Lesson 21 Banker Customer Relationship -Banking and Finance-Handout, Exercises of Banking and Finance

Download Lesson 21 Banker Customer Relationship -Banking and Finance-Handout and more Exercises Banking and Finance in PDF only on Docsity! LESSON 21 BANKER-CUSTOMER RELATIONSHIP Nature of Legal Relationship: Basic legal relationship between banker and customer is contractual relationship. This relationship is established from the time of opening an account in a bank. This relationship is at the root of all other legal relationships that exist between the banker and customer. As such, scope, essentials and type of contracts have been discussed in the following paragraphs. Contract-- Defined Contract is an agreement enforceable at law. Essentials of a Valid Contract: To understand a contract, we need to know what an agreement is. The agreement has been defined in section 2 (e) of the Contract Act which is given below. Agreement Every promise or every set of promises, forming the consideration for each other is an agreement. --To understand an agreement, we must know what a promise is. The promise has been defined in section 2 (b) of the Act which is reproduced below: Promise When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. Proposal and Promise: The word "proposal" is synonymous in English use with "offer". But the language of these definitions appears to confine "proposal" to an offer to be bound by a promise. Thus a man who offers to sell and deliver, then and there, existing portable goods in his immediate control, such as a book or a jewel, does not offer a promise but an act, and if the other party takes the goods on the spot and becomes liable to pay for them, he (the buyer) is the Promisor. In such a case the seller would seem not to make a proposal within the terms of the Contract Act. A quotation of prices is not an offer, but an invitation for offer; the same is true of many common forms of advertisement. A statement of the lowest price at which a landowner is prepared to sell is not an offer. A term in a partition deed that any of the parties wishing to sell his share will sell to the others at the market value is not an offer but an undertaking to make an offer. The Act does not say, but it seems to imply, that every promise is an accepted proposal. In the Common Law this is not so, for a binding promise may be made by deed, that is, by writing under seal without any communication between the parties at all. This is because the deed, as an ancient formal method of proof, was conclusive against its maker. Promisor and Promisee has been defined in section 2(c) The person making the proposal is called “the Promisor” and The person accepting the proposal is called “the Promisee” To transform a promise into an agreement consideration is also an important ingredient. Consideration has been defined in section 2 (d) of the Act which is reproduced below: Consideration When at the desire of the Promisor, the Promisee or any other person who has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. docsity.com All agreements are not contracts, meaning thereby that all agreements are not enforceable at law. Such agreements are called void agreements. The same has been defined in section 2 (g) of the Act which is reproduced below: Legal relationship Intention to create legal relationship must exist, in commercial transactions it is presumed that such intention always exists. Social agreements do not give rise to any legal relationship, hence no rights or obligations arise/accrue from social agreements, i.e. (Social agreements are not enforceable at law) Free consent This is an important essential of a valid contract. It requires that contract should be entered into with free consent of parties. Consent is said to be free if not caused by:  Coercion  Undue influence  Fraud  Misrepresentation or  Mistake Competent Parties Another important essential of a valid contract is the legal capacity of the parties to enter into a contract; this has been provided in section 11 of the Act which is reproduced below: “Every person is competent to contract who is of the age of majority according to law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject”. Who are competent to contract? Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. This section deals with personal capacity in three distinct branches: (a) disqualification by infancy; (b) disqualification by insanity; (c) other special disqualifications by personal law. "To Contract."---means, to bind himself by promise. A minor who gives value, without promising any further performance, to a person competent to contract is entitled to sue him for the promised equivalent. This may be properly not in contract but on a quasi-contract under section 70. Minor's agreement: If the first branch of the rule laid down in the section be converted into a negative proposition, it reads thus: No person is competent to contract who is of the age of majority according to the law to which he is subject: in other words, a minor is not competent to contract. This proposition is capable of two constructions · either that a minor is absolutely incompetent to contract, in which case his agreement is void, or that he is incompetent to contract only in the sense that he is not liable on the contract though the other party is, in which case there is a void able contract. If the agreement is void, the minor can neither sue nor be sued upon it, and the contract is not capable of ratification in any manner; if it is void able, he can sue upon it, though he cannot be sued by the other party, and the contract be ratified by the minor on his attaining majority. Where, an infant retains property obtained under the contract from the other party, the equitable remedy of restitution has been applied, even though the infant made no false representation as to his age. docsity.com