Banking Law And Practice Question Paper
Banking Law And Practice
Course:Bachelor Of Commerce (Commerce)
Institution: Kabarak University question papers
Exam Year:2012
KABARAK
UNIVERSITY
UNIVERSITY EXAMINATIONS
2011/2012 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF LAWS
KLAW 317: BANKING LAW AND PRACTICE
DAY: WEDNESDAY
DATE: 08/08/2012
TIME: 2.00 – 4.00 P.M.
STREAM: Y3S1
INSTRUCTIONS
1. Answer Question 1 and any two other questions
2. Question 1 carries 30 marks. All other questions carry Equal (20) marks
3. No materials are to be brought into the examination room
4. Candidates should illustrate their answers with appropriate case law and other
relevant authorities.
Question 1
1. a) Mr. Wekesa is the Managing Director of a limited company in which capacity he is
authorized to sign alone on the Company’s bank account which is kept with XYZ
Bank, in Nakuru town. Wekesa’s personal account is in OPQ Bank in Nakuru,
where he has maintained an average credit balance of Kshs 500,000/=.
Wekesa draws a cheque on the Company’s bank account in favour of himself for
Kshs 850,000/= which he paid in at OPQ Bank for Credit to his personal account.
The cheque is duly collected by OPQ Bank and the proceeds credited to his
account. Subsequently, the company goes into liquidation and the liquidator files a
suit against OPQ Bank for recovery of the money.
As a legal advisor to OPQ Bank, does OPQ Bank have a defence to the liquidator’s
claim?
(10 Marks)
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b) You are an employee of OP Bank. Your valued customer S.K. Patel asks you to
stop payment of the cheque for Kshs 25,000/= which he has issued to a salesman as
deposit for a washing machine which he promised to deliver the next day. The
Machine has not arrived and the firm whom the salesman claimed to represent has
no knowledge of him, and has no authority to act on its behalf. The cheque which
is crossed “Not Negotiable” is paid in at your branch by another customer of yours,
a local radio dealer, who had paid cash against it to the salesman. Can the radio
dealer set up a valid claim to recover the value of the cheque from the bank? Give
reasons for your answer.
(10 Marks)
c) With the help of decided cases explain who is a customer according to banking law
and practice.
(10 Marks)
Question 2
2. a) Explain why the Central Bank of Kenya is not an Ordinary Commercial Bank.
(8 Marks)
b) What is meant by the term “Banking Business?”
(12 Marks)
Question 3
3. a) “A banker’s obligation to honour cheques drawn by his customer is not absolute.”
Discuss.
(10 Marks)
b) Discuss the importance of letters of credit in banking law and practice. (10 Marks)
Question 4
4. a) Discuss the exceptions to the rule in Tournie v. National Provincial and Union
Bank of England (1924) 1 KB 461
(10 Marks)
b) Suggest ways of reducing fraud in Banking Institutions
(10 Marks)
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