TITLE III. BANKING TRANSACTIONS
Chapter 1. Bank Deposits
Section 1. Deposit of funds
Art. 896. - Nature of the contract.
The contract of deposit of funds renders the bank owner of the funds deposited, irrespective of the mode of deposit. The bank may dispose of these funds respect of its professional activity, subject to their repayment under the conditions provided in the contract:
Provided that the bank shall not acquire the title to nor the right to dispose of coins or other individual monetary tokens in respect of which there is a provision that they shall be refunded in kind.
Art. 897. - Deposit account.
1. The contract of deposit of funds results in the opening of an account in which the bank enters by way of credit and debit all transactions carried out with the depositor, or on his behalf with third parties.
2. Transactions which the parties have agreed to exclude shall not be entered in the account.
Art. 898. - Forms of deposit.
1. Unless otherwise agreed, a deposit of funds shall be at sight and 1Ihe holder of the account may dispose at any time of the whole or part of the balance.
2. The right of disposal as defined in sub-art. (1) may be made subject to notice or the expiry of a fixed period.
Art. 899. - No overdrafts.
A contract of deposit of funds shall as of right give no right to an over draft.
Art. 900. - Statements of account.
A copy of the account shall be sent to the depositor once each year or more frequently, where customary or agreed, showing the balance to be carried forward.
Art. 901. - Place of transactions.
Unless otherwise agreed deposits and drawings shall be effected at the office of the bank where the account was opened.
Art. 902. - Several accounts.
Where more than one account has been opened by the same person, at a bank or several branches of the same bank, each account shall, unless otherwise agreed, operate separately from the other.
Section 2. Bank Transfers
Art. 903. - Definition.
1. A bank transfer is a transaction by which a bank debits the account of a depositor, upon his written instructions, and credits by its entry another account with the same amount.
2. The conditions of the issue of transfer order shall be as agreed by the parties. Tranfers to bearer shall not be permitted.
3. Where the beneficiary under the transfer is required to carry the sum to die credit of a third party, the name of the third party shall appear in the transfer order.
Art. 904. - Types of transfer.
A transfer may be internal or external depending on whether the account to be debited and the account to be credited have been opened at the same branch of the bank or at different branches.
Art. 905. - Sums for which the transfer order is given.
A transfer order is valid either in respect of sums already entered in the account of the person who orders transfer or in respect of sums to be entered therein, within a period determined in advance in agreement with the bank.
Art. 906. - Transfer of title. Cancellation of transfer order.
1. The beneficiary under a transfer obtains title to the sum to be transferred at the time when the bank debits the account of the person who orders transfer.
2. A transfer order may be cancelled until that time.
3. The issue of a transfer order as provided in Art. 907 (1) involves final disclaimer of the right of cancellation.
Art. 907. - Special provisions.
1. It may be provided that transfer orders shall not be notified directly to the bank but may be presented to it by the beneficiary himself.
2. It may be provided that certain transfers shall not be entered upon receipt of the direct orders of the person issuing the order or,t he presentation of the instrument of transfer, but only at the end of the day together with all transfer orders coming within the same category received during that day.
Art. 908. - Insufficient cover.
Where there is not sufficient cover, the bank may refuse transfer.
Art. 909. - Subsistence of causal debt.
The debt for the settlement of which a transfer order is issued shall subsist together with all securities and collateral until the account of the beneficiary is effectively credited with the amount of the transfer.
Art. 910. - Opposition to transfer order.
The person ordering transfer may validly oppose the execution of a transfer order, notwithstanding that it has been evidenced by an instrument banded to the beneficiary, from the date of a judgment declaring the bankruptcy of the beneficiary or granting him the benefit of a composition with creditors.
Art. 911. - Transfer orders presented before the declaration of the bankruptcy of the person issuing the order.
A bank may validly debit the account of the person issuing the order with all transfers presented before a judgment declaring his bankruptcy or granting him the benefit of a composition with creditors.
Section 3. Deposit of Securities
Art. 912. - Prohibition of bank handling securities on its own behalf.
Unless otherwise agreed in writing a bank may only handle securities and exercise the right relating thereto exclusively on behalf of the depositor.
Art. 913 - Duty to provide custody.
1. A bank shall ensure the custody of the securities and act in relation thereto with, the due care required of a public bailee under the civil law.
2. Securities may only be surrendered under a transaction requiring such surrender.
Art. 914. - Collection of yields of securities and collateral obligations.
1. Unless otherwise agreed a bank shall collect the amount of interest, dividends, capital repayments, amortisation and any other entitlements arising under the securities deposited as soon all they can be claimed.
2. Sums collected shall be placed at the disposal the depositor, in particular by entry to the credit of his deposit account.
3. A bank shall collect free scrip issues and join them to the deposit.
4. It shall carry out transactions for the safe-keeping of the right arising out of the securities, such as regrouping, exchange, renewal of coupon sheets and stamping.
Art. 915- Notification to depositor.
1. Transaction which involve the exercise of an option by the owner of the securities shall he notified to the depositor by registered letter, the costs being borne by him.
2. Where the depositor does not give his instructions in due time, the bank shall transact, on behalf of the depositor, the rights which he has not exercised.
Art. 916. - Duty to restitute.
1. A bank shall restore securities at any time, upon the demand of the depositor, and within the periods of time provided in the conditions of custody and subject to any rights of retention which the bank may he entitled to claim.
2. Restitution shall he made at the place where the deposit was made. It shall relate to, the titles deposited, unless restitution of different tides has been agreed by the parties or is permitted by law.
Art. 917. - Persons to whom restitution is to be made.
1. Restitution shall only he made to the depositor or those having rights from him or to, the person appointed by him or them, even where the securities indicate that they are the property of third panics.
2. Securities in a specific name registered in the names of a usufructuary and a bare owner may be validly handed to the bare owner upon production of proof of the death of the usufructuary.
Art. 918. -Claims regarding securities.
The bank shall inform the depositor of any claim; regarding deposited securities which has been made in court and of which the bank has notice.
Chapter 2. Hiring of Safes
Art. 919. - Object of contact.
The contract of hire of a safe has as its object to place at the disposal of the hirer a safe or compartment of a safe for a specified period of time on payment of a rent.
Art 920. - Obligations of the bank.
1. The bank shall take all necessary measures to ensure the upkeep and custody of safes.
2. In the event of any potential risk .to the security of the safes, the bank shall take all necessary steps to enable the hirers to empty their safes before the risk materialises, even outside working days and hours of business. The bank is not bound to give individual notices to, the hirers.
Art. 921. - Access to safes. Keys.
1. The bank shall only permit the hirer or his agent to have access to a safe.
2. The key of a safe shell remain the property of the bank.
Art. 922. - Obligations of hirer.
Where the hirer places in his safe anything, which is dangerous in itself, the bank may forthwith cancel the contract of hire.
Art. 923. - Termination for failure to pay rent.
1. In default of payment of the rent for any single 'term, the contract shall terminate as of right one month after the bank has sent notice by registered letter and the rent has not been paid. At the expiry of this period the bank shall take possession of the safe after calling upon the hirer to be present at the safe on a day and time fixed.
2. Where a hirer so called upon does not present himself or refuses to give up his safe open with its contents removed and to return the key giving the combination, the said safe shall be forced in the presence of a court official who shall draw up a descriptive report which shall constitute evidence as regards all interested parties.
Art. 924. - Execution levied on a safe.
Execution may be levied on a safe in accordance with the provisions of the Civil Procedure Code.
Chapter 3. Contracts for current accounts
Section 1. Definition, conditions and duration of current accounts
Art. 925. - Definition.
1. A contract for a current account is a contract whereby named correspondents agree to enter in an account, by reciprocal and simultaneous remittances, debts arising out of transactions between them and thus to substitute for individual and successive settlements of these transactions a single settlement to be carried to the sole balance of ,the account at its closure.
2. Where it has been agreed that the remittances of one party shall only begin when the remittances of the other have terminated, or where an examination of the account so indicates, the rules governing current accounts shall not apply.
Art. 926. - Debts brought into account.
1. All debts arising out of the business relations between the correspondents and which are not guaranteed by security by operation of law or under agreement are the subject of remittances into current account, unless it has been agreed that certain of them shall be excluded by general or particular stipulations.
2. Debts guaranteed by security under agreement, accorded by one correspondent or by a third party, may be entered in current account under a special and formal agreement between the interested parties.
Art. 927. - Debts expressed in different currencies or dealing with non-fungible things.
1. Where given debts deal either with sums of money expressed in different currencies or with non-fungible things, the correspondents may enter them in current account provided that:
a. they enter the remittances relating thereto under separate heads within which fungibility is required; and
b. it is provided that the current account shall retain its unity, despite the material division into several heads.
2. In this case, all the balances under the different heads must be capable of being converted, in order to be merged so as to show a sole balance at a time fixed by the correspondents and in no case later than the closure of the current account.
Art. 928. - Duration of current account.
1. A current account which has been opened without specifying its duration may be closed at any time if a correspondent so desires, subject to the time limits for notice provided or, where not provided, customary.
2. A current account which has been opened for a fixed period shall be closed at the expiry of the term or earlier by agreement between the correspondents.
3. A current account shall be closed in any event by the death of one or other of the correspondents, or by his becoming legally incapable or bankrupt.
Art. 929. - Effects of closure of account.
The closure of a current account converts the statements at the date of closure into a balance and this balance is thereupon at call unless the correspondents have otherwise agreed or certain transactions giving rise to remittances and not completed are of such nature as to modify the balance.
Section 2. Effects of current accounts
Art. 930. - Disposal of the credit balance in the books.
Unless otherwise agreed, either correspondent may freely dispose, at any time, of the credit balance shown in his favour.
Art. 931. - Extinction or reduction of debt.
Where a debt which has been the subject of a remittance into current account ceases to exist or is reduced by reason of an act arising after the entry of the remittance in the account, the corresponding item in the account shall be struck out or written down to the same extent and the account accordingly amended.
Art. 932. - Carry forward of the product of security.
1. Unless otherwise provided in the agreement made under Art. 926 (2), the product of the security originally relating to a debt entered in current account shall be carried forward up to the amount of the contingent balance of the account, without regard to changes which might arise in the books until closure.
2. Such carry- forward may only be set up against third parties if it has been published in accordance with the rules of civil law for the preservation o~ the said security.
Art. 933. - Prohibition of appropriation of one item to another.
No item in, a current account may be appropriated to an item on the other side.
Art. 934. - Rules regarding prescription and interest.
1. Debts entered in current account shall not be subject to the rules applying thereto in respect of prescription and interest.
2. The provisions of civil law shall apply toprescrip1lion of the balance after closure.
3. Remittances shall bear interest at the rate provided by the correspondents, or in, the absence of such provision, at the rate fixed under the Civil Code.
4. Unless otherwise agreed and until closure of the account this interest shall itself bear interest from the day of this remittance into account, provided that this remittance shall be made in accordance with the intervals of time fixed under the Civil Code.
Art. 935. - Different rates of interest on credit and debit items.
Whenever the rate of interest provided in a current account is not the same for credit and debit items, interest shall be charged at the time of each remittance by calculating interest produced from the date of the previous remittance on the balance following such remittance, and by adding this interest to that having already run on the same side, until Bet off against interest on the other side at the, time of remittance of interest into the account.
Art. 936. - Security established during suspected period may not be set up against the estate.
1. Where one of the correspondents becomes bankrupt, any security under agreement on ibis property established during the period provided in Art. 1029 of this Code, by way of guarantee of the contingent debit balance of the current account, may not be set up against the estate insofar as, at the time the said security was established, the current account already showed that correspondent as a debtor.
2. This security may be set up against the estate as regards the surplus, if any, of the debit balance of the account on the day of closure over this debit position, subject to the provisions of Art. 1030 of this Code, if applicab1e.
Art. 937. - Sequestration of current account.
1. The sequestration of a current account may be effected at any time on the credit balance, in accordance with the provisions of the Civil Procedure Code.
2. Such sequestration shall not prejudice such rights as the debtor's correspondent may enjoy with respect to this credit under an agreement by which the debtor has relinquished the free disposal at any time of this credit balance.
Section 3. Effects of bankruptcy of remitter where commercial
instruments are discounted and entered in current account
Art. 938. - Contra transfer of instruments.
1. Where the yield on discount of commercial instruments has been entered in current account and the instruments have not been paid on presentment, of the instruments may, even after the remitter is dec1arod bankrupt, contra transfer these instruments, that is to say carry to the debit of the account a sum equal to the nominal amount of the instruments together with the costs provided in Art. 791.
2. In the event of the bankruptcy of die remitter, contra transfer is only permitted in respect of instruments unpaid at the date of maturity; any agreement to the contrary shall be disregarded.
Art. 939. - Disposal of contra transferred instruments.
1. Where, after contra transfer, the current account shows a credit balance in favour of the remitter who has become bankrupt, the receiver shall restore the contra transferred instruments.
2. Where, after contra transfer, the current account shows a debit balance to the remitter who has become bankrupt, the receiver may retain the instruments, irrespective of the date of maturity.
3. The receiver may, in the case provided in sub-art. (2), accumulate the sums collected by him from persons jointly and severally liable, as a result of his exercise of the rights and securities arising out of the contra transferred instruments, with the dividend in the bankruptcy collected by him for, the balance owing to his account drawn up after contra transfer, subject however to the provisions of Art. 940.
Art. 940. - Extent of right of receiver.
1. The receiver may in no case take as a result of the accumulation proved m Art. 939 (3) a total amount greater than the debit balance of the current account after contra transfer, his right to a dividend in the bankruptcy of the remitter being thereby as of right reduced.
2. Where the status of, the account is such that on the date of bankruptcy 1ibere is already a debit balance to the remitter before contra transfer of the instruments, the receiver may not take by way of accumulation a total amount greater than the sum contra transferred together with the dividend calculated on the debit balance of the account before contra transfer, his right a dividend in the bankruptcy of the remitter being thereby as of right reduced.
Chapter 4. Discount
Art. 941. - Definition.
1. Discount is an agreement whereby a banker undertakes to pay in advance to the holder the value of commercial instruments or other negotiable securities having a definite time of payment, which, the holder assigns to the banker subject to repayment of their value if not paid by, the person principally liable.
2. This transaction gives to, the banker the right to charge interest and further an endorsing or other commission.
3. A special a agreement may provide for a fixed discount.
Art. 942. - Calculation of interest and commission.
1. Interest shall be calculated on the basis of the time remaining until maturity of the instruments, or for a shorter period in the case of so-called pawning transactions or others under which there is reimbursement before maturity by the beneficiary under the discount.
2. Commission shall be calculated on the basis of the value of the instruments.
3. A minimum amount of interest and of commission may be fixed.
Art. 943. - Duties of beneficiary.
1. The beneficiary under a discount shall reimburse to the banker the nominal value of unpaid instruments or securities.
2. Instruments accepted for discount for a partial amount only shall be reimbursed up to that amount.
Art. 944. - Rights of banker.
1. The banker may, with regard to the principal debtors under an instrument, the beneficiary under the discount and other persons jointly liable, exercise all the rights arising out of the instruments discounted by him.
2. The banker has in addition, as regards the beneficiary under the discount, a separate right to reimbursement of sums placed at, the disposal of the beneficiary, together with interest and commission. This right may be exercised up to the amount of the unpaid instruments, irrespective of the reasons for non-payment, and, in the case of a current account between the parties, in accordance with the provisions of Art. 938.940.
Chapter 5. Credit Transactions
Section 1. Open Credits
Art. 945. - Object.
1. An open credit has as its object to place directly or indirectly at the disposal of the beneficiary means of payment upto a certain sum of money.
2. An open credit may be granted for a limited or unlimited period. An unlimited credit may be cancelled at any time by the banker.
Art. 946. - Cancellation.
An open credit may be cancelled by the death or incapacity of the beneficiary or suspension of payment, even where not established by judgment, or on account of gross negligence in the use of the credit granted.
Section 2. Advances on Securities
Art. 947. - Definition.
An advance on securities is a transaction by which a banker credit against securities belonging to the beneficiary under the credit or to a third party who has agreed to the pledge.
Art. 948. - Forms.
1. An advance on
securities shall be in writing or it shall be null and void.
2. It shall contain:
a. the designation of the securities deposited; and
b. the name and domicile of the owner or other beneficiary under the credit; and
c. the amount of and conditions under which the credit is graded.
Art. 949. - Selling of securities.
borrower does not fulfil his undertaking to maintain the percentage of margin
or fails to' repay-the loan in accordance with the terms of the contract, the
banker may sell the securities.
Section 3. Pledge of Securities
Art. 950. - Principle.
Any transferable securities, irrespective of their form, may be pledged as provided in this Section.
Art. 951. - Obligations guaranteed.
securities may be pledged of any obligation even where, in the amount due is
2. The provisions of sub-art. (1) shall apply to a guarantee of obligations which are only contingent at the time of setting up of the pledge.
Art. 952. - Forms.
1. A guaranteed
creditor who already holds the securities involved in some other manner shall
be deemed to' be put in possession as pledgee from the date of the contract.
2. Where the securities pledged are held by a third party already in possession in some other manner; the guaranteed creditor shall be deemed to be in possession from the time when the third party possessor has placed the said securities in a special account which he shall open on first call.
3. In the case of securities in respect of which there is a certificate in a specific name constituting an entry in the register of the company issuing the securities, the guaranteed creditor shall be deemed to be in possesion from the time when the transfer by way of guarantee has been entered.
Art. 953. - Undertakings of pledger.
Where the pledger
is not personally responsible for the obligation guaranteed, he shall only be
bound as a material surety.
Art. 954. - Security set up by bare owner.
The security set
up by a bare owner on securities subject to a usufruct shall extend as of right
to the full title at the termination of the usufruct.
Art. 955. - Rights and obligation of holder of securities.
The holder of
pledged securities has the rights and is subject to the obligations set forth
in Art. 897-900.
Art. 956. - Status of a third party possessor.
A third party
agreed upon as possessor by way of pledge shall be deemed to have relinquished
any right of detainer to his advantage in respect of au earlier grounds unless
he has expressly reserved thereon in giving his acceptance.
Art. 957. - Preferred rights of pledgee.
rights of the pledgee subsist at the date thereof, both as between the
parties and as regards third parties, on the proceeds, amounts reimbursed or
instruments of replacement of the securities pledged.
Art. 958. - Failure of pledger to meet his obligations.
Where the pledger
fails to meet his obligations, the debt guaranteed shall became due
immediately, unless new securities of an equivalent amount are produced without
delay to replace the security which does no longer exist or is imperilled.
Section 4. Documentary Credits
Art. 959. - Definitions.
1. A documentary credit is a credit opened by a bank providing for payment against presentation of specified documents to the opening bank or to its agent. Goods represented by such documents maybe held and disposed of by the bank in accordance with the terms agreed between the bank and its principal.
2. A documentary credit is independent of any contract of ale on which it may be based and to which a hank is not a party.
Art. 960. - Obligations of the bank.
The bank opening
the credit shall honour the conditions as to payment, acceptance, discount or
Art. 961. - Revocable and irrevocable credits.
credit may be revocable or irrevocable. Unless otherwise provided, a credit is
deemed to be revocable even if it has been opened for a specific period.
Art. 962. - Effects of revocable credit.
are not legally binding undertakings between banks and beneficiaries. Such
credits may be modified or cancelled at any time without notice to the
beneficiary. When a credit of this nature has been transmitted to a branch, or
to another bank, its modification or cancellation can take effect only
upon receipt of notice thereof by such branch or other bank, prior to payment
or negotiation, or the acceptance of drawing there under by such or other
Art. 963. - Effects of irrevocable credit.
credits are definite undertakings by an issuing bank and constitute the
engagement of that bank to the beneficiary or, as the cue may be, to the
beneficiary and bona fide holders of drafts drawn there under that the
provisions for payment, acceptance or negotiation contained in the
credit, will be duly fulfilled provided that the documents or, as the case may
be, the documents and the drafts drawn there under comply with the terms and
conditions of the credit.
Art. 964. - Confirmation of irrevocable credit.
1. When the
issuing bank instructs another bank to confirm its irrevocable credit and when
the latter does so, the confirmation implies a definite undertaking of the
confirming bank as from the date on which it gives confirmation.
2. In case of credits available by negotiation of drafts, the confirmation implies only the undertaking of the confirming bank to negotiate drafts without recourse to drawer.
3. Such undertaking can neither be modified nor cancelled without the agreement of all persons concerned.
4. When a correspondent is instructed by cable or telegram to notify a letter of credit, the issuing bank must send the original of the said letter of credit to the said correspondent if it is intended to put the document itself into circulation. If any other procedure were followed, the issuing bank would be responsible for all consequences which may result therefrom.
Art. 965. - Obligation to verify documents.
The bank shall
satisfy itself that the documents conform strictly to the instructions contained
in the credit. When it refuses documents the bank shall notify the presenter
within as short a time as possible and inform him of the errors found.
Art. 966. - Liability of the bank.
The bank shall
not incur any liability where the documents are on their face in conformity
with the instructions received. It shall not incur any obligation in relation
to the goods which are the subject of the credit opened.
Art. 967. - Transfer and division of credit.
A documentary credit is only transferable or divisible where a bank is authorised to pay in whole or in part to one or more third parties on the instructions of the first beneficiary. A credit is only transferable on the express order of the bank opening the credit. It is so transferable once only, unless otherwise provided.