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F. Proper Law of the Contract
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 | 190-190 |
Page 190
The Bank Act provides that the debt owed by a bank by reason of a deposit in an account is situated at the place where the branch of an account is located72and that the debt is repayable at the branch of the account.73
The proper law applicable to the contract is the law of the jurisdiction of the place of the debt because that is the law with which the contract has the closest connection, although the contract may otherwise provide by an express term identifying the law by which it is to be governed. Where the contract provides for jurisdiction, the courts will enforce that provision.74
This rule also applies where a customer has two or more accounts with the same bank in two or more jurisdictions. In Libyan Arab Foreign Bank v. Bankers Trust Co.,75a customer had accounts in London and New York, and the court found that there was one contract governed by English law and the law of New York, respectively, for each of the two accounts.76
Whether there is one contract in such circumstances or two has been questioned,77but regardless of the result, the principle that an account contract is normally governed by the law of the jurisdiction in which the branch of the account is found would apply.
[72] Bank Act, above note 3, s. 461(4).
[73] Ibid., s. 461(2).
[74] Continental Bank NA v. Aeakos Compania Navierra S.A., [1994] 1 Lloyd’s Rep. 505 (C.A.).
[75] [1988] 1 Lloyd’s Rep. 259 (Comm. Ct.).
[76] Sierra Leone Communications Co. Ltd. v. Barclays Bank plc, [1998] 2 All E.R. 821 (Ch. D.) supports this approach by permitting severance of a contract where part has a closer connection with one country than another.
[77] Libyan Arab Foreign Bank v. Manufacturers Hanover Trust Co. (No. 2), [1989] 1 Lloyd’s Rep. 608 (Comm. Ct.). American case law also follows the principle that the jurisdiction is the place of the branch: Vishipco Line v. Chase Manhattan Bank, 66 F.2d 854 (2d Circ. 1981); Garcia v. Chase Manhattan Bank, N.A., 735 F.2d 645 (2d Circ. 1984); Wells Fargo Asia Ltd. v. Citibank, N.A., 936 F.2d 723 (2d Cir. 1991).
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