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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:2010
UNIVERSITY EXAMINATIONS: 2009/2010
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFM 304-F: BANKING LAW AND PRACTICE(day + evening)
DATE: AUGUST 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
a) You are the officer in charge of account opening. Mr. & Mrs. Juma, who have just formed a
partnership known as “Juma Roses” have come to open an account for the firm. You have issued
them with the standard bank form to sign.
Mrs. Juma has seen a clause titled “Joint and several liability” on that form and asks you what
these words mean and their legal effect on the relationship between the bank and the partnership.
Write down your response to Mrs. Juma’s question. (10 Marks)
b) Define the term “Bank” (6 Marks)
c) Explain the requirements that must be met by a customer before he is permitted to open an account
with the bank. (8 Marks)
d) Discuss the procedures to the followed by a bank upon receipt of notice of death of a customer,
where the deceased had issued cheques for payment before his death, and where there are cheques
to be credited into the deceased person’s account. (6 Marks)
QUESTION TWO
a) Fatuma has an unauthorized overdraft of Kshs. 150,000/= with your bank. She has failed to
respond to your demand letters and has declined to answer the bank telephone calls. The bank has
left a message for her with her secretary asking Fatuma to call the bank in relation to an
2
unauthorised overdraft and the cheque she has issued to Mr. Kanyeria, well known serial rapist and
murderer. (10 Marks)
b) The Banks duty of secrecy and confidentiality is subject to certain important exceptions.
Highlight four exceptions in this regard. (10 Marks)
QUESTION THREE
a) Mr. Makau issued a cheque for Kshs 55,000/= to Ideal Traders Ltd towards purchase of a domestic
washing machine. The machine was duly delivered to Mr. Makau’s house. Two days letter, Mr.
Makau countermanded the cheque and notified the bank in writing. In the meantime, the Ideal
Traders Ltd issued a cheque to their landlord for Kshs. 22,000/= in payment of arrears of rent.
Upon presentation, this cheque was returned unpaid due to lack of funds.
Discuss the legal position of the parties. (10 Marks)
b) Discuss the effect of a forgery on a customer’s cheque, which upon presentation, has been paid by
the bank. (10 Marks)
QUESTION FOUR
a) Otieno, aged 17 years, operates an account in your bank. The account is in credit to the tune of
Kshs. 4,000/=. Otieno has issued a cheque for Kshs. 8,500/= in payment to Uzuri Studios where he
has purchased a camera. Otieno’s father also operates an account with the same bank and is one of
your esteemed customers. Explain how you would deal with Otieno’s cheque. (10 Marks)
b) How would you deal with an account of your customer where you have received notice that he has
been certified insane. (10 Marks)
QUESTION FIVE
Write short notes on the following:
a. Bank as Bailee
b. Tai Hing Cotton Mills Ltd v. Chong Hing Hing Bank Ltd 1986.
c. Estoppel
d. Retiring partner (20 Marks)
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