Contract Law: Banker-Customer Relationship
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Contract Law: Banker-Customer Relationship

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Questions and Answers

What is a factor that influences the interest rate charged by a bank?

The borrower's creditworthiness

What is the nature of the relationship between a banker and a customer?

Contractual

Why do banks adjust their interest rates?

To respond to changes in market conditions or manage credit risk

What is the basis of the special relationship between a banker and customer?

<p>Principles of trust and confidence</p> Signup and view all the answers

What is the role of a bank when it acts as a trustee?

<p>Holder of legal title to property for the benefit of another</p> Signup and view all the answers

What is the right to set-off typically used for?

<p>To offset debts owed by customers who have defaulted</p> Signup and view all the answers

What is the consequence of a bank dishonouring a cheque when the customer has sufficient funds?

<p>The bank has breached its contractual obligation</p> Signup and view all the answers

Under what circumstances may a bank not be able to exercise its right to set off?

<p>If there is an express or implied agreement to the contrary</p> Signup and view all the answers

What is the relationship between a trustee and a beneficiary?

<p>One of trust and confidence</p> Signup and view all the answers

What type of account may a bank use to offset a debt owed by a customer?

<p>Any type of account owned by the customer, including checking or savings accounts</p> Signup and view all the answers

What is the purpose of the right to set-off?

<p>To enable the bank to recover debts owed by customers</p> Signup and view all the answers

What is the result of a customer entrusting their money or assets to a banker?

<p>The bank becomes a financial adviser or broker</p> Signup and view all the answers

What is a lien in the context of banking?

<p>The right of the bank to retain possession of securities, property or documents</p> Signup and view all the answers

What is the primary goal of a banker's duties?

<p>To provide high-quality financial services to customers</p> Signup and view all the answers

What is the principle behind a banker's duty to follow customer instructions?

<p>The principle of agency</p> Signup and view all the answers

What is implied by the banker and customer relationship?

<p>Both a duty of care and a duty of secrecy</p> Signup and view all the answers

What is the significance of the banker-customer relationship?

<p>It is a relationship based on trust and agency</p> Signup and view all the answers

What is the consequence of a banker not following a customer's instructions?

<p>The bank is liable for any losses</p> Signup and view all the answers

What is a key aspect of a banker's duty of care towards customers?

<p>Providing accurate and timely information about banking products and services</p> Signup and view all the answers

What is the nature of a banker's duty of secrecy in Malaysia?

<p>Both statutory and contractual</p> Signup and view all the answers

What does Section 133(1) of the Financial Services Act 2013 prohibit?

<p>The disclosure of customer information to any person</p> Signup and view all the answers

What is expected of a banker when carrying out a customer's instructions?

<p>To act in the best interest of the customer</p> Signup and view all the answers

What is the purpose of a banker's duty of secrecy?

<p>To maintain the confidentiality of customer information</p> Signup and view all the answers

Who is bound by the duty of secrecy under the Financial Services Act 2013?

<p>Any person who has access to customer information, including the bank and its employees, directors, and agents</p> Signup and view all the answers

What is one of the primary benefits of keeping track of finances and ensuring sufficient funds to cover cheques?

<p>To reconcile bank statements and detect errors</p> Signup and view all the answers

What is a consequence of issuing a cheque without sufficient funds?

<p>The customer may face legal action or criminal charges</p> Signup and view all the answers

What is the importance of using cheque forms supplied by the bank?

<p>It is a regulatory requirement for bank customers</p> Signup and view all the answers

What should customers consider when issuing cheques to avoid dishonour?

<p>The balance in their account and any pending transactions</p> Signup and view all the answers

What is a benefit of keeping a record of all transactions?

<p>It allows the customer to reconcile bank statements</p> Signup and view all the answers

What is the customer's duty regarding cheques and their account balance?

<p>To ensure that they have sufficient funds in their account to cover issued cheques</p> Signup and view all the answers

Study Notes

Banker-Customer Relationship

  • The relationship between a banker and customer is contractual in nature, with terms set out in account opening documents and agreements.
  • A banker has a legal and ethical duty to act in the best interests of their customer, based on principles of trust and confidence.

Special Relationship

  • A special relationship exists between a banker and customer, where the banker becomes a financial adviser or broker to the customer.

Trustee and Beneficiary Relationship

  • A trustee holds legal title to property for the benefit of a beneficiary, with a relationship based on trust and confidence.
  • A bank acting as a trustee holds legal title to property or assets on behalf of the beneficiary.

Right to Set-Off

  • A bank has the legal right to use funds from one account to offset or pay off debts owed by the account holder in another account.
  • This right is usually outlined in the terms and conditions of a bank's account agreement.

Duties of Bankers

  • Duties of bankers include managing customer deposits, making loans and investments, and providing financial services.
  • Key duties include following customer instructions, providing accurate information, and maintaining secrecy of customer affairs.

Duty to Follow Instructions

  • A banker has a duty to follow instructions made by the customer, acting in the best interest of the customer.
  • This duty is based on the principle of agency, where the banker acts as an agent for the customer.

Duty of Secrecy

  • A banker owes a duty of secrecy to its customers at all times, keeping information concerning customer affairs confidential.
  • This duty is statutory under the Financial Services Act 2013 and is also implied by the banker-customer relationship.

Customer Duties

  • Customers have a duty to keep track of their finances and ensure they do not issue more cheques than they have funds available to cover.
  • Customers must also exercise caution when issuing cheques, taking into account pending transactions that may affect their account balance.
  • Using only bank-supplied cheque forms is also a customer duty.

Consequences of Non-Compliance

  • If a customer issues a cheque without sufficient funds, they may be liable for fees, charges, and damages, and may face legal action or criminal charges.

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Description

Test your understanding of contract law in the context of a banker-customer relationship. This quiz covers the contractual obligations of a bank to its customer, including the dishonouring of a cheque. Learn about the terms of the contract and how they are set out in account opening documents.

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