Duty of care is the a legal obligation which is imposed on an individual requiring adherence

to a standard of reasonable care while performing any acts that could foreseeably harm
others. It is the first element that must be established to proceed with an action in negligence.
The claimant must be able to show a duty of care imposed by law which the defendant has
breached which in turn subjects the defendant to liability.
Duty of care may be succinctly summed up as the duty not to injure your neighbour. The
legal basis for duty of care has its roots in land mark case of Donoghue vs Stevenson (1932)
All ER 1 that was cited in the case of Mobil (U) Ltd v Uganda commercial Bank (1982)
HCB 64. Lord Atkin held that a general duty of care could be said to exist between two
parties under the ‘neighbour principle’.
Common law has established that a duty of care is owed to persons whom one could
reasonably have contemplated may be harmed by his action (or inaction in certain cases).
However, even though a duty is owed, no liability attaches unless the harm suffered was of a
foreseeable kind.
In the case of Mobil (U) Ltd v Uganda commercial Bank (1982) HCB 64 the plaintiff sued
the defendant on a cheque for Shs. 40,301. The brief facts are that a cheque drawn by the
defendant Bank for Shs. 10,301 however the amount was altered to read Shs. 40,301. When it
was presented for payment, it was rejected as having been forged. The Plaintiff thereupon
brought the suit to recover Shs. 40,301. High Court held that:
a) A customer and a banker, being under a contractual relationship, the customer in
drawing cheques is bound to take usual and reasonable precautions to prevent forgery.
b) If a cheque is drawn in such a way as to facilitate or almost to invite an increase in the
amount by forgery, if the cheque should get into the hands of a dishonest person,
forgery is not remote but a very natural consequence of negligence of this description.
c) The defendant was negligent when drawing the cheque but the alteration on the
cheque was not apparent and therefore the provisions of S. 64 of the Bills of
Exchange Act could not be invoked.
From the foregoing, it is clear that common law principles of contract including
representations/misrepresentation, apply in the relationship between a banker and customer
such as between the Plaintiff and the Defendants. It is well settled that a customer has a duty
to the banker to exercise reasonable care in drawing cheques so as not to perpetuate as the
customer and banker are under a contractual relationship.
Therefore in drawing a cheque, the customer is bound to take usual and reasonable steps to
prevent forgery. If a cheque is drawn in such a way as to facilitate or enable a third party
increase the amount on the cheque through dishonest means, forgery is in such circumstances
not a remote but a very natural consequence of negligence the customer is liable for. More so,
it is the duty of the customer to exercise reasonable care in executing his/her written order so
as not to mislead the bank or to facilitate forgery.
The same principle was recognized in the case of London Joint Stock Bank V Mac Millan
and Athur, (1918) AC 777 as was cited in Mobil (U) Ltd v Uganda commercial Bank (1982)
HCB 64. In this case the House of Lords said that a cheque drawn by a customer is in point
of law a mandate to the banker to pay the amount according to the tenor of the cheque. It is
therefore beyond dispute that the customer is bound to exercise reasonable care in drawing
the cheque and if he/she does in a manner which facilitate fraud, he/she is guilty of breach of
duty as between himself or herself and the banker, and he then will be responsible to the
banker for any loss sustained by the banker as a natural and direct consequence of his breach
of duty.
Arising from the neighbour principle, it may also be said that a banker owes a duty of care to
any person (customer or otherwise) that he/she can reasonably foresee as likely to suffer
injury by his action, while the standard of care to be applied is that of a reasonable banker.
We now turn to consider the duty of care that a bank owes to its customers.
A banker has certain duties vis-à-vis his customer, and these include the following;
According to Paget’s law on banking, the duties owed by the bank to the customers relate to
the carrying out the banker’s payment instructions, dealing with securities deposited with the
bank and the way the bank handles information concerning the affairs of the customer.
This implies that, it is reasonable for the Bank to act with due care and in the interest of its
customer. The duty calls upon the Banker to exercise skill while dealing with transactions on
the customer’s account.
In the case of Mobil (U) Ltd v Uganda commercial Bank (1982) HCB 64 it was
established that the bank-customer relationship is contractual in nature and it may therefore
be said that a bank has a contractual duty to its customer to exercise reasonable care and skill.
the same was laid out in the case of Karak Brothers Company Ltd v Burden (1972) All
ER 1210 where the Court had this to say about a bank’s contractual duty to its customer:-
“…. a bank has a duty under its contract with its customer to exercise “reasonable care and
skill” in carrying out its part with regard to operations within its contract with its customer.
The standard of that reasonable care and skill is an objective standard applicable to bankers.
Whether or not it has been attained in any particular case has to be decided in the light of all
the relevant facts, which can vary almost infinitely.”
A bank’s duty of care to its customers may also arise concurrently in tort. The case of Hedley
Byrne v Heller & Partners Ltd (1963) 2 All ER 575 introduced the idea of “assumption of
responsibility” by recognising liability for pure economic loss not arising from a contractual
relationship.
A bank’s duty of care to its customers is wide and ranges from protecting a customer from
fraud by agents such as directors and partners in issuing cheques and other payment
instructions, to ensuring that the financial advice it issues is sound and reliable, to explaining
the meaning and effect of security documents. The list is not exhaustive and whether a bank
owes a duty of care is determined on a case by case basis, the test being whether the customer
has suffered injury due to action or inaction of the bank that the bank ought to have
reasonably foreseen the action or inaction as likely to injure the customer.

Conclusion
In conclusion, it should be noted that if both the bankers and their customers have put into
practice/complied to the respective duties and obligations they owe to one another, it could
lead to improved bank customer relationship and help reduce the problem of unconscionable
transaction in Uganda’s banking sector.

Examining duty of care in Banking by John Mbaluto