Types of Account
Current accounts
- You could only get one if you were 'credit-worthy' or had a guarantor. You also had the opportunity to access an overdraft. Mid 1980s: turning point! Either paid no interest or very little.
- If a bank pays interest, they'll pay 2%. If they charge it, it will be 15%. This is how they make a profit!
- If there are cleared funds in the account (money paid in that is not in the form of cash and thus not immediately available, e.g. cheques - approx. 10 days), and the agreement for card and PIN is signed, money can be withdrawn.
- The legal requirement for a signature exists because there has been an agreement signed when creating an account.
- Banks want people to stop using cheques (will not make it any easier).
- Bank can refuse to pay if there is a lack of funds, if the customer is drunk etc. (mental incapacity)...
- There is no legal automatic entitlement to overdraw money
- It is very difficult for a bank employee to say that a customer is incapable to withdraw money
- If an 80 year old goes into the bank, looks confused, and takes out £4000 to gamble with, would the employee allow that? Cannot legally refuse the customer as you aren't qualified to judge the customer's mental state.
- Courts would generally be unsympathetic to a bank saying they were trying to protect the customer.
- Drunk customers usually use ATMs which swallow the card if they put the wrong PIN in too many times.
- In the case of death or bankruptcy, the bank stops all payments.
- If the bank isn't convinced that it is the customer's signature, it can refuse to pay.
- You can stop payment of a cheque, which you can't do with a debit card. This was only without a cheque guarantee card. The bank would have to accept the instruction to stop payment.
- At common law, the only reason to stop payment of a cheque was if there is no consideration.
- Will often be referred to by different names
- Normally repayable on demand, and in the absence of any agreement to the contrary, that will be the common law position.
- This can be varied by the parties, e.g. deposit for a fixed term for a higher rate of interest - will be subject to the terms of the contract.
- Withdrawals traditionally had to be made at the branch where the account is held.
- Many accounts still operate by passbook.
- Many are now only available in electronic form (e.g. Halifax ISA - linked to my student, savings and current account)
- Limit per tax year for tax-free ISAs is £5,640.
- George Osbourne: tax avoidance is terrible.
- Parliament then creates individual savings accounts...
- Stocks and shares ISAs exist: allowed twice as much as a cash ISA.
- It is now mandatory to comply with anti money laundering legislation.
- There are problems with limited contractual capacity of minors.
- Nash v Inman 1908: D ordered eleven waistcoats then refused to pay because he was under 18... (now have Minors Contracts Act 1987).
- A joint account is held by two or more persons (not in a partnership, not trustees, not executors/administrators).
- Husband/wife, same-sex relationships etc.
- Needs to be signed by all parties.
- From a legal point of view, it isn't the bank's problem who owns the money. The bank has no interest in the ownership of the money: it is only in following its customers' instruction.
- Husband deposits money, wife can withdraw the entire amount!! Not the bank's job to work out who owns what - general position is that it is not interested in ownership.
- Have to trust the other person, not so much in a relationship breakdown.
- If the bank pays out on one signature only when it should have been signed by two, the customer can sue the bank. There is only a remedy available if there is a loss suffered (if one party only benefits his/herself).
- Catlin v Cypres Finance Corp (London)
- If one party dies, all of the money goes to the surviving person if there is a survivorship clause.
- If cheques are presented for payment, it depends on the type of instruction.
- If a bank has notice that one party is mentally incapable, they can stop.
- A partnership is a collection of people who work together in business.
- It is not unlike a joint account.
- All partners need to sign the agreement in the first place but not needed in all operations of the account (specified in the mandate).
- Death, requirement, resignation and bankruptcy terminate the agreement unless it is specified in the mandate.
- A company exists as a legal person - can open an account in its own name (unlike a partnership).
- The money in accounts belongs to companies and not the people running or owning them.
- £12,500 for a PLC.
- For a company account, the bank needs to see a certificate of incorporation; a certificate to commence business (only for PLCs); and a memorandum of association and articles of association (not needed under legislation, but banks still ask for them).
- Ultra vires transactions are not normally a problem nowadays because short-form object clauses are used.
- Officers acting without authority is potentially more problematic: but there is a presumption that a director can bind a company.
- Disqualified directors: the bank must be aware of disqualified directors because if they are disqualified it is not binding on the company.
- Removal of directors.