Implied Conditions and Warranties in Banking

In banking, there are certain implied conditions and warranties that are automatically incorporated into every banking contract. These conditions and warranties are not expressly stated in the contract, but they are implied by law.

The main implied conditions and warranties in banking are as follows:

  • Condition of title: The bank impliedly warrants that it has good title to the goods that it is selling to the buyer.
  • Warranty of fitness for purpose: The bank impliedly warrants that the goods that it is selling to the buyer are fit for the purpose for which they are being bought.
  • Warranty of merchantability: The bank impliedly warrants that the goods that it is selling to the buyer are of merchantable quality.
  • Warranty of quiet possession: The bank impliedly warrants that the buyer will have quiet possession of the goods that it is buying.

If the bank breaches any of these implied conditions or warranties, the buyer may be entitled to damages.

Here are some MCQs on the implied conditions and warranties in banking:

  1. Which of the following is an implied condition in a banking contract?
    • The bank has good title to the goods.
    • The goods are fit for the purpose for which they are being bought.
    • The goods are of merchantable quality.
    • The buyer will have quiet possession of the goods.
    • The answer is (a). The bank having good title to the goods is an implied condition in every banking contract.
  2. Which of the following is an implied warranty in a banking contract?
    • The bank has good title to the goods.
    • The goods are fit for the purpose for which they are being bought.
    • The goods are of merchantable quality.
    • The buyer will have quiet possession of the goods.
    • The answer is (b). The goods being fit for the purpose for which they are being bought is an implied warranty in every banking contract.
  3. A bank sells a car to a buyer. The car is not fit for the purpose for which it was bought. Can the buyer sue the bank for damages?
    • Yes, the buyer can sue the bank for damages.
    • No, the buyer cannot sue the bank because the condition of fitness for purpose is not an express term of the contract.
    • The answer is (a). The condition of fitness for purpose is an implied warranty in every banking contract. The buyer can therefore sue the bank for damages.