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The Banking Contract as a Special Contract: The Israeli Approach

By   /  November 18, 2013  /  Contracts, Featured 

Scales of Justice and Gavel

The banker-customer relationship is a contractual relationship based on a contract between the parties. As a contractual relationship, it is governed by contract law. However, contract law does not provide the customer with the protection he or she requires against the bank. Therefore, the Israeli courts have adopted a unique approach in determining that the banking contract is a special contract—a fiduciary contract. Under a fiduciary contract, the bank, as a fiduciary, is subject to a fiduciary duty vis-à-vis the beneficiary, the customer. The fiduciary duty imposes a very high standard of behavior on the bank, much higher than the standard imposed on it under contract law. By adopting a fiduciary approach, the customer is granted very wide protection against the bank.

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