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Cfm 304 - F Banking Law And Practice (Sunday) Question Paper
Cfm 304 - F Banking Law And Practice (Sunday)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
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UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFM 304 - F BANKING LAW AND PRACTICE (SUNDAY)
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
Question One
a) In relation to the banks duty of confidentiality, discuss the legal position of the bank in the
following situations;-
i. Jack, your customer, has come to the bank to inform you that he recently separated
from his wife Jacqueline and complains that his bank statement for this month was
given to her without his authority. Jacqueline has been in the habit of collecting her
husband’s statement from the bank at the beginning of each month. (6Marks )
ii. Mr. Shah, the director of Trupi Ltd has sued Chick Bank on the ground that the
bank informed the police of unusually large sum of money of Ksh 200,000,000/=
which he deposited into the company’s account with the bank. He claims as a result
he was arrested and charged with fraud, but he was subsequently acquitted. He
further alleges that the bank breached its secrecy towards him (6Marks )
b) You are the officer in charge of opening accounts. Mr and Mrs Mutua have just formed a
partnership known as Mutua Roses and have come to you to open an account for the firm.
You have issued them with the standard bank mandate form to sign. Mrs. Mutua has seen a
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clause titled “Joint and several liability” on the from and asks you what these words mean
and their legal effect in the relationship between the bank and the partnership
i. Write the response to Mrs. Mutua’s question
ii. How would the absence of this clause effect the relationship should one partner die.
(10Marks)
c) Charles Kairu and James Mutune have a joint account at your branch with the usual from
of mandate requiring both to sign withdrawals. With the balance of account of Ksh
825,000/= you receive notice of death of Mr Mutune from his executors. Accompanying
the notice is another letter addressed to the bank claiming the balance of the account.
By the same post you receive a request from Mr Kairu asking you to transfer the joint
account balance into a fixed account for 12 months in his sole name at your bank. Giving
legal reasons, state the action you would take (8Marks)
Question Two
a) Discuss the procedure to be followed by a bank in order to open a partnership account
(12Marks )
b) Duck Hotels a family business in which Charles Mutua, Joseph Mutuku and Jacob Mutie
are equal partners, have been very good customers at your bank for the last five years. In
September you agreed an overdraft facility of Ksh 2 million on the partnership account
and a loan facility of Ksh 2,500,000/= all secured by partnership property
In this morning mail,you receiveda letter from the firm enclosing a new signing
mandate in which Chris Matiro is included as the new partner and Mutuas signature
withdrawn as he is retiring.
In the light of the fore going, explain the respective position of:-
i. Mutua
ii. Matiro
iii. The bank
iv. Duck hotels (10Marks)
Question Three
a) In relation to the banker’s customer relationship, highlight features of the creditor-debtor
relationship. (10Marks )
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b) You are holding in a safe custody on behalf of your customer, Moses Mbai a number of
share certificates valued at 250,000/= which are registered in the name of his younger sister
,Jeniffer Mbai. Miss Mbai calls and states that she knows the certificate in her name are
held by you. She explains that she is now 19 years old, and asks that you hand over to her
the certificates as she requires them for personal reasons. State with reasons how you
would reply. (10Marks )
Question Four
Write explanatory notes on the following:-
i. “Not negotiatable” crossing
ii. Shares as security for loans
iii. Automatic teller machines
iv. Debenture
v. Co-ownership of land (20 Marks)
Question Five
a) Discuss various practices applied by the banks in conducting their role as lenders of money
(8 Marks )
b) Discuss the role and functions of the Central Bank (6Marks )
c) What remedies are available to the mortgagee against the mortgagor where the latter has
defaulted in paying the principal and interest on the loan (6Marks )
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