Here are the essential characteristics of a contract of agency in banking, with MCQs and answers:
Essential Characteristics of a Contract of Agency in Banking
- Existence of a Principal: There must be a principal who appoints the agent. In the context of banking, the principal is the customer who appoints the bank as his agent.
- Existence of an Agent: There must be an agent who is appointed by the principal. In the context of banking, the agent is the bank that is appointed by the customer to act on his behalf.
- Appointment of the Agent: The agent must be appointed by the principal. This can be done in writing or orally.
- Scope of Authority: The agent must have the authority to act on behalf of the principal. This authority can be express or implied.
- Liability of the Principal: The principal is liable for the acts of the agent within the scope of his authority.
- Liability of the Agent: The agent is liable to the principal for any loss or damage caused by his negligence or breach of duty.
Here are some MCQs on the essential characteristics of a contract of agency in banking:
- Which of the following is not an essential characteristic of a contract of agency in banking?
- Existence of a principal.
- Existence of an agent.
- Appointment of the agent.
- Scope of authority must be in writing.
- The answer is (d). The scope of authority does not need to be in writing. It can be implied from the conduct of the parties.
- A customer opens a bank account with a bank. The customer gives the bank a power of attorney that allows the bank to withdraw funds from the account without the customer’s signature. Is the power of attorney a valid appointment of the bank as the agent of the customer?
- Yes, the power of attorney is a valid appointment of the bank as the agent of the customer.
- No, the power of attorney is not a valid appointment of the bank as the agent of the customer because it is not in writing.
- The answer is (a). The power of attorney is a form of appointment of the bank as the agent of the customer and it does not need to be in writing.
- A customer asks a bank to invest his funds in a particular stock. The bank invests the funds in a different stock. Is the bank liable to the customer for the loss?
- Yes, the bank is liable to the customer for the loss.
- No, the bank is not liable to the customer for the loss because the bank acted in good faith.
- The answer is (a). The bank is liable to the customer for the loss because the bank did not act in accordance with the customer’s instructions.