FIRM A2

WORKSHOP 1
Corporate & Commercial Practice
TERM 3- WEEK 2
GROUP 1
Part A- Task I
• BRIEF FACTS
• Born-rich Enterprises LTD (BEL) is a incorporated company
involved in the business of buying and selling produce in
Uganda and East African region. It opened up a current
account with Centenary Bank (Uganda) Ltd in2020 qho availed
several forms with the terms and conditions to the company.
BEL negotiated with Centenary Bank for its employees to open
up bank accounts, and the employees will exclusively receive
their salaries through the Bank. BEL and the Bank signed a
Memorandum of Understanding with different agreements.
• ISSUES
1. What is the nature of the relationship between Centenary
Bank ltd on one hand and BEL and the employees on the
other hand?
2. What are the standard terms and conditions, how do they
relate to the Banker-customer relationship and what are the
salient features?
3. What potential liability could arise from the document?
4. What is the legality of the Memorandum of Understanding?
1. What is the nature of the relationship between Centenary bank
on one hand and the BEL and the employees on the other hand?
Definition of a bank provided under section 3(c) of the Financial
Institutions Act, 2004 as a company licensed to carry on financial
institution business as its principle business.
Characteristics usually found in banks mentioned in United Dominion
Trust Ltd v Kirkwood (1966) 1 ALLER 968.
Great Western railways co. ltd v London & County Banking Co. Ltd
(1901) Ac 414 defined a customer using the factor of whether or not
such a person has or will have an account with the bank. Thus there
must be some sort of account held with the bank by the person to be
deemed a customer.
• Nature of the relationship between the Bank and BEL.
• In Mobil (U) Ltd v Uganda Commercial Bank (1982) HCB 64, it
was held that the banker-customer relationship is contractual in
nature. This means that there is a contractual relationship
between Centenary Bank and BEL who opened up a current
account with the Bank.
• When it comes to the employees, there is a negotiation that they
will open accounts with the Bank and exclusively receive their
salaries through the Bank. Those who open accounts will also
become customers of the bank.
• However there is need to also address who a consumer is to a
bank.
• Guideline 3 of the Bank of Uganda Financial Consumer
Protection Guidelines, 2011 defines a consumer as an
individual or small firm who uses, has used or is or maybe
contemplating using, any of the products or financial services
provider by a financial services provider. This means that such
persons do not need to open up accounts with the Bank to
enjoy its services.
• In the event some employees do not open up accounts with
Centenary bank but use its services, they will be consumers of
the bank and the relationship will be one of Banker-Consumer.
a) Debtor-creditor relationship
In this relationship, where a customer deposits money on their bank
account, they become a creditor and the banker a debtor. This means that
the banker is liable to pay the customer their money upon demand of such
payment. Foley v Hill (1848) 2 HLC 28.
This can be true vice vera where a customer borrows money from the Bank.
b) Principle-agent relationship
Here, the Bank acts as an agent for the customer in instances such as
payment of salaries, pensions, dividends among others
c) Fiduciary relationship
The Bank has a duty to advise the customer with reasonable skill and care in
issues relating to the account, conflict of interest or confidential information
among others.
2. What are the standard terms and conditions, how do they relate to the
Banker-customer relationship and what are the salient features?
a) Limitation of liability. – Clause 8.0 Annexure A1. The Bank shall not be
liable for any delays, errors, loss, damage or failures in the provisions of
the services not within the reasonable control of the Bank and includes
force majure
b) Indemnity- Clause 9.0. Where the customer breaches the terms and
conditions they shall hold the Bank harmless from any loss or damage,
costs, expenses or liability suffered.
c) Waiver- clause 11.0. Where a Bank waives any breach of a customer or
extends time to them, it shall not affect the Bank’s rights and powers in
the terms and conditions set.
d) d) Termination- Clause 13. The parties are at liberty to terminate the
agreement at anytime upon written notice which will end the bank-
customer relationship.
3. What potential liability could arise from the document?

Limitation of liability; limits the liability to the customer in the relationship

Limitation clauses; The limitation clauses also limit the liablity to the customer

Security; Only meant to secure liability from the bank

Termination; the liability at the time of termination, termination of a bank-

customer relationship.

Confidentiality; there is need to make ensure that no information is let out

without consent.
4.What is the legality of the Memorandum of Association?

• Paragraph 1 is legally plausible

• Paragraph 2 is embedded with illegality
• Paragraph 3 is legal plausible
• Paragraph 4 is legally plausible.
 GROUP 2

Part B-Tasks II
BRIEF FACTS.
On 8th day of July 2022,General manager MML (Mobile money
Uganda Ltd received complaint from Katono Rashid a customer
who allegedly deposited UGX 4,000,000 shillings with BEL(Born
rich enterprises ltd) as agent of both centenary bank and
MML.UGX 500,000 was to be deposited on his mobile phone and
3,500,000 was to be deposited on his account with centenary
bank. Manager of BEL MR Clever Mutoni convinced Mr. Kato
leave the money with him and that the same would be credited
on his phone and account later, instead MR clever deposited
money on his personal bank account.
ISSUES
1. What are the rights and obligation of the parties in circumstance?
2. Whether the bank has any liabilities to BEL and Mr. clever Mutoni ?
4. What remedy is available to Mr. Katono Rashid in the circumstance?

RESOLUTION
ISSUE 1
RIGHTS OF THE BANK
• Right to combine accounts (Obed Tashobya v DFCU Bank ltd hct -00-cc-
cs-742 of 2004.
• Right to access the Agent, Regulation 11(3) Financial Institutions (Agent
Banking) Regulations 2017
• Right to supervise Agent Reg 18(1) Financial Institutions (Agent banking )
Regulations 2017
• Right to property in data and information received by agent reg 10(3)g
Financial Institutions(agent banking)Regulations 2017
• Right to repudiate transaction section147 Contracts act.
• Right to terminate the agency section 135of contracts act.
RIGHTS OF AN AGENT
• Right to be assigned unique identification number Reg 9(2) a of
financial institution (agent banking) Regulations, 2017
• Right to technology support Reg 9(2)(d)
• Right to remuneration Reg 10(3)(d) Financial Institution(Agent
Banking)Regulations 2017
• Right to indemnity Section 156(1) contracts act 2010
Rights of Customer ( Mr Rashid )
• Right to a honest transparent and fair dealing Reg 15(1) (f) Financial
Institution (Agent Banking)Regulations 2017
• Right to enjoy consumer protection Regulation 17(1) financial
institution (agent banking )Regulations
• Right to have complaints heard Regulation 17(2) same regulations
• Right to terminate the agency section 135of contracts act.
RIGHTS OF AN AGENT
• Right to be assigned unique identification number Reg 9(2) a of
financial institution (agent banking) Regulations, 2017
• Right to technology support Reg 9(2)(d)
• Right to remuneration Reg 10(3)(d) Financial Institution(Agent
Banking)Regulations 2017
• Right to indemnity Section 156(1) contracts act 2010
Rights of Customer ( Mr Rashid )
• Right to a honest transparent and fair dealing Reg 15(1) (f) Financial
Institution (Agent Banking)Regulations 2017
• Right to enjoy consumer protection Regulation 17(1) financial
institution (agent banking )Regulations
• Right to have complaints heard Regulation 17(2) same regulations
• Right to sue in case of any breach, Section 159 Contracts act 2010
• Right to privacy and to confidentiality Regulation 17(2) Financial
institution (agent banking )Regulation
OBLIGATIONS
(a) BANK
• Regulation 9(2)Financial Institution(agent banking) Regulations
provides for duties of bank include:
• Duty to exercise due care and skill in executing the customers
instructions case of Stanbic Bank (u) Ltd v Uganda Cross
LimittedSCCA4/2004
• Duty to conduct due diligence, Section 81 Bill of Exchange Act
• (b)AGENT
• Bank agency are obligated not to perform any prohibited activities Reg
15 of the regulations
• Have a duty to protect their customers Reg 17(1) of the Regulations
• Bank agency are bound by the agency agreement between themselves
and the principal.reg 10 (20 of the regulations
• (c) Customer
• Duty to alert the bank incase of any fraud( Greenwoods v
Martins Bank ltd 1933 AC 51)
• Duty to exercise reasonable care in executing their written
orders so as not to mislead the bank
Issue 2
• The bank is liable to the works of agent and is under
obligation to help client receive his money from the bank
agent .
• The key principle of consumer protection includes fairness
and reliability in all transactions with the customer.
• This therefore calls for the needs for remedial measures
against the agent (Guideline 5 bank of Uganda financial
consumer)
• Section 8 (2) (1) Financial Institution Act 2004 provides for
the bank of Uganda intervention where agencies are being
conducted in a manner detrimental to interests of the
depositors and may make the following orders;
1. Order in writing that remedial action is taken to ensure
compliance
2. Issue directions regarding measures to be taken to
improve the management and financial soundness.
Issue 3
Remedy available
• According to the facts there was breach of fiduciary duty by the
bank to make sure customers money is safe .
• There was a breach of contract and negligence on the side of the
bank
• Reg 17 (1) of regulations provide that the financial institution
shall put in place adequate polices and procedure to ensure
consumer protection and that all agents conduct business in
according to the regulations.
• Therefore he can sue the bank under Section 98 Civil Procedure
Act and Section 33 of Judicature Act where he can pray for
general damages, special damages and specific damage and
specific performance.
GROUP 3

Part C-Task III

 What are the different types
of negotiable intruments ?

• Definition. The Black’s law dictionary 8th edition at page 3289 defines a negotiable
instrument to mean a written instrument that is signed by the maker or drawer, including an
unconditional promise or order to pay a specified sum of money payable on demand or at a
definite time, and is payable to order or to bearer.

• Characteristics of Negotiable instruments.

(Cf. Blackburn J in Crouch v The Credit Foncier Co. (1873) LR 8 QB 374, at p.381)
a) The instruments and the rights which it embodies are capable of being transferred by
delivery either with or without endorsement according as to whether the instrument is
in favour of order or bearer: an instrument thus transferred is said to be negotiated.
b) The person to whom the instrument is negotiated can sue on it in his own name.
c) The person to whom a current and apparently regular negotiable instrument has been
negotiated, who takes it in good faith and for value, obtains good title to it, even though
his transferor had a defective title or no title at all.

There are several types of negotiable instruments , but the one commonly used in Uganda
are as follows;
 CONTINUATION.

1. Bill of exchange

 Section 2(1) of the Bills of Exchange Act, Cap 68 defines a bill of

exchange as; “An unconditional order, in writing, addressed by one person
to another, signed by the person giving it, requiring the person to whom it is
addressed, to pay on demand or at a fixed or determinable future time, a
sum certain in money to or to the order of a specified person or bearer.”

 Subsection 2 emphasizes that an instrument which does not comply with

these conditions, or which orders any act to be done in addition to the
payment of money is not a bill of exchange.
 CONTINUATION.

Parties to a bill of exchange

Drawer: the person who makes the order for making payment.
Drawee: the person to whom the order to pay is made. He is generally a
debtor of the drawer.
Payee: the person to whom the payment is to be made. The drawer can
also draw a bill in his own name thereby he himself becomes the payee.
Here the words in the bill would be pay to us or order. In a bill where
time period is mentioned, it is called a Time Bill. But a bill may be made
payable on demand also. This is called a Demand Bill.
NB > Bills of exchange, therefore involves an order to pay money rather
than a promise to pay money. The person issuing the order is the drawer,
the person ordered to pay is the drawee and the person who receives the
payment is the payee.
 CONTINUATION.

• 2 CHEQUES.
Section 72. The Bills of exchange Act defines a cheque as
a bill of exchange drawn on a banker payable on
demand.
Features of a cheque.
• Bearers name , acc. Number , date , cheque leaf number,
bank account, signature.
• Drawer – Person who writes
• Drawee- Bank from whom the check is drawn.
• Payee- the person who is paid.
 CONTINUATION

• since a cheque is defined by reference to a bill of

exchange, most provisions governing bills of exchange
are applicable to cheques.
• Thus a cheque may be viewed as a type of bill of
exchange.
• It has the same general characteristics but is limited to
situations in which the drawee is a bank and payment
can be demanded immediately.
• HOW IT WORKS.
• See Section 73, 74 ,75 &76 Bill Of exchange Act 68.
 Continuation.
Promissory note.
Section 82 of the Bill of Exchange Act defines promissory note as;

1. an unconditional promise in writing made by one person to another signed by

the maker, engaging to pay, on demand or at a fixed or determinable future
time, a sum certain in money, to, or to the order of, a specified person or to
bearer.
2. An instrument in the form of a note payable to maker’s order is not a note
within the meaning of this section unless and until it is endorsed by the
maker.
3. A note is not invalid by reason by reason only that it contains also a pledge of
collateral security with authority to sell or dispose thereof.
4. A note which is, or on the face of it purports to be, both made and payable
within Uganda is an inland note. Any other note is a foreign note
 CONTINUATION.

NB. Section 83 of the same Act provides that, a promissory note is inchoate and incomplete until delivery of
it to the payee or bearer.
Features of a promissory note.
• It must be in writing.
• It must contain an unconditional promise to pay.
• The sum payable must be certain.
• The promissory notes must be signed by the maker.
• It must be payable to a certain person.
• It should be properly stamped.
OTHER INSTRUMENTS INCLUDE INCLUDE.
• treasury bill -Are short term (1 year or less) debt instruments issued by Government regularly to the
investing public.
• Interest warrants.- An instrument that demands payment due on notes/debts. .
• A certificate of deposit- A financial product that allows customers to earn a certain level of interest on
their deposits if they leave the money untouched for a certain period.
• How does it work - In exchange for depositing your money into a bank for a fixed period (usually called the term or duration),
the bank pays a fixed interest rate that’s typically higher than the rates offered on savings accounts. When the term is up (or
when the CD matures), you get back the money you deposited (the principal) plus any interest that has accrued.
 WHAT ARE THE MAXIMUM AMOUNTS
PERMITTED ON A CHEQUE?

UGANDA CLEARING HOUSE RULES AND PROCEDURES

March 2018
RULE 4.3 Cheque Value Limit
(a) Cheques exceeding the following amounts shall not be exchanged in the Clearing House:
(i) UGX =20,000,000= (Twenty Million UGX)
(ii) USD = 5,500= (Five Thousand Five Hundred USD)
(iii) EUR = 4,500= (Four Thousand Five Hundred EUR)
(iv) GBP = 4,000= (Four Thousand GBP)
(v) KES = 600,000= (Six Hundred Thousand KES)
(b) The Clearing House Committee shall, with the approval of UBA and BOU:
(i) review the cheque value limits and currencies to be exchanged in the Clearing House
from time to time; and
(ii) issue a circular to the Participants communicating the revised cheque value limits
and currencies to be exchanged in the Clearing House.
 PART c ,3.

BRIEF FACTS.
Assuming the estates officer of Born-rich Enterprises Ltd (“BEL”) accessed the document marked B from the managing director’s desk. He
appended the second mandatory signature on the document. He also completed the document and filled in the details Kaka Hardware
Limited for cement supplied to his site in Kawuku. He wrote the amount on the document as UGX 5,900,000/= The document was
honoured.
ISSUES .
1. Whether DFC (U) Ltd has potential liability against Born-rich Enterprises Ltd (“BEL”) ?
2. What remedy does DFC (U) Ltd have against Kaka Hardware Limited?.
3. What remedy does the DFC (U) LTD have against the estates officer of Born-rich Enterprises Ltd (“BEL”)?

LAW APPLICABLE.
4. Bill of Exchange Act Cap 68.
5. Companies Act No. of 2012
6. Case Law.

RESOLUTION.
ISSUE ONE. Whether DFC (U) Ltd has potential liability against Born-rich Enterprises Ltd (“BEL”) ?
Yes.
In Esso Petroleum Co. v Uganda Commercial Bank 1992 the Supreme Court of Uganda held that the relationship of a
banker and a customer is contractual. This therefore implies that the Bank has a duty of care to its customer and thus
should not act negligently per Stanbick bank vs Uganda cross ltd SCCA of 2004.
 Continuation.

• Section 23 0f the Bills of Exchange Act Cap 68; is to the effect that where a signature on a bill is forged or
placed on the bill without the authority of the person whose signature it purports to be, the forged or
unauthorized signature is wholly inoperative, and no right to retain the bill or to give a discharge for it or
to enforce payment of it against any party to it can be acquired…..
A person in possession of a cheque on which the drawers or endorser’s signature has been forged or placed
thereon without authority has no title and therefore no right to retain the cheque or discharge the cheque.
In Kepitingalla Rubber Estates Ltd v. National Bank of India Ltd (1909) 2 K.B. 1010, the court held that the
bank could not charge the company with the amounts paid out on forged cheques and the plaintiffs were
under no duty to organize their business in such a way that forgeries of cheques could not take place.
Banex Ltd v Cold Trust Bank civil Appeal No 29 of 1995 (SCU) (unreported), Harsbry’s Laws of England, 4 th
Edition, volume 3 (1) paragraph 175. If the banker pays and debit its customers in reliance on signature
being his customer’s, which is not so, he cannot charge its customer with the payment, in paying cheques, a
banker must not be negligent and cannot charge its customer with money lost through his negligence.

• THEREFORE since DFC (U) LTD paid out on BEL’s cheque which had been forged, it must credit the BEL’s
account with the amount paid since the forgeries are not due to the BEL’s negligence. This is in
accordance with the holding in Banex Ltd vs Cold Trust Bank civil Appeal no 29 of 1995.
ISSUE 2. What remedy does DFC (U) Ltd have against Kaka Hardware
Limited?
• Section 29(1) Bill of Exchange Act Cap 68. Every party whose signature appears
on a bill is prima facie deemed to have become a party to it for value.
• Section 29(2) Every holder of a bill is prima facie deemed to be a holder in due
course; but if in an action on a bill it is admitted or proved that the acceptance,
issue or subsequent negotiation of the bill is affected with fraud, duress, or force
and fear or illegality, the burden of proof is shifted, until the holder proves that,
subsequent to the alleged fraud or illegality, value has in good faith been given
for the bill.
• In the case of Obed Tasobya versus DFCU HCT - 00 - CC - CS – 742 – 2004, court
allowed the recovery of money paid out on cheques wrongly, stating that the
plaintiff had an obligation to repay the money that he had mistakenly received.
• THEREFORE DFC (U) Ltd can recover that money from Kaka Hardware.
 Continuation.

Issue 3. What remedy does the DFC (U) LTD have against the estates officer of Born-rich Enterprises Ltd
(“BEL”)?
This person who perpetuates the forgery. Therefore can bank should sue the manager individually for the
forgery to recover the sum paid out to him.
The banker enjoys a right to sue the party who perpetuated the forgery. Since the purported drawer is a
company and the fraudster is the manager of the company, the principle of piercing the corporate veil may
come accrue.

Section 2 of the Companies Act No. of 2012, defines ‘lifting corporate veil’ to mean ‘disregarding the
corporate personality of a company in order to apportion liability to a person who carries out any act.

The Court of Appeal in the case of Commodity Export International & anoer v MKM Trading Company Ltd &
another (Civil App. No.96 of 2005) [2006] UGCA 40 (16 June 2006) 4 held that the legal personality of a
company does not protect a director or a shareholder for thepurpose of defrauding the company itself or
members of the public.

The DFCU Ltd can sue the manager of BEL Ltd for recovery of the money lost as a result of his fraudulent
transactions in regards to the cheque in issue.
 RESOLUTION.

ISSUE 1. What are the rights of Born-rich Enterprises Ltd

(“BEL”) in the circumstance?
• The relationship of a banker and customer is a contractual
one.
• Joachimson vs. Swiss Bank Corp (1921) 3 KB 110 at 127 court
stated that that a bank is a trustee receiving funds from its
customer’s account. The cardinal duty of a bank is to honor
the instructions of the customer. If it does not act within the
law, then it breaches its duty to its customer.
BEL has the following rights in the circumstances:
 Continuation.

• Right to information.
• Section 65(2) (a) the National Payments Systems Act No.15 of 2020 provides for the right to the
customer and a duty to the bank to be transparent. This is also emphasized under paragraph 8 Bank
of Uganda Consumer Protection Guidelines, 2011, In our case, DFC(U) bank failed to inform its
customer about the initiation process of the transfer of the money hence contravening the above
• Right to be protected from unfair practice.
• Section 65(2) the National Payments Systems Act No.15 of 2020.
• Para. 6(1)(a) of the Bank of Uganda Consumer Protection Guidelines 2011. provides a duty to the
bank to protect its customer from unfair trade practice.
• See the Obed Tashobya V DFCU Bank Ltd HCCS No.742 of 2004.
• Therefore , it was unfair practice for the bank to release money without consent from the customer.
• Right to confidentiality.
• Section 65(2)(f) of the National Payments Systems Act No.15 of 2020.
• See. JESSICA KAKOOZA v ECOBANK UGANDA LIMITED HCCS NO.44 of 2014 where court stated that ,
“The standard by which the absence or otherwise of negligence is to be determined must be ascertained by
reference to the practice of reasonable men carrying on the business of bankers and endeavoring to do so in such
a manner as may be calculated to protect themselves and others against fraud.” In the instant case, it was unfair
practice for the bank to release money without consulting the customer
• Right to account protection.
• Paragraph 7(4)(b) The Bank of Uganda Consumer Protection
Guidelines 2011.
• Right to reimbursement.
• Paragraph 9(4)(C) of The Guidelines.
• Right to file a complaint:
• Section 65 (2) of the National Payments Systems Act No.15 of
2020
• Right to seek for damages in court of law.
 GROUP 4
Part D- TASK IV
Brief facts
• Kaka hardware limited presented a cheque of a sum
UGX5,900,000signed BEL to Centenary Bank. Centenary Bank
without carrying out any due diligence proceeded to pay the
money to Kaka Hardware ltd.
• A few hours later, the managing director of BEL called Centenary
and informed it that that same cheque qas lost and that the
bank should not honour it if it is presented.
• Centenary wants a refund of the money from Kaka Hardware
Ltd at an interest rate of 15% per annum. The bank has
threatened to recall the 5 years loan facility with Kaka and to
foreclose on its property if it refuses to refund the money with
the interest.
• Issues
1. Whether Centenary Bank is entitled to demand for a refund of
the UGX 5,900,000/= from Kaka Hardware Ltd?
2. Whether the 15% interest charged by the bank is legal?
3. Whether the bank can recall the loan facility and foreclose on
the property that has been running for 5 years?

Law applicable
1. Contract Act 2010
2. The Bank of Uganda Consumer Protection Guidelines 2011
3. Case law
Issue 1: Whether Centenary Bank is entitled to demand the refund of
UGX 5,900,000/= from Kaka Hardware Ltd?
• Barins, Jnr & Sims v. London & South Western Bank Ltd [1900] 1 QB
270 at 277
“Credit given to a customer by a bank is in its nature provisional only
and depends upon the question whether the cheque or other
documents finally result in a right to recover or retain the money, the
customer is only credited with the amount subject to this risk.”
Section 60 – Contracts Act 2010 – money paid to a person by mistake
must be repaid or returned.
Obed Tashobya v. DFCU Bank Ltd HCT-00-CC-742-2004
Therefore, Kaka Hardware Ltd must refund the money to the bank.
• ISSUE 2: whether the 15% interest charged is legal?
The Bank of Uganda Financial Consumer Protection Guidelines
2011
Guideline 6 (1)a- financial service provider to act fairly and
reasonably in all its dealings with customer.
Guideline 8 (4) – Disclosure of interest rates prior to consumer
signing a contract.
Bank cannot collect 15% interest from Kaka Hardware Ltd because
there was never consent by both the bank and Kaka (U) Ltd.
• Issue 3 : Whether Centenary Bank can recall the loan facility
and foreclose the property of the mortgage?
• Mugobi Traders Ltd v. Standard Chartered Bank HCMA No.
269 of 2016
• For a bank to recall a loan facility, there should be default and
there should be an issuance of a recall notice.
• In conclusion, Centenary Bank can not recall the loan because
it has not satisfied the pre requisites for recalling a loan
facility.
THANK YOU