G. Termination 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: 190-193

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Account agreements are typically entered into for an indefinite period of time and are often expected to be of considerable duration. Some

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may expressly provide for a termination date, such as a fixed term deposit, but most do not. In the absence of an express agreement as to a termination date, termination may be at any time after the execution of the agreement at the instance of either party or as a result of certain events, such as death, insolvency, or illegality.

A customer may terminate the agreement at any time by demanding that any outstanding funds in the account be paid and by closing the account.⁷⁸

The contract may require that the customer give a short period of notice to ensure that outstanding cheques have been cleared, but once notice has been given, a bank is obliged to comply.⁷⁹

A customer is responsible for any overdraft in the account prior to closure, and a bank is not responsible for honoring cheques subsequently presented. Where a customer terminates an account and orders that any balance be transferred to another customer, the contract is deemed to be terminated prior to the completion of the transfer by notice to the other customer.⁸⁰

A bank may terminate an account contract unilaterally without the consent of the customer by giving reasonable notice, so as to permit customers to arrange their affairs and avoid any embarrassment resulting from the return of cheques, including potential defamation of the customer’s credit reputation.⁸¹

In determining what is reasonable notice, factors to be considered include whether the account has been in persistent overdraft or is being operated fraudulently⁸²and whether there is an established course of dealing in which the bank has permitted overdrafts over a long period.⁸³

Where there has been a persistent overdraft situation about which the bank has expressed concern to the

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customer, the bank may unilaterally close the account immediately and demand immediate payment of the outstanding amount.⁸⁴

In addition to situations in which either bank or customer voluntarily decide to terminate an account agreement, termination may occur on the occurrence of certain other events, including the death, mental incompetence, or bankruptcy of the customer or the insolvency of the bank.

Receipt of notice of the death of a customer effects the termination of the bank and customer relationship.⁸⁵

Prior to notice, the bank may continue to honour cheques and other...