A. Introduction

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 315-316

Page 315

The latest stage in the evolution of payment systems between humans from barter to precious metals to money to negotiable instruments is the development of payment by computerized electronic funds transfer. Indeed, Paget describes electronic funds transfer as the third of three great ages of payment, succeeding payment by cash and paper-based payment.¹

Just as banks have been central to cash and paper-based payment systems, so, too, have they been central to payment by electronic funds transfer (EFT). Yet, despite all the recent marketplace excitement around the computerization of banking services, it is important to state at the outset that EFT is simply another method of effecting payment, of transferring economic value, and while its implementation has resulted in some new legal rules resulting from changes in banking practice, it has little impact on the underlying concepts in the law about the legal relationship between bank and customer. Each party to the contract is bound by the same duties and standards of care in giving and implementing payment instructions electronically as in giving and receiving instructions by paper.

Page 316

In contrast to the United States, where the Electronic Funds Transfer Act was passed in 1978,²or the United Kingdom, where there is a growing body of common law, as well as various European Union directives,³ in Canada there is neither legislation nor a substantial body of case law defining the law in this area. Rather, in Canada the rules governing EFT remain within the realm of banking industry practice. The relative absence of case law may suggest that those rules are working well and have led to few disputes in the courts. On the other hand, the cost of litigation may have deterred most potential litigants. It is difficult to judge. However, the absence of law means that a text such as this is largely limited to describing the various services offered, and these will be covered in this and the next two chapters (Chapters 9 to 11).

The focus of this chapter is the infrastructure of the electronic and paper payments system, to which some references were made from time to time in the previous chapter, which assumed but did not explicitly address its existence. Whether customer payment or collection instructions are delivered electronically or by paper to the customer’s bank, the actual transmission of economic value between and among banks requires an industry-wide infrastructure to...