Creation of the Relation of Debtor and Creditor between Banker and Customer
Columbia Law Review
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... out Early Journal Content at http://about.jstor.org/participate--jstor/individuals/early-journal--content. JSTOR is a digital library of academic journals, books, and primary source objects. JSTOR helps people discover, use, and build upon a wide range of content through a powerful research and teaching platform, and preserves this content for future generations. JSTOR is part of ITHAKA, a not--for--profit organization that also includes Ithaka S+R and Portico. For more information about JSTOR, please contact firstname.lastname@example.org. reached in Jennings v. Dark, although in accord with the weight of authority,18 would therefore appear to be erroneous upon principle, and the members of the association, it is submitted, should have been held liable upon the contract as general partners. CREATION OF THE RELATION OF DEBTOR AND CREDITOR BETWEEN BANKER AND OUSTOMER.-The legal relations between banker and customer, though theoretically regulated entirely by contract, are, in the absence of express stipulation, determined by commercial usage in contemplation of which the parties are presumed to have dealt. The legal consequences of this complicated contract are, on the other hand, ascertained by the application of fundamental principles of agency and negotiable paper. While the numerical weight of authority has, in accordance with sound theory, deduced the rule that the liability of a bank receiving paper to be sent for collection to a distant point is dependent entirely upon the exercise of due care in the selection of a suitable correspondent,' a considerable number of courts have nevertheless established the contrary doctrine of absolute liability by interpolating into the contract a term discernible neither in commercial usage nor in the reasonably presumable intention of the parties. This doctrine, though originally founded on a supposed analogy to the liability of an independent contractor for the torts of his servant,2 is now based on broad and persuasive considerations of public policy indicating that the recognition by law of this obligation, which is like that of a del credere factor, will best "promote the general welfare of the commercial community."3 The property rights in negotiable instruments transferred to a bank are, like the other incidents of the contract, derived primarily from the nature of the original transaction. If the checks or drafts are regarded by both parties as so much cash, the contract is one of deposit and title to the paper passes to the banker who, as in the case of a general deposit of cash, becomes forthwith the debtor of his customer.4 If, however, the instrument is received for collection merely, title remains in the customer and the relation between him and the banker is that of principal and agent.5 The mere fact that the collecting bank has credited the depositor with the amount of his parties, see however Hoyt v. McCallum (I902) xo2 Ill. App. 287, but merely results from an application of the rules of law to the contract as written by them; nor is there involved a nullification of franchises. Francis M. Burdick, Are Defectively Incorporated Associations Partnerships? 6 COLUMBIA LAW REVIEW I.