The Rights of Account Holders
Elgar Financial Law series
Chapter 7: Funds transfers, finality and security interests
The nature of money whether coins, banknotes, or funds in bank accounts determines the relevant legal rules governing transfers. Recall from an earlier discussion that coins and banknotes are items of property whereas funds held in deposit accounts are in their nature contractual claims against banks. Cox noted that 'A transfer of corporeal money involves an alteration in the spatial location of money with consequent changes in the parties' rights to possession and ownership of it. In contrast, a transfer of incorporeal money involves an adjustment of the debt liabilities owed by the depository institutions to the transferor and transferee'. Accordingly, property law governs transfers of physical money while contract law determines when a transfer of account-based funds occurs. The following paragraphs are concerned only with the latter. When one analyses a transfer of funds between bank accounts one must forget about property and one must think in terms of contract rights and debt liabilities. Physical location, possession and delivery are relevant only in the analysis of transfers of coins and banknotes, similar to transfers of security certificates and actual physical commodities. The consequence of the nature of bank account relationships as debt liabilities is that in a funds transfer, the transferor's title to the money is not transferred for the depositor is not the owner thereof. What is transferred is 'the title to the value' rather than a title to an identifiable asset.
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