GROUP 1

BRIEF FACTS
Josrich Trading Co. ltd is a duly incorporated company involved in the business of real
estate. The company wishes to open a current account with Centenary Bank Ltd. The
bank availed several forms with the terms and conditions to the company. On the 1st day
of August 2021, the company opened the account and with 2 signatories being Josephine
Kenyangi the Managing Director and Emmanuel Okello the secretary signing jointly.
The company asked its employees to open salary accounts with the bank and Babirye
Mary opened an account with the bank for that purpose
LEGAL ISSUES
1. What is the relationship between Joshrich trading co.ltd and centenary bank?
2. What is the relationship between centenary bank and the employees of Joshrich?
3. What is the legality of the terms and conditions in relation to the bank customer
relationship?
4. What potential liability would arise from the documents?
LAW APPLICABLE
1. The 1995 constitution
2. The bank of Uganda act
3. The financial institutions act as amended
4. The bank of Uganda consumer protection guidelines
5. Case law
Resolution
Issue 1 What is the relationship between josrich trading company limited and
centenary bank?
It’s prudent to first understand the meaning of a bank/banker. There are different
legislations that have attempted to define a bank for example the Bills of exchange Act
cap 68 Section 1 notes unless the context otherwise require bankers include a body
of persons whether incorporated or not who carry on the business banking. The
Bank of Uganda Act- defines the Bank as the bank of Uganda established under Act.
Bank is also defined in Section 3 (c) of the Financial Institutions Act 2004 as-
any company licensed to carry on financial institution business as its principal
business as specified in 2nd schedule to this Act, including all branches and
offices of that company in Uganda..
The main definition of a bank/banker was set out In United Dominion Trust Ltd v
Kirkwood [1966]2QB431 A bank was defined as an institution that accepts money from
their customers in the form of deposits and then collects cheques on their behalf, placing
those cheques to the customer’s credit. The banks must honour the cheques that are
drawn on them or orders drawn on them to pay a third party. To carry on the banking
business the institution must maintain current accounts for customers and record debits
and credits to the account.
In United Dominion Trust Ltd v Kirkwood [1966]2QB431 it was noted that there are
three characteristics usually found in bankers today;
• they accept money from and collect cheque for their customers and place them to their
credit
• They honor cheques for orders drawn on them by their customers when presented for
payment and debit their customers accordingly,
• They keep current accounts or study of that nature in their books in which the
credit and debits are entered.
From our facts Centenary Bank is the banker or bank.
WHO IS A CUSTOMER?
This presents difficulty in defining just like what or who a banker or bank is. The first
requirement of establishing bank-customer relationship is that an individual must be
classified as a customer. Not all persons who approach the bank for services will be
considered customers. In Great Western railways co. ltd v London and county
Banking co. ltd (1901) ALLer Rep 1004 a rent collector who regularly cashed his
cheques at the bank was not considered as a customer since he did not maintain an
account with the bank. Therefore casual service by the bank for a person does not make
them a customer.
The major factor in determining whether or not a person is a customer depends on
whether or not they have or will have an account with the bank. Therefore, there must
be some sort of account, either a deposit, or current account or similar
relationship to make a person a customer of a bank. However one need not have an
account to qualify as a customer. An agreement to open an account is sufficient to
constitute a person a customer of the bank. Commissioners of Taxation v.
English, Scottish and Australian Bank 1920 AC the word customer signifies a
relationship in which duration is not of the essence.
Therefore Josrich Trading Co. ltd qualifies to be a customer since it opended a current
account with Centenary Bank on the 1st day of August 2021.
On the side of its employees, Babirye Mary qualify to be customer of Centenary Bank
because she opened a salary account with the same bank. However until the other
employees open up accounts with the same bank, they cant be considered as customers of
the bank/
A person having an account has 3 fundamentally legal consequences.
a) Where the bank collects in good faith and without negligence, cheques remitted to
it, it is entitled to a statutory defence against the true owner.
b) The bank owes a duty to obey customer regarding collection of cheques and other
effects payable to him and further as regard the making of payments ordered by the
customer..
c) The bank owes incidental duties to its customer i.e. confidentiality.

NATURE OF THE RELATINSHIP

Generally, the nature of relationship between banker-customer is a contractual one
governed by the principles of contract such as offer, acceptance, and consideration. In
Mobil (u) ltd v UCB(1982) HCB 64s it was held that the banker-customer
relationship is contractual in nature.
In Esso Petroleum Co. v Uganda Commercial Bank 1992 the Supreme Court of
Uganda has held that the relationship of a banker and a customer is contractual.
Hence the respondent was in breach of his duty emanating from the contractual
relationship. The customer if relationship is breached is entitled to a tracing order.
Joachimson v Swiss Bank Corp [1921] 3 KB .110 Lord Atkin stated. The
relationship is contractual and that the bank undertakes to receive money and collect bills
for its customer’s account.
This relationship gives rise to a number of duties and obligations as seen hereunder
It is a term of contract that the bank will not cease to do business with the
customer except upon reasonable notice.
The customer undertakes to exercise reasonable care in executing written orders so as not
to mislead the bank or facilitate forgery.
The bank is not liable to pay the customer the full amount of this balance until
he demands payment from the bank at the branch at which the current account is kept.
Hence from Foley v Hill it can be seen
a) Demand exists only in the case of current savings account which provided for the
payment at call.
For fixed deposits payment only on the designated day.
b) The amount standing to the customer’s credit becomes payable without demand if
this bank is being wound up or if the banker customer relationship is terminated.
c) The period of limitation begins to run from the day on which the amount is payable.
d) Contract exists between banker and customer based on maintenance of the account.
Bank of Baroda (U) Ltd v. Kamuganda (2006) 1 EA 11

Debtor-creditor relationship
More so, the banker-customer relationship is a debtor-creditor relationship.
In Foley v Hill(1848) 2 HLC 28, the question was whether the relationship between a
banker and a customer was that of a creditor and a debtor or whether it was that of a
principal and agent, the House of Lords in relation to the fundamental nature of a bank
account. Lord Cottenham L.C held that banker does not hold the sums in a bank
account on trust for its customer. Instead the relationship between them is that of
debtor and creditor.
Therefore, upon the customer depositing money on the account he holds with the bank,
he/she becomes a creditor and the banker becomes a debtor. The banker is liable to
pay the customer his money upon demand of the payment. The banker accepts the
deposits with an obligation to honor his customers’ cheques. The creditor must
demand payment at the proper time, place and in the proper manner with reasonable care.
It is further a relationship of debtor and creditor because the bank undertakes to
borrow money from the customer as and when the customer lends it to him when
he deposits it. In Foley v. Hill it was stated that money paid into a bank ceases
to be the money of the principal but of the bakner who is bound to return it upon
demand. Hence the banker is not an agent or a factor but a debtor.
A banker can also be creditor and customer a debtor where the customer borrows
money through loans and overdrafts. that relationship hence can change. hence a
banker and a money-lender are the same thing.
Agency relationship
The bank acts as an agent for the customer in performing the following functions:
payment and collection of subscription, dividends, salaries, pensions etc. A banker
makes payments and receive money on behalf of their customer in the following
ways: payment of insurance premium. In Indechemist ltd v National Bank of
Nigeria ltd (1976) 1 ALR comm 143, court held that one of the principal
function of the banker is to receive instruments including cheques from its
customers in order to collect proceeds hence the existence of a principal (customer) –
agent(banker) relationship.

Trusteeship and beneficiary

This is not an appropriate relationship for a banker and customer, this is because
a trustee is usually restricted in the use of funds, however, we have to note that this
does not exclude the possibility of a banker acting as a trustee for its customers in some
aspects. Furthermore, in ordinary depositing collecting transaction, there is no fiduciary
relationship and debtor creditor relationship is applied. However, there are four
circumstances where a fiduciary relationship might arise between a banker and customer;
1. When it’s giving advice in a position of conflict of interest.
2. When it’s receiving or transferring the customer money.
3. When the bank is holding confidential information of its customers.
4. Where the money is mistakenly paid or credited.
In woods vs martins’ bank ltd (1959) 1 QB 55 court held that there was a fiduciary
relationship as the manager had chosen to give the advice and he was advising the
claimant in a position where there was conflict of duty and interest. Furthermore, there
was no disclosure of such interest made to the claimant
The proceeds received are not held in trust for the customer; the bank borrows
them and undertakes to repay them. The promise to repay is to repay at the
branch of the bank where the account is held and during the banking hours.
It includes a promise to repay any part of the amount due against the written order of the
customer, addressed to the bank at the branch and such written orders may be outstanding
in the ordinary course of business for 2 to 3 days.
The relationship’s terms are of an implied contract and hence not written but depend on
bankers customs. They may be modified by express agreement between bank and
customer. Statutes in force may also regulate or modify them they are as follows:
1. Bank account balance is financial position between bank and customer- when
account credited, the banker owes balance, when account overdrawn, customer owes
balance to banker.
2. Bank agrees to pay the customer’s cheques cheques up to the amount
standing to credit of the customer’s account plus any agreed overdraft limit.
3. Bank may not pay from customers account without a mandate from them
( e.g. cheque drawn by them).
4. The bank agrees to promptly collect cheques deposited to the customer’s
account as agent and credit proceeds to customer’s account
5. Bank has right to combine customer’s account- each account is just an
aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customers account, to
extent that customer is indebted to the bank
7. The bank must not disclose details of transactions through the customer’s account-
unless customer consented, public duty to disclose the bank’s interests require it to or the
law demands.
8. Bank musn’t close customer’s account without reasonable notice since cheques are
outstanding in the ordinary course of business for several days.
The contract has with it superadded obligations which however do not affect the
main contract. They are the duties which arise in the ordinary course of business such
as the
Ways in which the bank –customer relationship can be terminated
In Mobil (u) ltd v U.C.B, it was noted that the relationship between a banker and
customer is contractual. It’s an implied contract whose terms are in much dependent on
the custom of bankers. Because it is a contract the banker customer relationship can as
well be discharged or terminated thereby determining the relationship.
The banker-customer relationship can be determined on ways applicable to ordinary
contracts. There are four methods of discharging contractual obligations in an ordinary
contract; these include performance, agreement, impossibility or frustration and breach.
However as per the banker-customer relationship the only applicable and practical
methods are agreement and frustration also known as impossibility.
The banker-customer relationship will be determined by agreement through mutual
agreement where the both the banker and customer agree to extinguish the rights and
obligations under the he banking contract. This can be enlightened by the latin maxim
translated as “what has been created by agreement can be extinguished by agreement”
However in usual banking practice, such cases of mutual termination are rare.

Issue 2 Examine the standard terms and conditions (here to attached), relate them
to your understanding of a banker customer relationship and explain the salient
features thereof?

The first requirement of establishing bank customer relationship is that an individual

must be classified as a customer.
Not all persons who approach the bank for services will be considered customers. In
Great Western Railways co. ltd vs London and Country Banking co. ltd (1901) AC
414 a rent collector who regularly cashed his cheques at the bank was not considered as a
customer since he did not maintain an account with the bank.
In Woods vs Martins Bank ltd (1959)1 QB 55, the other way to establish a banker
customer relationship is that one must hold an account with the bank. Therefore, Josrich
trading co. ltd upon opening an account with centenary bank ltd will be considered as a
customer thus banker customer relationship.
Salient features of the banker – customer relationship as per the T&Cs.

Contractual in nature; The nature of banker – customer relationship is contractual in

nature as spelt out by the case of Stanbic Bank v Uganda Crocs Limited SCCA No.4
of 2004. This implies that there are terms and conditions that bind both parties to the
agreement.

Capacity to contract; under the terms and conditions 4.1 of A2; the minimum age to
apply for a savings account is 18 years and that accounts opened for minors are operated
by parents/guardians until they become of age

Debtor – creditor relationship; In the decision of Foley v Hill (1848) 2 HLC 28, 9 ER
1002, Lord Cottenham noted that money when paid into a bank ceases altogether to be
money of the principal; it is then money of the banker who is bound to return an
equivalent by paying a similar sum to that deposited when asked.

Duty owed by customer to banker;

The duty of reasonable care in drawing cheques; In Mobil (U) Ltd v Uganda
Commercial Bank (1982) HCB 64, the court found that if a cheque is drawn in such a
way as to facilitate or almost invite an increase in the amount by forgery should the
cheque fall in the hands of the wrong people, forgery is not a remote but a natural
consequence of the customer’s negligence.

The terms and conditions provides that a customer ought to be careful when writing
cheques to prevent fraud by forgery by using non-erasable ink, never pre-sign a blank
cheque, crossing it with two parallel lines and crossing out the words ‘’or bearer’’

The duty to inform the bank of any forgeries that the customer is aware of; In
Greenwood v. Martins Bank Ltd (1932) I KB 371, the court stated that there is a
continuing duty on either side to act with a reasonable care to ensure the proper working
of the account. That the bank, if a cheque was presented to it which it rejected as forged,
would be under a duty to report this to the customer to enable him or her to inquire into
and protect himself or herself against the circumstances of forgery.

This involves a corresponding duty on the customer, if he or she became aware that
forged cheques were being presented to his or her banker, to inform him or her banker in
order that the banker might avoid loss in future

Duty owed by banker to customer;

Honoring the customer’s mandate; The customer gives the bank authority to operate the
account in accordance with his or her instructions. The banker has an implied duty to
honor its customer’s cheques provided that; they are drawn in a proper form,the account
on which they are drawn for credit to an amount sufficient to pay them or arrangements
have been made for an overdraft facility,there is no legal cause (service of a garnishee
order, they are presented during banking hours.

Skill and care; In Barclays Bank PLC V. Quincecare [1992] 4 ALLER 363 it was
held that it is an implied term of the contract that the banker will exercise reasonable care
in executing the customer’s orders to pay or transfer money.

The bank goes ahead and issues standard terms and conditions for the customer to follow
in order to mitigate fraudulent transactions.

Secrecy/confidentiality; In Tournier v. National Provincial and Union Bank of

England (1924) 1 KB 461, It was stated that it may be asserted with confidence that the
duty of non- disclosure is a legal one arising out of contract and that the duty is not
absolute, but qualified. It is not possible to frame any exhaustive definition of the duty.
On principle, the qualification can be classified under four heads (a) where disclosure is
under compulsion (b) where there is a duty to the public to disclose (c) where the interest
of the bank require disclosure; and (d) where the disclosure is made by the express or
implied consent of the customer.

Other features;
Current bank accounts are operated to run a business
It is a non interest bearing bank account.
It needs a higher minimum balance to be maintained as compared to the savings account.
Penalty is charged if minimum balance is not maintained in the current account.
It charges interest on the short term funds borrowed from the bank.
It does not promote saving habits with its account holders.
There is no restriction on the number and amount of deposits.
No restriction on the number and amount of withdrawals made.
Issue 3. Whether there are any potential liabilities arising out of the banker-
customer relationship.

Liability shall arise from the obligations of each party to the banker-customer relationship
in case of breach.

Centenary bank Ltd has the following obligations arising out of the terms and conditions.

1. It has a duty to safe guard the information concerning Josrich Trading Company’s
account which is the duty of confidentiality. Failure to do so shall make the company
vulnerable to fraudulent actions being carried out on it. The disclosure of this
information by the bank shall lead to breach of contract. So Centenary bank ought to
make sure that it does not disclose the account information of Josrich Trading Company
and Nabirye Salma to third parties and if it does, it shall be liable for breach of contract.

2. The bank has an obligation to handle it's client's account with skill and care. This
obligation arises out of clause 5.0 where the bank has an obligation to record bank log-in
attempts to detect any suspicious activity to avoid fraudulent activity on the client's
account. This shows that the bank has a duty of skill and care which if neglected will
make them liable to pay damages to it's client in case of negligence on it's part

3. The bank also has a duty to honour the customer's mandate and this is through doing as
the client desires while following the necessary safe guards put in place by the bank
itself. For example the bank has a duty to allow it's client to withdraw their money when
they decide to if they have followed the terms and conditions that the bank set out when
doing so. Failure of the bank to give it's client their money shall make them liable for
breach of contract and fraud.

4. The bank also has an obligation to give their client all the relevant information for it to
ensure that the client does not act in a manner that will expose them to fraudulent actions.
For instance the duty to teach a client how to draw a cheque in a manner that will not
encourage fraudulent activity. This includes not using erasable ink on the cheque, not to
pre-sign a blank cheque, not using correction fluid on the cheque among others under
paragraph 4.6 terms under document A2. Failure for the bank to ensure that the client
understands this information will make the bank liable for negligence Incase fraudulent
activity happens on the account due to mistakes such as this. As was discussed in the case
of Layo v CRDB [2002] 1 EA 288 It was held that a bank who pays up on a customer’s
cheque which has been forged, must credit the customer’s account with the amount paid
if the forgeries are not due to the customer’s negligence.

b. Josrich Trading Company has the following obligations.

1. It has an obligation to keep it's account information and bank information confidential
as required under clause 4.3 of the terms and conditions under Document A1. This is to
ensure that there is no fraudulent activity carried on due to the client's disclosure of this
information. Failure to do so makes the client liable for any losses due to their breach of
this confidentiality.

2. The company also has a duty to notify the back incase of any suspicious activity
happening on its account or incase of any forgeries or concerning it's data storage system
as per clause 4.3d and failure to do so shall make it liable for any losses under breach of
contract.
GROUP 2

TASK B

Brief Facts;

Assume the company applied and was appointed as banking agent for Centenary Bank
Limited and has since been operating as its agent in Kajjansi area.
On the 8th day of July 2022, the Managing Director received a complaint from Nambafu
James a customer who allegedly deposited UGX 10,000,000/- (Uganda Shillings Ten
Million) with Josrich Trading Co. Ltd as agent of centenary Bank to be deposited on his
account a/c No. 010735002956176 with Centenary Bank Entebbe Road Branch. It was
discovered that money was not deposited although the customer was in possession of a
deposit slip issued by Mugisha Moses.
Mr. Nambafu approached the bank and raised the complaint with the bank manager
Opoka David. Mr. Opoka indeed verified that Nambafu James’s account had not been
credited with the said amount. However, in the process, the Manager established that the
account of Mrs. Serah Mugisha, wife of Mr. Mugisha Moses, received a deposit of UGX
10,000,000 less than an hour after the transaction of Nambafu James allegedly took place.
the manager blocked Mrs. Serah Mugisha’s account to prevent further withdrawals and
advised Mr. Nambafu to resolve the matter with Josrich Trading Co. Ltd, and should the
bank fail to recover money from Mr. Mugisha, the bank would not be liable.

Issues;

1. Whether there are any rights and obligations of all the parties above?
2. Whether the bank is liable to Ms. Serah Mugisha?
3. Whether the bank is liable to Josrich Trading Company Ltd.
4. Whether there are any remedies are available to James Nambafu in the
circumstances?

Law Applicable;
The Constitution of the Republic of Uganda, 1995. As Amended.

Financial Institutions (Agent Banking) Regulations, 2017

The Contracts Act, 2010

The relevant case law

Resolution;

Issue 1;Whether there are any rights and obligations of all the parties above?

The relationship between the bank and Josrich Trading Co. Ltd id one of agent banking
whereas the one between the bank and Nambafu is a bank-customer relationship.

According to Regulation 4 of the Financial Institutions (Agent Banking) Regulations,

2017 defines agent banking to mean the conduct by a person of financial institution
business on behalf of a financial institution as maybe approved by the Central Bank. The
regulation further defines an agent to mean a person contracted by a financial institution
to provide financial institution business on behalf of the financial institution in
accordance with the act and regulations.

Under the agent banking system, a financial institution contracts a third party usually a
retail outfit to perform some actions on its behalf these include; cash deposits and cash
withdrawals, payment services including bill payments, transfers, facilitating
disbursements, and repayment of loans, receipt and forwarding of documents in relation
to loans, leases, payment of retirement and social benefits, account balance inquiry,
provision of account statements and other permitted products. It should be noted that,
Regulation 6 provides for person eligible to be agents to include, a) a sole proprietorship;
(b) a partnership; (c) a company; (d) a cooperative society; (e) a microfinance institution;
or (f) an entity approved by the Central Bank.

From the facts disclosed, an agent-principal relationship exists between Centenary bank
as the principal and Josrich as the agent, also it being a company makes it eligible to be
an agent of the bank.
On the other hand, Centenary Bank has a bank- customer relationship with Nambafu. The
first requirement of establishing bank-customer relationship is that an individual must
be classified as a customer. According to the case of Iwa Kizito (Administrator of the
Estate of the late Felix Charles Maku) V Equity Bank (u) ltd & Anor HCCS No. 36
of 2013; a customer is one who has an account with the bank or who is in such a
relationship with the bank that shows a customer- bank relation exists. In the facts, it’s
disclosed that Nambafu has an in Centenary Bank; account a/c No. 010735002956176
and this therefore classifies him as a customer of the bank.

Obligations of the principle to the agent (Centenary bank to Josrich Company Ltd)

There are a number of obligations owed to the agent by the principal and these include;

According to Regulation 9(2) of the Financial Institutions (Agent Regulations)

Regulations, 2017 a principle has the obligations to;

(a) Assign each agent or agent outlet a unique identification number;

(b) Assign each agent or agent outlet to a specific parent branch, regulation 4 defines a
parent branch as the branch responsible for the operations of an agent or agent outlet;

(c) Display a list of agents at the agents’ respective parent branch;

(d) Ensure that the technological infrastructure supporting agent banking runs effectively;

(e) Put in place adequate and secure technological infrastructure capable of processing all
transactions in real time, regulation 4 defines real time to mean the electronic processing
of instructions instantaneously upon data entry or receipt of a command;

(f) Ensure that agents have appropriate equipment to carry out agent banking, including
the ability to generate hard copies of transaction receipts;

(g) Ensure that agents receive appropriate training and are provided with the necessary
manuals and supporting tools and procedures;

(h) Ensure appropriate management and supervision of all agents;

(i) Set limits and monitor compliance within such limits;

(j) Ensure that all agents provide services in accordance with consumer protection
requirements determined by the Central Bank;

(k) Compensate agents for the services rendered as per the contract;

(l) Update the Central Bank periodically on its agent network in accordance with
regulation 19;

(m) Ensure that all agents comply with the requirements of these Regulations.

Furthermore, Regulation 17 (1) Financial Institutions (Agent Regulations)

Regulations, 2017provides that a financial institution granted approval to conduct agent
banking shall put in place adequate policies and procedures to address consumer
protection and ensure that its agents conduct business in accordance with consumer
protection requirements applicable to the financial institution

The principal also has an obligation to provide a contract to the agent. This is provided
for under section 10(1) of the Financial Institution (Agent Regulations) Regulations,
2017.

Rights of the Bank;

In these circumstances the bank is the principle.

1. Right to assess the agent

Regulation 11(3) Financial Institution (Agent Regulations) Regulations, 2017

provides for the right of a financial institution to assess the capacity of an agent to
manage transactions for different financial institutions in terms of space, technology,
adequacy of funds or float of the agent.

2. Right to supervise the agent

Pursuant to Regulation 18(1) Financial Institution (Agent Regulations) Regulations,
2017, the bank has the right to supervise its agents to ensure that regulatory provisions
are complied with. Thus Centenary Bank has the right to supervise the activities of
Josrich Trading Co. ltd.

3. Right to property in data and information received by the agent

Regulation 10(3) (g) Financial Institution (Agent Regulations) Regulations, 2017

stipulates that all information or data collected by the agent in relation to agent banking is
property of the financial institution and subject to data protection requirements.

4. Right to accounts of an agent

Section 147 of the Contracts Act states that an agent shall render proper accounts to a
principle on demand. Thus, whichever data is collected by Josrich trading co ltd belongs
to Centenary Bank since it is entitled to it.

5. Right to repudiate transaction

Section 149 of the Contracts Act provides that Right of principal to repudiate when
agent deals without consent of principal that Where an agent deals on his or her own
account in the business of the agency, without obtaining the consent of a principal and
without acquainting the principal with all material circumstances which come to the
knowledge of the agent on the subject, the principal may repudiate the transaction where
the case shows that any material fact was dishonestly concealed from the principal by the
agent or that the dealings of the agent is unfavorable to the principal.

Regulation 15(1)(a) Financial Institution (Agent Regulations) Regulations, 2017

provides for Prohibited activities that an Agent shall not offer financial institution
business on its own accord, except where it is the agent’s principal business as at the time
of engagement.

Centenary Bank has right to repudiate a transaction where Josrich trading co. Ltd enters a
transaction on its own accord.
6. Right to benefit from agent dealing on own accord. Section 150 Contracts act 2010
provides that where an agent deals in the business of the agency without the knowledge
and consent of a principal, the principal may claim from the agent any benefit which may
have accrued to the agent from the transaction.

7. Right to terminate the agency

Section 135 of contracts act 2010 provides for termination of agency incase an agent is
adjudicated insolvent under the law or the Purpose of agency is frustrated. Furthermore,
Regulation 12 (2) of The Financial Institutions (Agent Banking) Regulations, 2017
provides that, an agency agreement may be terminated by the financial institution, if an
agent— (a) carries on agent banking when its licensed business has ceased;

(b) is convicted of a criminal offence involving fraud, dishonesty or other financial

impropriety;

(c) sustains a financial loss or damage to such a degree which, in the opinion of the
financial institution, makes it impossible for the agent to gain its financial soundness
within three months from the date of the loss or damage; (d) is being dissolved or wound
up through court or otherwise; (e) in case of a sole proprietor, he or she dies or becomes
mentally incapacitated; (f) transfers, relocates or closes its place of agent banking without
prior written consent of the financial institution;

(g) fails to renew or does not hold a valid business licence; or (h) contravenes these
Regulations.

Obligations of the agent Josrich Trading Co Ltd

It should be noted that Section 118 of contracts Act 2010 defines an “agent” means a
person employed by a principal to do any act for that principal or to represent the
principal in dealing with a third person. Section 3 Financial Institutions (Amendment)
Act 2016 “agent” means a person contracted by a financial institution to provide financial
institution business on behalf of the financial institution in accordance with the Act and
these Regulations.

Josrich Trading Co. Ltd is a company qualifying to do agent banking as per Regulation
6(1)(c) of The Financial Institutions (Agent Banking) Regulations, 2017 provides for
a company as a person qualifying to be agent.

Obligations

1. Obtain a valid agency agreement

An agent has an obligation to ensure that he obtains a valid agency agreement from the
principal as per Regulation 10 of the Financial Institutions (Agent Regulations)
Regulations, 2017.

2. Comply with the legal requirements

Act by the terms and the conditions of a contract: It is essential to perform following the
words and the requirements provided in the agreement with reference by the agent.

3. Exercise Care, competence and diligence.

In this, the agent needs to take the proper amount of care and steps which is required in
any difficult situation as per section 146 of the contracts act,2010

4. Ethical conduct: This requires that the agent act in a way that does not injure the
critical endeavor. The agent must take a reasonable attempt to provide the principal with
the relevant facts and the information.

The following are rights of agent.

1. Right to be assigned unique identification number. According to Regulation 9(2)

(a) of The Financial Institutions (Agent Banking) Regulations, 2017, a financial
institution shall assign each agent or agent outlet a unique identification number.
Josrich trading co ltd is entitled to a unique identification number.
2. Right to technological support

Regulation 9(2) (d) provides that a financial institution shall ensure that the
technological infrastructure supporting agent banking runs effectively.

3. Right to enjoy non-exclusivity & Right to deal with other financial institutions.

Article 40(2) of the constitution provides for every person has right to practice his or
her profession and to carry on any lawful occupation, trade or business. Regulation 11(1)
of The Financial Institutions (Agent Banking) Regulations, 2017 provides for Non-
exclusivity. It states that an agreement between a financial institution and an agent shall
not include a provision prohibiting the agent from conducting agent banking with other
financial institutions. Regulation 11(2) (a)(b) further stipulates that an agent may
provide agent banking for other approved financial institutions provided that the agent
has entered into an agency agreement with each financial institution for provision of
agent banking services; and the agent has the capacity to manage the transactions for the
different financial institutions.

Thus, Josrich trading Co. ltd has right to enter into agent banking agreement with other
financial institutions despite being in an agent of Centenary Bank.

4. Right to Equality and freedom from discrimination.

Article 21(1) (2) of the 1995 Constitution provides that no person shall be discriminated
based on economic status. Regulation 11(4) Financial Institutions (Agent Banking)
Regulations, 2017 is to the effect that; Without prejudice to sub regulation (2), an agent
shall not be discriminated against on grounds of providing agent banking services to
more than one financial institution. & Discrimination is defined under sub regulation (5)
that for purposes of sub regulation (4), “discriminate” means to give different treatment
to different agents attributed only or mainly to their respective agent banking with more
than one financial institution.
Thus Josrich trading co. ltd has right not to be discriminated against by Centenary Bank
because Josrich trading co. ltd is offering agent banking services to other financial
institutions.

5. Right to Remuneration

Regulation 10(3)(d) of The Financial Institutions (Agent Banking) Regulations, 2017

Requires an agency agreement to specify and provide for the remuneration arrangement
between Agent and financial institution.

Thus, Josrich trading co. ltd is entitled to remuneration from Centenary Bank. Section
153 of Contracts act 2010 provides that in the absence of any special contract, payment
for the performance of any act is not to be made to an agent until the completion of that
act. However, according to Section 154, an agent who is guilty of misconduct in the
business of the agency is not entitled to any remuneration in respect of that part of the
business.

6. Right to be indemnity.

Section 156(1) Contracts Act 2010 provides that a principal shall indemnify an agent
against the consequences of all lawful acts done by the agent in exercise of the authority
conferred upon that agent. Subsection(2) further states that; where a principal employs
an agent to do an act and the agent does the act in good faith, the principal is liable to
indemnify the agent against loss, liability and the consequences of that act, although it
may affect the rights of a third person.

Thus, Josrich trading co. Ltd is entitled to be indemnified in case of loss, liability and
consequences relating to agent banking services offered on behalf of Centenary Bank.

Obligations of the customer (Nambafu) to the Bank

1. Duty of reasonable care in drawing cheques

A customer must execute his order in a way that neither misleads the bank nor facilitates
forgery. In Mobil (U) Ltd v. Uganda Commercial Bank (1982) H.C.B. 64, The High
Court of Uganda held that a customer and a banker being under a contractual
relationship, the customer in drawing a cheque is bound to take reasonable and usual
precautions to prevent forgery.

2. Duty to inform the bank of any forgeries that the customer is aware of

In the case of Greenwood v. Martins Bank Ltd (1932) I KB 371, The English Court of
Appeal said that there is a continuing duty on either side to act with a reasonable care to
ensure the proper working of the account. That the banker, if a cheque were presented to
it which it rejected as forged, would be under a duty to report this to the customer to
enable him or her to inquire into and protect himself or herself against the circumstances
of forgery. However, the customer has a corresponding duty, if he or she became aware
that forged cheques were being presented to his or her banker, to inform him or her
banker in order that the banker might avoid loss in future.

Rights of the Customer

1. Right of transparent, fair and honest dealing

Banks should ensure that their customers understand the terms and conditions stipulated
in the contract, the interest rates, the risks involved more so when dealing with an agent
and all other terms and conditions. Banks have the responsibility to disclose in a language
understood by the customer, all the necessary information required despite all the
possible short comings involved.

2. Right to enjoy consumer protection

Regulation 17 (1)of The Financial Institutions (Agent Banking) Regulations, 2017

provides that a financial institution granted approval to conduct agent banking under
these Regulation shall— (a) put in place adequate policies and procedures to address
financial consumer protection; and
(b) ensure that all its agents conduct business in accordance with consumer protection
requirements applicable to the financial institution. Subsection (2) Subject to sub
regulation (1), a financial institution shall also ensure that— (a) every transaction— (i) is
effected in real time; (ii) requires at least two-factor authentication; and (iii) generates a
standard, easily identifiable copy system receipt or acknowledgement with the name of
the financial institution, unique identification number of the agent who processed the
transaction and a unique transaction reference number; (b) the agent clearly displays in a
conspicuous place at its premises of operation of agent banking— (i) the signage of the
financial institution which shall include the responsible parent branch, the agent’s unique
identification number and the dedicated telephone line through which customers can
contact the financial institution; (ii) a list of the services offered and the prohibited
activities; (iii) a written notice that no charges or fees are levied at the agent location; and
(iv) all fees and charges imposed on services or products under agent banking. (c) the
agent shall avail for inspection key facts documents for products which are being
advertised or offered through the agent.

3. Right to have complaints heard.

Customers have Right to grievance redressal and compensation. Banks are responsible
for all the products and services offered by them which agent banking is one of them and
customers have the right to easy and simple grievance redressal systems in case the bank
fails to adhere to basic norms. If the customer complains then the bank should address
such complaint.

Regulations 17(2)(d) of The Financial Institutions (Agent Banking) Regulations,

2017 complaints are handled by the financial institution in an appropriate and effective
manner, such that— (i) information about procedures for handling complaints is easily
available at an agent’s location or its outlet; (ii) every agent is trained on receiving
complaints and handling their resolution or escalation; (iii) a dedicated toll free telephone
line for complaint resolution is provided; and (iv) all records are kept for each complaint
lodged.
Paragraph 9 of the Bank Of Uganda Financial Consumer Protection Guidelines,
2011 provides for Complaints Handling and Consumer Recourse (1) Scope With the
exception of paragraph 9(5)(b), paragraph 9 of these Guidelines does not apply to
alleged acts or omissions which occurred before [insert date on which the Guidelines will
take effect. A complainant does not need to use any of the terms contained in paragraph
3 of these Guidelines, such as “act or omission by or on behalf of the provider”,
“financial loss”, “material inconvenience” or “material distress”. A financial services
provider shall make a fair and balanced judgement about whether an expression of
dissatisfaction is suggesting, in effect.

4. Right to be informed in case of complaints.

Paragraph 9 (5) (a) is to the effect that; A financial services provider shall, on receiving
a complaint, provide the complainant with a prompt written acknowledgement that it has
received the complaint shall keep the complainant informed. Thus James Nambafu had a
right to have his complaint about the missing UGX.10, 000,000/= deposited with Josrich
trading co. ltd, an agent heard and redressed by Centenary Bank.

5. Right to privacy -&- Right to confidentiality

The personal information provided by the customers to the bank even in cases where
banking agents are involved must be kept confidential. Banks can disclose only such
information, which is required by law or only after customers have given permission.

According to Article 27 (2) of the 1995 constitution, no person shall be subjected to

interference with privacy of that person's correspondence, communication and other
property. Regulation 17(2)(e) of The Financial Institutions (Agent Banking)
Regulations, 2017 further provides that in a bid to ensure consumer protection both the
financial institution and it’s agent shall uphold privacy and confidentiality of customer
information and data and data protection.

Paragraph 7 (3) (a) of Bank Of Uganda Financial Consumer Protection Guidelines,

2011 provides that a financial services provider shall not disclose any information about
a consumer to a third party except where: the financial services provider is compelled by
law to disclose the information; or the disclosure is made with the express consent of the
consumer. The duty not to disclose any information about the consumer includes
information relating to the consumer's account and any information about the relationship
between the financial services provider and the consumer.

6. Right to sue.

The Latin maxim " Qui facit per alium facit per se" meaning 'He who acts through
another does the act himself'.

Therefore banking transactions done by Josrich trading company ltd are said to be done
by Centenary Bank.

7. Right to receive notice in case of termination of agency

Regulation 12(3.) provides that where an agency agreement is terminated, the financial
institution shall cause a notice of the termination to be published within the locality of the
premises where the agent was operating or in any other way or manner as to inform the
general public of the cessation of the agency agreement.

Issue 2.Whether the bank is liable to Ms. Serah Mugisha?

Liability is the state of being legally responsible for something. It arises in instances
where there has been a breach of legal duty, obligation, or a violation of a right by one
party to the detriment of the other.

In determining whether the bank has any liability to Mrs. Serah Mugisha, we have to first
establish the legal relationship between the two parties and this will lead us to the duties
and obligations the bank owes to Mrs. Serah Mugisha.

According to the instant facts, the relationship between Mrs. Mugisha and the bank is one
of a banker-customer relationship. This is because in our instant facts, Mrs Mugisha has a
bank account with Centenary bank and in the case of Woods V Martin’s Bank Limited
(1959)1QB 55, Salmon J held that the relationship of a banker and customer had come
into existence when the branch manager agreed to accept the plaintiff instruction to open
an account in his name, so this qualifies Mrs. Mugisha as a customer since she has an
active bank account with centenary bank.

It’s important to note that the nature of relationship between banker-customer is a

contractual one and is governed by the principles of contract such as offer, acceptance,
and consideration. In the case of Mobil (u) ltd v UCB (1982) HCB 64, it was held that
the banker-customer relationship is contractual in nature. So due to the existence of this
relationship, there a certain duties and obligations that a created by virtue of this
relationship. In determining whether the bank is liable to Mrs. Mugisha, we have to
establish which duties and obligations does the bank owe to Mrs. Mugisha as their
customer, and then consider whether any of such duties were breached by the bank.

The following are the general duties and obligations of a bank towards its customers

1. Duty to honor customer’s mandate

The customer gives the bank authority to operate the account in accordance with the
instructions, that is, the customer’s mandate. However, this duty requires a customer has
a duty to give a clear and unambiguous instructions to the bank and this includes a duty
to ensure that his or her signature upon orders to the bank is similar to the specimen
signature held by the bank.

The bank therefore has an implied duty to honor its customer’s cheques provided that; -
a) they are drawn in proper form b) the account on which they are drawn for credit to an
amount sufficient to pay them, or arrangements have been made for an overdraft facility
and the agreed overdraft limit will not be exceeded; c) There is no legal cause (service of
a garnishee order nisi which makes the credit balance or the agreed overdraft limit un
available and they are presented during banking hours or within a reasonable time
thereafter.
In the Supreme Court case of Arim Felix Clive vs. Stanbic Bank (U) Ltd SCCA No.
3/2015. It was held that one of the general principles in the banker-customer relationship
is that a bank is expected to comply strictly with their customer’s orders. That the duty is
not absolute and there are instances when the bank’s decision not to honor its customer’s
instructions will not amount to breach of its duty to the customer.

2. Duty of skill and care

The bank should exercise reasonable care in carrying out the customer’s operations. This
duty is implied into a contract and covers wide range of banking business. In Barclays
Bank PLC V. Quince care [1992] 4 ALLER 363 it was held that it is an implied term of
the contract that the banker will exercise reasonable care in executing the customer’s
orders to pay or transfer money.

Furthermore, the duty of skill and care may also arise where a bank offers advice to its
customers. The bank is not under obligations to give advice to its customer but if it takes
upon itself to give it then it will be held liable for any negligence in the process giving
rise to loss after the customer or another has relied on it. In Woods v. Martin Bank
(1959) 1 QB 55, Salmon J held that even though the banker-customer relationship had
not been established at the time the advice was given, the bank, through its branch
manager had assumed a fiduciary obligation towards the plaintiff when it agreed to act as
his financial adviser.

Also in Stanbic bank Uganda ltd V Uganda crocs Ltd SSCA No.4 of 2004, it was stated
that a banker is under a duty of care to its customer, which duty may require him to
question payment.

3. Duty of secrecy / Confidentiality, that is, a duty not to disclose any information
concerning the affairs of the customer without his consent.

It is an implied term of the contract that the banker enters into a qualified obligation not
to disclose information concerning the customer’s affairs without his or her consent. This
is a legal duty arising out of the contract between the banker and a customer. In Tournier
v. National Provincial and Union Bank of England (1924) 1 KB 461. It was stated that
it may be asserted with confidence that the duty of non- disclosure is a legal one arising
out of contract and that the duty is not absolute, but qualified. It is not possible to frame
any exhaustive definition of the duty. On principle, the qualification can be classified
under four heads (a) where disclosure is under compulsion of law (b) where there is a
duty to the public to disclose (c) where the interests of the bank require disclosure; and
(d) where the disclosure is made by the express or implied consent of the customer.

In conclusion, the bank according to our instant facts did not breach any duties it owes to
Mrs. Mugisha Serah, the act of blocking her account temporarily until the matter is
resolved, is justifiable as it happened after a suspected fraud of money transfers on the
bank account of Serah Mugisha to the other accounts of the Mugisha’s and the bank
manager was simply carrying out the bank’s duty of skill and care

3. Whether the bank is liable to Josrich Trading Company Ltd.

Its trite law in agency that the principle is liable for the actions of an agent if the said
actions fall within the scope of the agent’s responsibilities. Regulation 9 (1) provides that
a financial institution approved to conduct agent banking is liable for the actions or
omissions of its agent relating to agent banking.

The facts disclose that an employee of Josrich Company ltd failed to deposit Nambafu’s
money on his account as he had instructed. Instead, the employee deposited the money on
his wife’s account which amounts to a breach of the agent’s duty to exercise skill and
care in carrying out the customer’s mandate. Therefore Centenary Bank is liable for the
actions of Josrich Company limited.

Issue 4; Remedies to Nambafu

2. Regulation 9(1) provides that a financial institution approved to conduct agent

banking is liable for the actions or omissions of its agents relating to agent banking. The
Bank of Uganda provides that every contract between a financial institution and an agent
shall contains provision that the institution is wholly responsible and liable for all acts
and omissions of the agent. This liability extends to acts not authorized in the contract so
long as they relate to banking services or matters connected therewith. Therefore basing
on this assertion, the bank is liable for the acts of its agent, Josrich Tading Co. ltd and
Nambaffu can seek the following remedies;

a) A claim for specific performance

Section 64 of the Contracts Act provides that where a party to a contract is in breach,
the other party may obtain an order of court requiring the party in breach to specifically
perform his or her promise under the contract. Section 159 further stipulates that a
contract entered into through an agent ad obligation arising from acts done by the agent
under the contract shall be enforced in the same manner and have the same legal
consequences as if the contract was entered into or done by the principle. therefore in this
case, Nambafu may seek for specific performance where by the Bank shall be required to
accomplish its obligation under the contractual agreement between the bank and its
customer by crediting the sum of UGX 10,000,000 shillings as deposited by the customer
through the banks agent.

b) sue for general damages

By virtue of the fact that there exists a relationship of bank-customer between Centenary
Bnak and Nambafu, the bank owes him a duty to honor the customer’s mandate and
exercise skill and care in honoring this mandate. However the bank through its agent,
breached this duty when he they failed to deposit Mr. Nambafu’s money onto his account
as he had instructed.