Devaynes v Noble (Clayton's Case) 1816 | First-In First-Out Rule in Bank Accounts Explained

Banking Law Case 12 of 29 by Law Easy, for LL.B., CLAT PG, UGC NET Law and Judiciary exams. Case: Devaynes v Noble (Clayton's Case) (1816), English Court of Chancery, judgment of Sir William Grant, Master of the Rolls. FACTS: Devaynes was a partner in a London banking firm. He died in 1809 and the firm went bankrupt about a year later. A customer named Clayton had a current account with the firm, and when Devaynes died the firm owed Clayton about 1,700 pounds. Clayton went on depositing and withdrawing money with the surviving partners. When the firm failed, he tried to recover the old balance from the estate of the dead partner. LEGAL ISSUE: In a running current account, how are later withdrawals applied against the earlier and later credits? JUDGMENT: The court held that in a running current account, the sum first paid in is the sum first drawn out. The withdrawals Clayton made after the death were set against the earliest credits, which made up the old balance. Since he had drawn out more than the old balance, it stood fully paid off and the dead partner's estate was not liable. PRINCIPLE TO REMEMBER: First in, first out in a running account. It is only a presumption about the parties' intention and can be displaced by agreement or a clear contrary intention. It can work silently against a bank or a creditor when a partner dies or leaves a firm. PROVISIONS: Sections 59, 60 and 61 of the Indian Contract Act, 1872 (appropriation of payments between different debts). Distinguish these from the rule in Clayton's Case. EXAM NOTE: This is a presumption, not a rigid command. A contrary agreement or intention, and modern rules about trust money, may affect the result. PLAYLIST (all 29 cases in order): https://www.youtube.com/playlist?list=PLbhYsrMKgACA COMPLETE LECTURE (all 29 cases with timestamps): https://youtu.be/ayAN7RLlfPM PREVIOUS CASE (11, Foley v Hill): https://youtu.be/mDYDEA_skoo More law notes: https://www.thelaweasy.com If this helps your exam preparation, please subscribe to Law Easy. This video is for education and is not legal advice. #BankingLaw #ClaytonsCase #ContractAct #CLATPG #Judiciary #LLB #LawEasy