KANKAM JONATHAN

COMMERCIAL LAW TRIALS SET

TOPIC: BANKER & CUSTOMER RELATIONSHIP

COMPILED BY: JONATHAN KANKAM

OBJECTIVES

1. What is the primary business activity of a bank?

a) Accepting deposits from the public
b) Providing financing for trade and agriculture
c) Issuing credit cards and traveler's cheques
d) Engaging in portfolio management and advice

Answer: a) Accepting deposits from the public

2. According to the Common Law definition, who can be considered a customer of a bank?
a) Any person who receives services from the bank
b) Any person who has an account with the bank
c) Any person who is about to open an account with the bank
d) Any person who has borrowed money from the bank

Answer: b) Any person who has an account with the bank

3. What are the implied terms of the contractual relationship between a bank and its customer?
a) The bank must repay the customer without any demand
b) The customer must exercise reasonable care in drawing cheques
c) The bank can cease business with the customer without notice
d) The customer is responsible for the bank's debts and obligations

Answer: b) The customer must exercise reasonable care in drawing cheques

4. Which duty does a bank owe to its customer regarding the confidentiality of their affairs?
a) Complete transparency and disclosure
b) Sharing customer information with other banks
c) Maintaining confidentiality except under certain circumstances
d) Publishing customer account details publicly

Answer: c) Maintaining confidentiality except under certain circumstances

5. When can a bank close a current account without notice to the customer?

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a) At any time and without providing a reason
b) Only if the customer defaults on loan payments
c) Only with the consent of the customer
d) After giving reasonable notice to the customer

Answer: d) After giving reasonable notice to the customer

6. What duty does a bank have regarding honoring its authorized agent's word?
a) The bank is not obligated to honor the agent's word
b) The bank must honor the agent's word without question
c) The bank must exercise reasonable skill and care in honoring the agent's word
d) The bank can ignore the agent's word if it conflicts with its own policies

Answer: c) The bank must exercise reasonable skill and care in carrying out the customer's
instructions

7. In case of an inaccuracy in a statement of account, what principle may prevent the bank from
disputing its correctness?
a) Estoppel
b) Forfeiture
c) Malfeasance
d) Arbitration

Answer: a) Estoppel

8. Which of the following actions by a bank is NOT a duty towards its customer?
a) Honoring customer's cheques up to the credit balance
b) Keeping customer's affairs and status confidential
c) Closing a current account without any notice
d) Exercising reasonable skill and care in carrying out customer's instructions

Answer: c) Closing a current account without any notice

9. What type of relationship is the banker/customer relationship primarily based on?

a) Partnership
b) Trustee/beneficiary
c) Principal/agent
d) Debtor/creditor

Answer: d) Debtor/creditor

10. What activities are considered permissible for a bank to engage in?
a) Accepting deposits, lending, and financial leasing
b) Portfolio management and credit reference services

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c) Electronic banking and money transmission services
d) All of the above

Answer: d) All of the above

11. Which legal framework governs the relationship between a bank and its customer?
a) Banking Act
b) Financial Institutions Act
c) Commercial Law Code
d) Consumer Protection Act

Answer: a) Banking Act

12. When can a bank disclose a customer's information without consent?

a) Only under compulsion of law
b) Only in the bank's interest
c) Only with the customer's consent
d) Only in case of public interest

Answer: a) Only under compulsion of law

13. What is the primary duty of a bank regarding a customer's cash and instruments?
a) To keep them in safe custody
b) To return them to the customer upon request
c) To receive them for collection
d) To invest them for the customer's benefit

Answer: c) To receive them for collection

14. What is the significance of a customer's signature on a cheque?

a) It guarantees the authenticity of the cheque
b) It proves the customer's financial status
c) It ensures the bank's repayment obligations
d) It allows the bank to charge additional fees

Answer: a) It guarantees the authenticity of the cheque

PART II
1. The bank may rectify errors within a reasonable time if the customer has not been misled and the
transaction is reversed before the customer sees it. This is an example of:
a) Duty of confidentiality
b) Duty of care
c) Duty of disclosure

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d) Duty of rectification
Answer: d) Duty of rectification

2. In the case of Tai Hing Cotton Mill Ltd v Lui Chong Hing Bank, the court held that a customer is
not obliged to examine his statement of account furnished by a bank. True or false?
a) True
b) False
Answer: a) True

3. The Banking (Amendment) Act, 2007 provides statutory exceptions to the bank's duty of
confidentiality. Which of the following is NOT one of those exceptions?
a) Customer defaulting on credit or charge card
b) Customer declaring bankruptcy
c) Customer's death and information required by personal representative
d) Civil proceedings between the bank and the customer
Answer: d) Civil proceedings between the bank and the customer

4. The duty of the customer to exercise reasonable care in writing a check or other authorization to
avoid misleading the bank or facilitating fraud is an example of:
a) Duty of confidentiality
b) Duty of care
c) Duty of disclosure
d) Duty of rectification
Answer: b) Duty of care

5. Banker's opinion, also known as status enquiry, is a statement relating to the position of a
customer or their account given by a bank in response to a request, usually from another bank. True
or false?
a) True
b) False
Answer: a) True

6. Which of the following is a risk associated with providing a banker's opinion?

a) Breach of contract by unauthorised disclosure
b) Negligence
c) Libel
d) All of the above
Answer: d) All of the above

7. Appropriation of payments arises when a customer owes more than one debt to the bank and
pays in money that cannot fully pay all the debts. True or false?
a) True
b) False
Answer: a) True

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8. Banker's set-off is the right of the bank to combine or consolidate an account of the customer
against another account of the same customer. True or false?
a) True
b) False
Answer: a) True

9. Banker's lien is the right of the bank to hold on to a customer's property in its possession in
satisfaction of or pending the satisfaction of the obligation owed by the customer to the bank. True
or false?
a) True
b) False
Answer: a) True

10. Which of the following is NOT a condition that must be present for a right of set-off to be
exercised by the bank?
a) The debts must be for certain sums
b) The debts must be between the same parties
c) The debts must be in the same right
d) The debts must be unmatured or contingent liabilities
Answer: d) The debts must be unmatured or contingent liabilities

11. The banker's lien cannot be exercised when the property or security is held in trust by the
customer. True or false?
a) True
b) False
Answer: a) True

12. The banker/customer relationship can be terminated by:

a) Death of the customer
b) Closure of the account by the customer
c) Insolvency of the customer
d) All of the above
Answer: d) All of the above

13. In the Tournier case, the bank disclosed the status of the customer's account to his employers,
leading to his dismissal. True or false?
a) True
b) False
Answer: a) True

14. Which of the following is NOT one of the exceptions to the bank's duty of confidentiality under
the Tournier case?
a) Customer defaulting on credit or charge card

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b) Customer's death and information required by personal representative
c) Civil proceedings between the bank and the customer
d) Information required by a colleague in the bank or the auditor
Answer: d) Information required by a colleague in the bank or the auditor

15. The duty of the customer to pay any overdraft immediately on demand is an example of:
a) Duty of confidentiality
b) Duty of care
c) Duty of disclosure
d) Duty of repayment
Answer: d) Duty of repayment

16. Banker's opinion should be given by an authorized officer of the bank. True or false?
a) True
b) False
Answer: a) True

17. Which of the following is a risk associated with providing a banker's opinion?
a) Breach of contract by unauthorized disclosure
b) Negligence
c) Libel
d) All of the above
Answer: d) All of the above

18. The duty of the bank to maintain the confidentiality of customer information extends to former
customers as well. True or false?
a) True
b) False
Answer: a) True

19. Which of the following is NOT a remedy available to the bank in case of a customer's default?
a) Right of appropriation
b) Right of set-off
c) Right of banker's lien
d) Right of rectification
Answer: d) Right of rectification

20. A bank has a duty to disclose to the customer any irregularities or unauthorized activity in the
customer's account. True or false?
a) True
b) False
Answer: a) True

21. The duty of care owed by the bank to the customer is a fiduciary duty. True or false?

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a) True
b) False
Answer: b) False

22. The banker's lien can be exercised over both movable and immovable property of the customer.
True or false?
a) True
b) False
Answer: b) False

23. Which of the following is NOT a condition for the exercise of the right of set-off by the bank?
a) The debts must be in the same currency
b) The debts must be due and payable
c) The debts must be mutually enforceable
d) The debts must be certain or readily ascertainable
Answer: a) The debts must be in the same currency

24. The bank can terminate the banker/customer relationship by giving reasonable notice to the
customer. True or false?
a) True
b) False
Answer: a) True

25. In the event of the death of the customer, the banker's duty of confidentiality continues to apply
to the personal representatives of the deceased. True or false?
a) True
b) False
Answer: a) True

26. The duty of care owed by the bank to the customer requires the bank to exercise the skill and
care of a reasonable banker. True or false?
a) True
b) False
Answer: a) True

27. The right of set-off can be exercised by the bank even if the debts are of different nature or arise
from different transactions. True or false?
a) True
b) False
Answer: a) True

28. The banker's lien can be exercised over property held by the bank as security for the customer's
debt. True or false?
a) True

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b) False
Answer: b) False

29. The bank has a duty to disclose to the customer any changes in the terms and conditions of the
account. True or false?
a) True
b) False
Answer: a) True

30. The banker's lien can be exercised over any property of the customer, even if it is not in the
bank's possession. True or false?
a) True
b) False
Answer: b) False