties:
Duty to self-gating is fundamental to the notion of trusteeship and to the operation of trust. In a banker-customer's relationship, one of the role of a banker is to act as a trustee to customers.
A bank is a place for customers to keep their properties in order to secure them. Hence, it is the responsibility of the banker to ensure the safety of these properties and also ensure no harm is encountered.
Banker's duty of rendering statement of an account:
Another important duty of a banker to his customer is; the duty to render statement of an account.
A statement of account is the record of all daily transactions of the customer with the bank.
The bank has the obligation to render the account statement of a deposit account to the depositor; provided the statement are not required for time deposit.
Banker's duty to honor checks:
Checks are printed documents issued by a bank to its client to else money transactions.
The banker has the obligation to honor checks in the case where there are sufficient funds in the client's account to which the check is written or in case of overdraft.
Duties Of A Customer to A Banker?
In as much as a banker has duties in a banker-customer's contract, the customer also has duties to his banker too. Some of duties of a customer to his banker include;
- Providing true, complete and accurate information when filling out any form provided by the bank and reframe from providing any false information.
- Disclose all financial obligations when applying for a product or service.
- Update personal information to the banker on a continues bases when ever required to do so.
- Comply with the terms and conditions governing the choosing services or products. Companies may notify the bank on any unknown operation on her account.
Types of Relationships Between A Banker and A Customer?
After understanding the duties of a banker to his customer and also the duties of a customer to his banker, it is important to know the relationships that are created as a results of these transactions.
Due to transactions between a banker and its clients, there exist different type of relationships built between them. Some of which include;
Relationship of a Debtor and a Creditor:
When a customer opens up an account in a bank and this account has a credit balance, the banker becomes the debtor and the customer is the creditor.
On the other hand, when a customer loan money, takes an over-draft or advance payment from a banker, he/she will become a debtor to the banker (the creditor). The banker can legally refuse to honor checks if there is no proper proof of identity.
Relationship of a Pledger and a Pledgee:
This happens when a customer pledges(promises) certain assets or security like land, house or a car with the bank in order to take a loan.
In this case, the customer becomes the pledger and the banker becomes the pledgee.
Relationship of Assigner and Assignee:
Some golden loans are given to customers with conditions that they are given a life insurance with sum insuring the amount of loan. The first beneficiary of this life insurance policy is the banker.
In this case, the customer has assigned the banker as the irreversible beneficiary of the life insurance policy, making the customer the assigner and the banker the assignee.
Relationship of Bailor and Bailee:
The contract of bailment exist between the customer and the banker in which the customer entrust goods to the banker to hold the goods for a specific period of time before being returned.
In this case, the customer is the bailor since he is the one that deliver goods to the banker who is the bailee.
Relationship of Agent and A principal:
The banker acts as an agent of the customer (principal) or the customer acts as an agent of the banker (principal).
When the banker acts as agent of a customer, it does this by providing the following agency services;
- Buying and selling securities on behalf of the customer.
- Collection of checks, dividend, promissory notes on his behalf.
When can a Banker-Customer's Contract be Terminated?
Termination can occur in the following cases;
- Voluntary termination: This is when a customer decides to end his/her contract with his bank.
- In case of death of the customer.
- In case of liquidation of the Bank.
- In case of insecurity in the bank.
- What Are The Rights Of A Banker/Customer In A Banker-Customer's Contract?
- What Are The Various Types Of Checks That Banks Issued To Customers?
Final Thoughts on the Duties of a Banker/Customer in a Banker-Customer's Contract
A contract is an agreement between two or more individuals. It could be a formal contract( requiring a written agreement) or an informal contract (oral).
But despite the nature of the contract there are duties and rights attach to each party involved.
Once a banker-customer's contract is formed, a relationship is created between the banker and the customer and both parties most perform the above duties in order to maintained the contract.