This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 253.— Does the guarantee of a deposit receipt of, or deposit account with, a private banker come within the powers of a chartered bank? Can a branch manager give such a guarantee, and would he be personally liable if the bank were held not to be liable?
Answer.—A guarantee of this kind is probably within the scope of the bank's powers, and binding on it if given for a proper consideration. The right of a branch manager to bind the bank by such a guarantee depends on the circumstances; and the facts would have to be carefully ascertained before an opinion could be expressed. The case would, however, be so unusual and open to objection, that the presumption would be against his authority.
If the bank proved not to be bound by his act, he would, if the guarantee was not in itself ultra vires of the bank, be responsible to the creditor for am damages sustained through relying on his implied warranty that he had authority to bind the bank. If, however, the guarantee were held to be ultra vires, then the manager would not be responsible. The power of a bank to enter into a guarantee will depend upon the nature of the transaction. If the transaction be one which " appertains to the business of banking" within the meaning of section 64 of the Bank Act, it would be within the bank's powers.
It was held by the court in Montreal that a bank was not authorized to enter into a contract of suretyship guaranteeing the payment by a customer of the hire of a steamship under a charter party. Johansen v. Chaplin.