Duhaime's Law Dictionary


First In, First Out Rule Definition:

Each withdrawal in an account, made without particulars, is presumed to be a return of all or part of the oldest deposit.

Related Terms: Clayton's Case

See also The Rule in Clayton's Case.

In Wannan, Justice Sharlow of the Federal Court of Appeal used these words:

"It was determined in Clayton's Case that each withdrawal is presumed to be a return of all or part of the oldest deposit. The result is that the oldest deposit is withdrawn first, or the oldest debt is paid first. This is sometimes referred to as the first in, first out rule; its rationale is explained as follows: '[T]his is the case of a banking account, where all the sums paid in form one blended fund, the parts of which have no longer any distinct existence. Neither banker nor customer ever thinks of saying, this draft is to be placed to the account of the £ 500 paid in on Monday, and this other to the account of the £ 500 paid in on Tuesday. There is a fund of £ 1000 to draw upon, and that is enough. In such a case, there is no room for any other appropriation than that which arises from the order in which the receipts and payments take place, and are carried into the account. Presumably, it is the sum first paid in, that is first drawn out. It is the first item on the debit side of the account, that is discharged, or reduced, by the first item on the credit side. The appropriation is made by the very act of setting the two items against each other.'"

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