LML 4807 BANKING LAW EXAM MEMO
1. Name and explain the roles of the various parties involved in documentary letters of credit.
Depending on the circumstances a large number of different parties may be involved in a letter of credit. These include:
-The applicant
This is usually the buye...
LML4807
BANKING LAW AND
USAGE
PAST EXAM PACK QUESTIONS AND
ANSWERS
(2019 – 2014)
SUMMARISED
NOTES
2020
,
, LML 4807
BANKING LAW
EXAM MEMO
1. Name and explain the roles of the various parties involved in documentary
letters of credit.
Depending on the circumstances a large number of different parties may be involved
in a letter of credit. These include:
-The applicant
This is usually the buyer(importer) in terms of the contract of sale and who applies to
the issuing bank for the issuance of the letter of credit.
-The issuing bank or opening bank
This bank issues or opens the letter of credit. The issuing and opening banks are
usually one and the same bank, but that is not necessarily the case. Occasionally an
opening bank approaches an issuing bank on behalf of the applicant to issue a letter of
credit, in such a case the opening bank merely acts as messenger and does not assume
any liability on the credit. Usually the issuing or opening bank is situated in the same
country as the applicant or buyer, and the latter is usually an existing client of the
issuing or opening bank. The issuing or opening bank assumes independent and
separate liability toward the beneficiary on the letter of credit.
-The Beneficiary
According to the letter of credit the beneficiary is the party in whose favour the
credit is issued. Usually the beneficiary is the seller (exporter) in terms of the
contract of sale.
-The advising or notifying bank
Merely acts to advise or notify the beneficiary of the issuance of the letter of
credit. Often the advising or notifying bank and the issuing bank are co-
subsidiaries of the same holding company (bank).
Alternatively, they may simply be branch offices of a correspondent bank of the
issuing or opening bank. Usually they are situated in the same country as the
beneficiary. The advising or notifying bank does not bind itself toward the
beneficiary for the payment on the credit.
-The confirming bank
Confirming banks are only involved in the case of confirmed letters of credit and
never in the case of unconfirmed letters of credit. The confirming bank is usually
situated in the same country as the beneficiary. The confirming bank assumes a
separate and independent liability on the credit in favour of the beneficiary.
, -The presenting bank
Acts as a courier bank for the beneficiary in presenting the shipping documents to
the issuing bank and does not assume any liability for the letter of credit.
-The collecting bank
The collecting bank is appointed by the beneficiary to collect payment on its behalf
from the issuing, confirming or paying bank, as the case may be.
-The paying or nominated bank
The bank is appointed by the issuing or confirming bank to effect actual payment to
the beneficiary. The paying bank does not assume any independent and separate
liability toward the beneficiary, but only toward the bank that has appointed it to pay
the beneficiary. The paying or nominated bank therefore acts as the payment
mandatory of the issuing or confirming bank.
Question 2
(a) Our courts have described a fixed deposit as a loan to a bank repayable on a
certain date (the maturity date), usually bearing interest. Discuss the legal position
where a customer needs the amount of a fixed deposit before the maturity date of the
deposit. (10)
(b) S When a customer makes a deposit at a bank over the counter, he will receive a
deposit slip, which amounts to an admission of receipt by the bank and as such
would serve as an evidential advantage to the customer in the event of a dispute.
Discuss in detail whether this is also the position in respect of auto teller deposits.
(10)
The answer is No they are different because of the following
The transaction slip supplied by the machine has no evidential value,
because it is simply a record of what the customer has keyed into the
machine.
A question that may be important is whether the payment takes place when the
deposit amount is inserted into the machine, or only when the deposit
envelope is opened and its contents are accepted by the bank.
With a cheque it is clear that payment only takes place when the cheque
is honoured.
When cash is deposited into an atm. It seems that payment of such amount
takes place only when the contents of the envelope are removed by the
bank official.
If this view is correct, only a contract of deposit (depositum) exists while
the envelope is in the auto teller.
As banks receive amounts on loan, it is better to regard it as deposit
for reward.
X is an entrepreneur and the owner of various businesses. X's businesses include,
amongst others, the following:
1. XFinancial Safe Services which offers safekeeping facilities for clients for
small amounts of cash against a fee;
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