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Banking Law And Practice Question Paper
Banking Law And Practice
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE 2 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFM 304: BANKING LAW AND PRACTICE (EVENING CLASS)
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer Question ONE and Any other TWO Questions
QUESTION ONE
a) In relation to the bank-customer relationship, explain the duties of the bank towards the customer.
(10 Marks)
b) Mamba has an account with Zoa Bank Ltd. On 9th July 2007, he requested for his balance and was advised that his account had a credit balance of Kshs 70,000. Relying on this balance, he issued a cheque on the same day to Jua Kali Fabricators for Kshs 67,000 in payment of their debt.When the cheque was presented for payment on 10th July 2007, Zoa Bank dishonoured it since the credit balance in Mamba’s account was only Kshs 60,000.This was due to a credit of Kshs 10,000 which had been entered twice in error. Jua Kali Fabricators Ltd which had previously extended credit to Mamba refused him any further credit. Mamba is aggrieved and has sued Zoa Bank for damages. Explain the legal position. (10 Marks)
c) One of the types of the banker-customer relationships is that of a principal and agent. Explain
five circumstances when a bank acts as an agent of the customer (10 Marks)
QUESTION TWO
a) Quoting relevant authorities, explain the various circumstances under which a bank can ignore his duty of secrecy. (10 Marks)
b) Kabetu transferred the following cheques to John, who took them in good faith and for value.
i) A crossed cheque payable to Namweya or order, where on Namweya’s endorsement has
been forged.
ii) A cheque crossed “Not Negotiable” payable to and endorsed by Kabetu who
had obtained it from the drawer by fraud.
iii) A cheque crossed “Account Payee Only” payable to Sylvia and endorsed by
her. John who had no knowledge of the history of the cheques when they were transferred
to him now asks you whether he has a good title to them. Advice him (10 Marks)
QUESTION THREE
a) Outline the requirements a banker must be presented with in order to open an account for a
limited liability company. (6 Marks)
b) What is the effect of the following on a bank’s mandate to pay a cheque?
i) Death of an adult in a joint account with his wife
ii) Bankruptcy of an agent who has already signed a cheque on behalf of the principal
iii) A Garnishee order affecting the customers accounts (6 Marks)
c) Mweru, Mwilu and Mutune are partners in a firm whose bank account is substantially
overdrawn. Mweru is about to retire and is the wealthiest of the partners. The bank is anxious that he should remain liable for the overdraft. State the steps that the bank should take and why
(8 Marks)
QUESTION FOUR
a) Explain “Holder in due course” and his advantages (5 Marks)
b) Write short notes on the rights of appropriation by the bank (5 Marks)
c) Explain the characteristics of negotiable instruments (5 Marks)
d) Termination of the banker-customer relationship (5 Marks)
QUESTION FIVE
a) What is Banker’s Right of Lien? (5 Marks)
b) Explain the principles of lending as applied in banking practice (10 Marks)
c) Forged cheques were presented to Bill’s bank in respect to Bill’s account. The cheques were honoured by Bill’s bank. The bank routinely sent statements to all their customers including Bill, who looked through the statements, ticking out the suspect entries before returning to the bank.
He however did not further indicate to the bank that in fact there were forgeries against his account.Several months later, he decided to inquire from the bank about the irregularity to his account. The bank did nothing about Bill’s complaint Explain the legal position.
(5 Marks)
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