Facts
Bank X. SA was ordered to reimburse $250,000 to spouses Y. following the execution of fraudulent payment orders given by manager Z. acting on their behalf. Although the bank's general terms and conditions provided for a risk transfer clause in case of undetected forgery, the DFC considered that this clause was not enforceable against the clients in the circumstances of the case. Indeed, the bank showed excessive trust in the manager, waiving the normal precautions it applies in its relations with external managers, and executed orders that were exorbitant from the management mandate without requesting confirmation from the clients.Considerations
The DFC ruled that the bank could not rely on the risk transfer clause provided for in the general terms and conditions. Although this clause is generally enforceable against the client, it loses its effect when the bank commits a fault, even a minor one, in the performance of the contract. In this case, the bank showed excessive trust in the manager, waiving the normal precautions it applies in its relations with external managers. It thus executed significant and unusual payment orders without requesting confirmation from the clients. This minor fault of the bank prevents it from invoking the risk transfer…