loans and overdraft

Even though an overdraft and a loan seek to achieve the same suppose of borrowing, an overdraft is a method of borrowing whereby by a bank allows its customer on an agreement between them to withdraw money which is in excess of the amount standing as credit in the customer’s account but only up to the limit as already agreed. An overdraft is usually for a short term and repayment is usually through deposit by the customer into his account.

A loan on the other hand is a fix sum of money borrowed for a fixed period against collateral. It is usually for a long term and repayment is either on demand or on fixed instalments. Bank of the North V. Bernard (1976) 4 CCHCJ 981.

No, an action for breach of contract for a loan or overdraft contract will not arise unless the parties had gone beyond negotiations and a binding and conclusive agreement has been reached from such negotiations. Co-operative Bank V. Eke (1979) 2 FNR 190, 192.

It is not right and it is unfair for the bank to transfer the liability of the valuer’s fee to you. It is the bank who must bear the liability of the valuer’s fees since your application for loan was not granted. The clear understanding between you and the bank was that you would liable to pay the valuer’s fee if the loan was approved. African Cont. Bank V. Okonkwo (1985) 1 Builetion of Contemporary Law 34.

If an account is overdrawn, there is the presumption that it is the customer who has requested for an overdraft and so must become liable to pay the amount overdrawn. However, this is not always conclusive proof that it is the customer who is indebted to the bank for the amount overdrawn as it is quite possible that either as a result of negligence or fraud, the customer’s account may have been debited with cheque which he never drew. However, it is the customer who alleges fraud or negligence that must give evidence to prove this. Olashinde V. Africa Cont. Bank (1990) 7 NWLR (pt. 161) 180. National Bank of Nigeria V. Araoye (1977) OYSHE 253.

Yes. A loan and an overdraft agreement is an agreement contract agreement, as such for it to be valid, the following must be present.

a) There must be an offer.

b) There must be acceptance of the offer.

c) There must be intention to contract.

d) There must be a value for the contract (consideration)

Faagol Instrument Ltd. V. National Bank of Nigeria (1993) 1 NWLR (pt. 271) 586.

No, a consideration is the payment or reward essential to the formulation of a contract. It is the price (usually in monetary value) you pay in exchange for a performance or a promise kept. The mere deposit of a title deed with bank is not the consideration for the loan granted or to be granted. The consideration in a loan or overdraft agreement is the interest which you pay to the bank. Faagol Instrument Ltd. V. National Bank of Nigeria (1993) 1 NWLR (pt. 271) 586

Where your application for loan is not granted, the bank is expected to inform you of its intention not to grant you the loan, and if the bank is in possession of your title deed, the bank is expected to return it to you personally and you must sign for it. Co-operative Bank V. Eke (1979) 2 FNR 190, 192

Yes, you can get an additional loan from the same bank you got the first loan with the same property used for the first loan even when the repayment of the first loan taken has not been done or completed as long as there is an express agreement in the Deed of Mortgage that provides for the additional loan. In the absence of any agreement then additional loan on same property will not be allowed by the bank. Union Bank V. Sax (Nig.) Ltd. (19940 8 NWLR (pt. 361) 150.

If the bank manager acted above his authority in granting the loan, or overdraft the bank is still liable observe the agreement except the bank can show in evidence that the Manager acted far above his authority and the person requesting the overdraft or loan (the Customer) knows about the limited authority of the manager. Uzuegbu V. Progress Bank (1988) 4 NWLR (pt. 87) 253; Construction Industries Co. V. Bank of the North (1968) NCLR 194

When a bank refuses to honour a contract of overdraft you entered with it, it is like any other breaching of contract - you will be entitled to sue the bank to receive compensation as a result of the breach of the contract. Oyewole V. Standard Bank of West Africa (1968) NCLR 65

Where the subject matter of a breach of contract is a contract for the loan of money, the court is not obligated to award in your favour any amount you seek. In fact, compensation for a breach of contract in a contract of loan agreement is the amount it will take the borrower to go into the market and get a substitute loan for himself minus the amount of contractual loan sought. The difference is usually the compensation awarded. Uwa Printers (Nig.) Ltd. V. Investment Trust Co. (1988) 5 NWLR (pt. 92) 110; Issa V. Union Bank of Nigeria (1993) 4 NWLR (pt. 288) 503.

Yes, in fact, an overdraft facility cannot be given to a customer of a bank that does not maintain a current account with the bank. Barclays Bank V. Okenarie (1966) 2 Lloyds Rep 81

You can secure money from your bank either by applying out rightly for a loan or by means of an overdraft. Bank of the North V. Bernard (1976) 4 CCHCJ 981

Mere application to a bank for a loan or an overdraft is neither the offer nor the acceptance. An offer is only created when upon your application for a loan, the bank agrees to your request, sends to you a letter of loan agreement forms for completion stating the terms and conditions of the loan that an offer is made.

It is when the customer agrees to the terms and signs the forms that there is an acceptance and the loan is given. The offer is not in the bank agreeing to deal with you by treating your application; it is in the bank sending to you the conditions upon which they will give you the loan or overdraft. It is then left for you to accept, and you do that when you agree to relate with them on the terms offered. That is, it is the bank that *Offers * and the Customer Accepts. Faagol Instrument Ltd. V. National Bank of Nigeria (1993) 1 NWLR (pt. 271) 586.

An overdraft contract will come into effect by circumstances where a customer of a bank without any previous express agreement with the bank presents a cheque for withdrawal of an amount which is in excess of the amount in his account and the bank proceed to honour the cheque National Bank V. Olatunji (1974) 12 CCHCJ 1799; Lion Bank (Nig) Plc v Amaikom (2008) All Fwlr (Pt. 417) Pg. 85 @ 118 para B-C; ACB Ltd v Egbunike (1988) 4 NWLR (Pt. 88) 350

Where a bank refuses to honour its own part of an agreement even after you have satisfied your own part of the said agreement as laid down by the bank, then the bank becomes liable for breach of contract. This will give you the ground to sue the bank for breach of contract and received compensation. Oyewole V. Standard Bank of West Africa (1958) NCLR 65; Uwa Printers (Nig.) Ltd. V. InvestmentTrust Co. (1988) 5 NWLR (pt. 92) 110.

Yes, the bank will be entitled to hold back money in the customer’s deposit account. This is so because the customer will be deemed to have consented impliedly to the bank holding the balance of the deposit account as security for his borrowing on current account. Allied Bank V. Akubueze (1997) 6 SCNJ 116.

Yes, the nature of banking business makes it necessary for any overdraft or loan contract to be documented. This is to prevent any controversy that may arise from the contract were it not to be documented. Alhaji Mu. & Sons Ltd. V. L.B.N Plc. (2006) 2 NWLR (pt. 964) 288 at 297

No. The relationship between parties to loan agreement is contractual and thus binding so that either party cannot on their own alter the terms of it. The vexatious and usual issue on this matter of alteration of terms, is the one of Interest Rate - parties to a loan agreement cannot unilaterally alter the interest rate on the loan Unity Bank Plc v Ahmed (2020) 1 NWLR (Pt. 1705) Page 364 @ 387 para E – F; @ 390 para D-E

No, a bank cannot refuse to honour an overdraft agreement entered into by its bank manager as the manager is presumed to be an Agent of the bank and any act done by the manager is said to be validly done by the bank. Uzuegbu V. Progress Bank (1988) 4 NWLR (pt. 87) 253

Where the fulfilment of a third party contract is anchored on the successful grant of an overdraft or loan by the bank, and the bank was made aware of the fact that the overdraft or loan was for that third party contract, and the bank reneges on the overdraft or loan contract which directly resulted in your performing that contract and losing the profit you might have gotten if the overdraft or loan agreement had been honoured then yes, you can sue the bank to claim for damages for loss of profit expected. However, it is important to note that since the third party contract had not been carried out, the profit becomes an anticipated profit. As such, you must show evidence of the profit. The actual amount of the profit must be known and not merely speculative and you must give evidence to show that you lost such profit as a result of the bank’s failure to honour the overdraft/loan agreement. Where you are unable to do so, your claim for loss of profit will fail as it is a special damage that must be established by evidence. ISSA v. Union Bank of Nigeria (1993) 4 NWLR (pt. 288) 503.