Contract can exempt banks from transaction errors: Dubai court

Bank may seek exemption from mistakes in transactions like delays in collecting cheques, securities or bills of exchange in the terms of their contracts with customers, according to a new legal principle established by the Dubai Court of Cassation.

According to the legal principle, the client has no right to sue the bank but can do so only if the bank has committed a grave mistake and there is conclusive evidence of the error.

Based on these legal principles, the Court of Cassation ruled in favour of a bank operating in the UAE, rejecting the appeal of the bank’s customer, demanding that the bank pay him 4,150,000 Saudi riyals.

The client claimed that he had handed over to the bank four cheques drawn in favour of him for collection from a bank in Saudi Arabia.

However, the bank informed him that will not be able to collect the cheques as it had lost them.

The Court of Cassation based its judgment in favour of the bank on a clause in the contract signed between the bank and the client to exempt the bank from any responsibility for loss of cheques.

The client had filed a suit in the Court of First Instance which dismissed the case.

The client did not accept the ruling of the Court of First Instance and appealed before the Court of Appeal whose ruling was challenged in the Court of Cassation.

The Court of Cassation rejected the appeal of the client, saying that the bank can be exempted, as per terms of the contract, from liability unless it has committed fraud or serious error.

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