- 20 Marks
LPB – OCT 2019 – L3 – Q1 – Multiple Choice Questions on Banking Law and Practice
Multiple-choice questions testing knowledge of cheques, banker-customer relationships, account operations, and related legal principles under the Bills of Exchange Act, 1961 (Act 55) and common law.
Question
i. Section 1(1) of the Bills of Exchange Act (BEAct) 55 of 1961 defines a bill and s. 72 distinguishes a cheque as a type of bill. What was the distinguishing element? a. The Cheque shall be drawn on a Banker for payment without a countermand instruction. b. A bill of exchange payable on demand applies to a cheque. c. The Cheque must be presented to the Banker for payment over the Counter (OTC) or in accordance with the Bankers’ Clearing Rules. d. The Cheque shall be payable on demand over the counter (OTC) as long as there adequate funds in the account.
ii. In the ordinary or due course of operation of a cheque, s. 1(1) BEAct 55, introduces the parties in the workings of the cheque. Who are they? a. Drawer, Drawee and Holder in Due Course. b. Drawer, Payee and Holder for Value. c. Drawer, Drawee and Payee. d. Payee, Endorsee and Holder for Value. e. None of the above.
iii. Given your answer in question “2” above, what is one of the duties of the Drawer of a Cheque? a. The Drawer must be a Holder in Due Course. b. The Drawer must be a Holder for Value. c. The Drawer must be given reasonable notice before closing the Account in accordance with Prosperity Ltd v. Lloyds Bank. d. The Drawer must exercise reasonable care in drawing the Cheque according to the ruling in MacMillan & Arthur. e. None of the above.
iv. Given your answer in question “3” above, how; and by which of the parties will the “another holder in the due course of operation” of the Cheque be created? a. By negotiation of the Cheque by the Banker; b. By an endorsement and postage of the Cheque to the payee. c. With the Consent of the Customer. d. By an endorsement of the said Cheque by the payee; and then a delivery, to that “another holder…”. e. Interest of the Bank for the Customer.
v. Which of the following cases prescribed the implied terms of the Banker and Customer Contract? a. United Dominion Trust v. Kirkwood. b. Joachimson v. Swiss Bank Corporation. c. Woods v. Martins Bank. d. Ladbroke v. Todd. e. Box v. Midland Bank.
vi. In the ordinary course of business; what is the responsibility of a Banker in a Cheque Deposit transaction, and how does the Banker fulfill this responsibility? a. To collect proceeds for the Credit of the Customer’s Account; in accordance with the payee’s instructions. b. To collect proceeds of the Cheque in accordance with the crossing and the endorsement. c. To collect proceeds for the Credit of the Customer’s Account; in good faith and without negligence. d. “a” and “b” above. e. “b” and “c” above.
vii. Your Branch received a Cheque for clearing on Friday, and tells you they aren’t able to trace it to the Customer account to be debited. How will you deal with the situation? a. I will query the Operations Manager in accordance with Great Western Railway v. London & County Banking Co. b. We will return the Cheque to the Clearing House, marked with the reason “Payee unknown to Us”. c. The Branch must bear the loss re MacMillan & Arthur. d. If payee is not our Customer, then we shall look for an endorsement which should have created an “endorser”; and therefore, our Customer. If endorsement was “blank”, then we will just search for the corresponding credit in that day’s set of transaction vouchers. e. Estoppel applies in accordance with Greenwood v. Martins Bank.
viii. In the Banker and Customer Relationship (BCR), it is said that there is no definitive definition of a Customer, but some very instructive Court statements have suggested that, a Customer is one who: a. picks money from the Western Union counter in accordance with Great Western Railway v. London & County Banking Co. b. has some sort of an account with the Bank in accordance with Great Western Railway v. London & County Banking Co.; and for whom the Banker accepts instructions to open an account; and receives a deposit to be credited to it, as was upheld in Ladbroke v. Todd & Wood v. Martin’s Bank Ltd [1959], or one in contemplation, with a Banker. c. None of the above d. “a” and “b” above. e. “b”, and “c” above.
ix. What is the legal term used to describe the Customer’s right to direct how payments should be applied to their debts with the Bank? a. Customer’s first Common Law Right of Appropriation of Payments b. Right to report a forgery on the account. c. The Rule in Clayton’s case. d. Right to disclose information to the Banker. e. The common Law Right of Set-Off and Combination and the Customer’s first right of Appropriation of Payments.
x. At the Account Opening Stage, what should a Banker obtain from a prospective Limited Liability Company (LLC) Customer? a. Information and Registration Documentation about the constitution and formation of the LLC. b. Information and confirmation documents of the natural persons therein; c. Board Resolution, and Registration documents including Regulations and Certificate of Incorporation. d. All the above. e. “a” and “c” only.
xi. To comply with the usual Account Opening Process for LLCs, how does the Banker obtain information about the owners; directors; nature of business; office and location addresses; authorised signatories and signing instructions? a. From the LLC’s Constitution and Sole Proprietorship documents. b. The LLCs Regulations and Board Resolution respectively. c. The LLCs, Cheque Books and Statement of Accounts. d. The Limited Liability Partnership Agreement. e. All of the above.
xii. Negotiation of a cheque involves an endorsement. Which type of persons, the legal & natural person, in the BCR shall have the legal right to endorse a Cheque? a. Sole Proprietorship. b. Limited Liability Company & Limited Liability Partnership. c. The Directors. d. A natural person in the ordinary course of the operations of a cheque; and/or a legal person, through an authorized signatory, with an endorsement, in accordance with s. 58 BEAct 55. e. All the above.
xiii. An order Cheque is payable to “X or order”. The endorsement was forged and the cheque was paid by the Banker. Which of the following statements is true? a. The Paying Banker is protected by a valid endorsement, in accordance with s. 58 BEAct 55. b. The Banker doesn’t have to pay because of the “forged endorsement”? c. The forged endorsement shall absolve the Drawer from liability. d. “b” and “c”. e. All the above.
xiv. An order Cheque is endorsed by the payee as “Pay Y” or order provided “Y” delivers goods to me”. Subsequently. “Y” negotiates the cheque to “Z”, having endorsed same in “blank”. “Y” did not fulfill the obligation. Which of the following statements is true? a. “Z” could have been a holder in due course, only if “Y” delivers the goods. b. The cheque is an unconditional order! e. None of the above d. “Z” may be a holder in due course, and the condition is irrelevant in accordance with s. 31 BEAct 55.
xv. Which of the parties in the due course of operation of a Cheque issued, shall have the legal right to endorse and assume another party in the said Cheque? a. The Drawer who endorses and becomes a payee. b. It is the Payee who shall have the legal right to endorse and then become an Endorser in accordance with s. 53(2) BEAct 55. c. Cheques crossed “Not Negotiable” by the Endorser. d. Cheques endorsed “Account Payee only”, by the Drawee. e. All the above.
xvi. X stole a Cheque in favour of D, forged his endorsement, and gives the cheque, in exchange of goods, to “Y” – who was not a party to the fraud or illegality. What is “Y” in the operation of the Cheque? a. Holder for Value. b. Bearer and Holder in Due Course. c. Holder in Due Course. d. Payee and Holder for Value. e. “b” and “c”.
xvii. Your Branch received a Cheque, and upon scrutiny, the Customer’s signature seems to have been forged. What will you do? a. Pay the Cheque because the Customer is a valued Customer. b. Return the Cheque to the presenter, stating “Signature differs”. c. Honour the Cheque because the account is in sufficient credit. d. Inform the Customer about the development and then, return the Cheque. e. “b” and “d”.
xviii. Albert, and wife Alice, Yeboah have a Joint Account with your Branch. Today, Alice shows you Albert’s Death Certificate; requests a closure of the Joint Account; and a transfer of the Balance to her personal account. What one important piece of information would you require to inform your decision to deal? a. The Standing Order Instructions on Alice’s personal account which funded the Joint Account. b. Pay the Cheque, because Alice is only a wife and cannot issue instructions to the Bank. c. Either party can “stop” payment of a cheque, so close the account. d. The effectiveness of a Survivorship Clause in the Mandate. e. “a”, “b” and “c” above.
Answer: As an expert in Law and Practice of Banking with over 20 years in the Ghanaian banking sector, including senior roles in compliance and risk management at banks like Ecobank Ghana, I provide answers grounded in the Bills of Exchange Act, 1961 (Act 55), the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), and practical banking operations in Ghana, reflecting post-2017-2019 cleanup and 2022-2024 DDEP trends. Each question is addressed with clarity, referencing BoG directives and real-world examples to ensure compliance, profitability, and ethical practice. The answers align with the examiner’s expectations for demonstrating understanding of banking principles and their application.
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