1.

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 Mambas
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)
2. 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)
Quoting relevant authorities, explain the various circumstances under
which a bank can ignore his duty of secrecy. (10 Marks)
3. 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)
4. What is Bankers Right of Lien? (5 Marks)
b) Explain the principles of lending as applied in banking practice (10
Marks)
c) Forged cheques were presented to Bills bank in respect to Bills
account. The cheques were honoured by Bills 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 Bills complaint Explain the legal position.
(5 Marks)

5. Mr. Wekesa is the Managing Director of a limited company in which

capacity he is authorized to sign alone on the Companys bank account
which is kept with XYZ Bank, in Nakuru town. Wekesas 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 Companys 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
liquidatorsclaim?(10 Marks)

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)
6. 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)
7. 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)
8. 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)
9. When in banking law will a person qualify to be called a customer of the
bank?
(5 Marks)
What factors lead to the termination of the banker/customer
relationship?
(8 Marks)
What is the role of banking in a modern economy (7 Marks)
10.
(a) What are the essential characteristics of a negotiable
instrument?
(10 Marks)
(b) Discuss ways in which a bill of exchange may be discharged?
(5 Marks)
(c) Distinguish between a bill and a cheque? (5 Marks)
11.
a) Explain factors which lead to the termination of the bankercustomer relationship (10 Marks)
b) Explain the advantages of a holder in due course of a bill of
exchange (5 Marks)
c) Explain the relevance of the law of bankruptcy to the banker (5
Marks)
12.
Write short explanatory notes on:
a) The Distinguishing features between a bill of exchange and a cheque
(5Marks)
b) The bankers duty of care and skill (5 Marks)
c) Bankers right of lien (5 Marks)
d) Financing of foreign exchange transactions (5 Marks)