Deck 25: Business and Banking

Question 1

Which of the following would be most strongly influenced by an honoured cheque?

A) centralized clearing process
B) inadequate funds in an account
C) evidence of discharge of a debt
D) unambiguous payment instructions

Answer 1

C

Question 2

Tess deposited the $75 000 she received from the sale of her business into her daily interest savings account.In this instance,which of the following reflects the legal nature of the relationship created between Tess and her banking institution?

A) Tess is the debtor and the bank is the creditor.
B) The bank must report the transaction to FINTRAC.
C) The bank must verify the viable commercial source of the funds.
D) Tess is the creditor and her bank is the debtor.

Answer 2

D

Question 3

In what way do banks,trust companies,stockbrokerages,and insurance companies share a commonality with one another?

A) Each institution ensured stability within the financial services industry.
B) Liberalized ownership rules are traditionally applied to the four sectors.
C) Each was subject to the same regulations affecting the financial services industry.
D) The traditional financial services industry contained the four distinct sectors.

Answer 3

D

Question 4

The implied requirement that banks must honour cheques and repay deposits is a result of which of the following?

A) provincial legislation
B) banking agreement
C) federal Bank Act
D) banking practice and common law

Question 5

What is the name given to a person who has possession of a negotiable instrument?

A) holder
B) drawer
C) holder in due course
D) payee

Question 6

A written contract containing an unconditional order to pay a specific sum on demand to a specific bearer would most likely be classified as which of the following?

A) promissory note
B) cheque
C) negotiable instrument
D) bill of exchange

Question 7

In order for an instrument to become negotiable without investigation as to its validity through reference to circumstances or other documents,which of the following is the essential technical requirement that must be present?

A) payee's endorsement
B) authorized signature
C) drawer's endorsement
D) unconditional obligation

Question 8

The arrangements concerning the issue of cheques and instructions for payment by the customer are most likely to be strongly influenced by which of the following?

A) banking practice
B) bank-customer agreement
C) banking agreement
D) operation of account agreement

Question 9

Which of the following would a lawyer most likely indicate as being subject to the law of negotiable instruments?

A) credit cards
B) money laundering
C) cheques
D) electronic transfers

Question 10

What is the second focus of a banking agreement?

A) rights and obligations of the parties
B) the allocation of loss
C) protection of privacy
D) the bank's ability to apply charges

Question 11

Which of the following distinguishes a cheque from a bill of exchange?

A) Cheques fail to create a self-contained obligation.
B) The party instructed to pay is the bank.
C) Bills of exchange are negotiable instruments.
D) Bills of exchange are regulated by the Bills of Exchange Act.

Question 12

The bank's duty to maintain secrecy of customer information is subject to which of the following?

A) fraud and forgery legislation
B) money laundering legislation
C) federal privacy legislation
D) provincial privacy legislation

Question 13

Which of the following would a business law professor most likely indicate as being the reason that a commercial customer should be cautious with regard to its bank-customer agreement?

A) Banks creates agreements to limit their duties and liabilities.
B) Banks can transfer funds to cover negative balances.
C) Bargaining for greater flexibility can create an advantage.
D) Bargaining can limit a bank's ability to apply service charges.

Question 14

With respect to the banking relationship between a bank and its customer,which of the following would a business law professor most likely indicate as being an duty imposed upon the customer by common law?

A) to make use of restrictive endorsements whenever possible
B) to maintain adequate funds for issued cheques in an account
C) to detect unauthorized instructions within a reasonable time
D) to safeguard PINs from unauthorized use

Question 15

Since 1991,Canadian banking instructions,among others,have been urged to verify the identity of individual and corporate customers to determine the source of money transfers exceeding which of the following amounts?

A) $15 000
B) $5000
C) $10 000
D) $20 000

Question 16

As a result of the worldwide financial crisis,which of the following is a valid criticism of regulations created by the Bank for International Settlements with regard to international banking services?

A) The ability to conduct cross-border transactions was limited.
B) Voluntary governance rules failed to provide adequate protections.
C) Accounts in different currencies were prohibited.
D) The use of international letters of credit was too limited.

Question 17

Which of the following would a business law professor most likely indicate as formerly applying to banks,trust companies,stockbrokerages,and insurance companies?

A) participation by banks and trust companies in the insurance sector
B) liberal ownership rules for national banking institutions
C) prohibition from conducting business beyond a sector
D) ability of subsidiary companies to sell insurance on websites

Question 18

Highland Bakery Inc.has forwarded a cheque to Prairie Flour Mills Ltd.to pay Prairie's invoice for the flour it recently delivered.Prairie will deposit the cheque into its account upon receipt.How will the actual cash payment represented by the cheque be credited to the Prairie Flour Mills' account?

A) through the bank's bills of exchange clearance centre
B) through the instantaneous Internet transfer process
C) through the bank centralized clearing process
D) through the FINTRAC centralized clearing process

Question 19

Which of the following would strongly suggest to a court that a bank has entered into a fiduciary relationship with its customer?

A) non-traditional provision of financial advice to its customer.
B) FCAC regulations' onerous fiduciary duties on banks
C) CFSON regulations' onerous fiduciary duties on banks
D) implied common law expectation of competent financial advice

Question 20

Which of the following would most strongly support the controversy surrounding relaxation of bank regulation in Canada?

A) Provincial regulations lack customer protections.
B) Lax regulation caused a worldwide financial crisis.
C) Banks take on increasing risk exposure in international transactions.
D) The federal Bank Act offers little protection to bank customers.

Question 21

To combat the increase of electronic identity theft,the federal government introduced Bill S-4.Which of the following is a distinguishing characteristic of Bill S-4?

A) The bill received Royal Assent on 22 October 2009.
B) Internet providers must block and report e-mail phishing.
C) Disclosure of information to verity accounts is mandatory.
D) It defined electronic storage as data subject to system crashes or hackers.

Question 22

Marina is transferring a cheque to Scott by endorsing his name and her signature to the instrument.What is the legal name for this type of endorsement?

A) special endorsement
B) direct endorsement
C) blank endorsement
D) restrictive endorsement

Question 23

Which of the following distinguishes a cheque from an Internet transaction?

A) Electronic transfers are instantaneous.
B) A cheque leaves a paper trail.
C) A cheque increases efficiency.
D) Verification is absent.

Question 24

The reclassification of non-commercial promissory notes,enacted to ensure payment is subject to claims arising from the original contract of sale,resulted in which of the following?

A) bills of exchange
B) holder in due course
C) consumer notes
D) letters of intent

Question 25

Why are banks placing daily and weekly limits monetary limits on transactions?

A) to shift risk allocation for finalization of payments
B) to shift risk allocation for authentication
C) to combat uncertainty surrounding electronic banking
D) to control losses in the event of fraud

Question 26

Which of the following would strongly support a refusal to honour payment to a holder in due course?

A) performance of contractual obligations
B) substandard goods
C) quantity of purchased goods
D) document alteration

Question 27

Which of the following is a variation that would provide an individual without a bank account with the means for conducting online banking?

A) PayPal
B) smart cards
C) cellphones
D) credit cards

Question 28

In law,the expression "an assignee can have no better rights than an assignor" is synonymous with which of the following?

A) unscrupulous financiers and assignees selling substandard services
B) an assignee's right is subject to contractual obligations
C) assignee's independent problems with quality and performance
D) the buyer's nearly absolute obligation to pay the assignee

Question 29

Which of the following forms of electronic transaction involves a contract between the issuer and the user and a contract between the issuer and the merchant?

A) PayPal
B) credit cards
C) money cards
D) smart cards

Question 30

Which of the following is a valid criticism of electronic transactions?

A) Safeguarding transfer authority is a major challenge for e-commerce.
B) Authorization codes are necessary in electronic messages.
C) There is a tradeoff between increased efficiency and the absence of rules.
D) Safeguarding transfer authority is a major challenge for customers.

Question 31

Which of the following international rules deals with,among other things,the obligations of the parties,consequences for technical problems,and damages?

A) Electronic Funds Transfer and Electronic Banking Code
B) FINTRAC Financial Transactions and Reports Analysis Code
C) UNCITRAL Model Law on International Credit Transfers
D) ITRMC Identity Theft and Related Misconduct Code

Question 32

With respect to the secure position of a holder in due course,which of the following would most strongly support the reluctance of banks to honour cheques without verification of the various endorsements appearing on a cheque?

A) ability to report discrepancies within a reasonable time
B) the absence of a verification agreement
C) inability to recover advanced funds on an invalid cheque
D) banker's responsibility to know his customer's signature

Question 33

Which of the following parties would a lawyer most likely indicate to be subject to claims arising from the original contract of sale?

A) an assignee of non-commercial debt
B) a holder in due course
C) a holder of a consumer note
D) a holder of a negotiable instrument

Question 34

In circumstances where a bank has been left with liability for a forged cheque,why should every party accepting that cheque have verified the authenticity of the endorsements on it?

A) The bank will deduct the value of the worthless cheque from any endorser's account.
B) A verification agreement will entitle the bank to recover assets of endorsers.
C) Without a special endorsement, collection may be a problem.
D) All prior endorsers risk the bank's recovery efforts.

Question 35

In legal terms,which of the following is synonymous with the concept that liability for payment of a negotiable instrument is independent of the original debtor-creditor relationship?

A) A negotiable instrument has a life of its own.
B) Each cheque is valuable evidence of contractual obligations.
C) There is always good reason for liability to be borne by the other party.
D) It is convenient and dependable for commerce.

Question 36

Which of the following would a business law professor most likely identify as creating the legal uncertainty surrounding electronic banking?

A) Potential for forgery and fraud are changed and expanded.
B) Existing legislation is irrelevant in a paperless environment.
C) The bank is responsible for electronic failures.
D) It increases potential for transmission failures and system crashes.

Question 37

Kellie's date of possession for the home she recently purchased is October 1.Her lawyer instructed her to provide the cash to close by way of a certified cheque in the amount of $35 000,payable to "Sheps & Shaps LLP in trust," by September 29.Which of the following would Kellie most likely indicate as the reason her lawyer requires payment of these funds in this manner?

A) It prevents the drawee from requesting a stop payment on the cheque.
B) A cheque is a self-contained obligation, independent of any outside circumstances.
C) The major risk involved with cheques relates to the financial health of the drawee.
D) Risk is eliminated as payment of funds from bank reserves is guaranteed.

Question 38

When she went to her bank to obtain a certified cheque for the $35 000 cash to close regarding her house purchase,Kellie endorsed the $20 000 cheque her mother gave her and requested that the remaining $15 000 be withdrawn from her savings account.Kellie requested that the certified cheque be made payable to "Sheps & Shaps LLP in trust." In this instance,which of the following is most likely to characterize the nature of the endorsements?

A) restrictive endorsement, certified endorsement
B) endorsement in blank, special endorsement
C) certified endorsement, special endorsement
D) endorsement in blank, restrictive endorsement.

Question 39

Emily gave Pierre a cheque for $5000 as payment for the car he sold her.Pierre owed Henry $5000,and he provided Emily's cheque to Henry to satisfy the debt.Henry couldn't make it to the bank,so he gave it Nigel to deposit for him.When Nigel attended Henry's bank to deposit the cheque,which of the following was most likely the result?

A) The Bills of Exchange Act will require the bank to hold the cheque for 10 days.
B) Provided all endorsements were in order, the bank accepted the cheque for deposit.
C) The bank will refuse the cheque as acceptance will effectively extend credit.
D) The bank was required by FINTRAC to verify the validity of the transaction.

Question 40

In addition to payment of a portion of the proceeds of sales,which of the following would most likely strongly support a retailer qualifying for a guarantee of payment on credit card sales?

A) negotiability requirements
B) irrevocability of the transaction
C) secure status of Internet provider
D) verification of signatures

Question 41

Businesses commonly use restrictive covenants,such as "for deposit only," to ensure that the bank is instructed to deposit each cheque endorsed in a like manner into a particular account.

Question 42

When a commercial retailer accepts a cheque as payment from one of its customers,the retailer becomes the payee and the customer is the drawer.

Question 43

One of the difficulties presented by the instantaneous nature of electronic transactions is that,while efficiency is greatly improved,the transfers are irrevocable.

Question 44

Banks have become financial marketplaces,offering services in cash management,investment advice,and business financing as a result of regulatory changes and decisions by banks to broaden their range of services.

Question 45

The banks duty to honour cheques and repay deposits is an express obligation imposed by the federal Bank Act.

Question 46

The contract that specifies the rights and obligations of a bank and a customer is known as the operation of account agreement.

Question 47

In situations where the bank fails to detect forged signatures and the customer does not immediately notice that the forged cheques have been cashed from its account,the courts will look to the bank-customer agreement to determine liability.If there is none,the common law rules apply.

Question 48

International services offered by Canadian banks include letters of credit,cross-border transfers,and accounts in different currencies.

Question 49

In practical and legal terms,the focus is shifting to electronic banking,which includes a growing range and variety of transactions that previously required less formal documentation.

Question 50

A retailer who has made a substantial sale to an individual who paid cash need not be concerned whether or not the monies it received are the proceeds of a crime.

Question 51

A cheque endorsed in blank may be cashed by whoever possesses it because,with this type of endorsement,the bank will consider that the signature is complete.

Question 52

A written contract that contains an unconditional promise or order to pay a specified sum on demand or on a specific date to a specific individual or bearer is legally known as a bill of exchange.

Question 53

A stop payment means that a bank's customer cancels its instructions to pay a particular cheque and orders the bank to refuse payment when that cheque is presented.

Question 54

With respect to the party bearing the risk where payment of goods is made by cheque,the risk is borne largely by the payment system.

Question 55

A written order to a person directing that a specific amount be paid to another individual is commonly described as a negotiable instrument.

Question 56

Retailers embraced debit cards use by consumers as the transfer of payment of goods is immediate and the risk is borne largely by the card provider.

Question 57

A promissory note is a written order to a bank to pay money to a specified person.

Question 58

Individuals who conduct contractual business with banks need to appreciate the importance of the contract and become familiar with their basic rights and obligations,and they should understand that not only is the contract is written largely to protect the bank,but their bargaining power is very limited.

Question 59

A cheque is a written promise to pay a specified amount to another person.

Question 60

The risk associated with a retailer accepting payment for goods in cash is that,while payment is immediate,the money may be counterfeit.

Question 61

Describe Justice LaForest's comments with respect to what a banker is supposed to know,which formed a broader basis for the court's decision in Canadian Pacific Hotels Ltd.v.Bank of Montreal (1987),40 D.L.R.(4th)385 (S.C.C.),where the bank failed to detect forged signatures.

Question 62

In the case of Canadian Pacific Hotels Ltd.v.Bank of Montreal (1987),40 D.L.R.(4th)385 (S.C.C.),the Supreme Court found that the bank failed to detect forged signatures.What was the ruling in this case? Describe Justice LeDain's ruling with respect to the customer's duty in these circumstances.

Question 63

Briefly discuss the legislative amendment that applied to consumer notes and its ramifications.

Question 64

Discuss the purpose of the banking agreement.

Question 65

Discuss the various aspects of evolution of credit cards.

Question 66

Identify the additional duties implied on the bank with respect to the banking contract by common law and banking practice.

Question 67

Describe the various models for electronic cashless transactions.

Question 68

List the electronic options offered by banks to their customers that were noted in the text.

Question 69

Describe the essence of the requirements that must be present for an instrument to become negotiable without the need to investigate its validity through reference to circumstances of the instrument's creation or to other documents.

Question 70

Identify the essential point for a creator of a cheque and briefly discuss what is required in order for the bank to honour the cheque with respect to a payee or holder in due course.