The legal relationship between a bank and its customer can include the bailor/bailee relationship, the mortgagor/mortgagee relationship and the fiduciary relationship.
Alex, a business consultant to banking customers has made the following statements concerning each relationship.
Statement 1 In the fiduciary relationship the bank is expected to act with the utmost good faith towards the customer.
Statement 2 In the mortgagor/mortgagee relationship the bank asks the customer to secure a loan with a charge over the customer’s liabilities.
Statement 3 In the bailor/bailee relationship the bank accepts the customer’s property for storage in its safe deposit boxes and undertakes to take reasonable care to safeguard it against loss or damage.
Identify which of the statements about these relationships are true?
Select ONE answer:
- Statements 1 and 2 only
- Statements 2 and 3 only
- Statements 1 and 3 only
- Statements 1, 2 and 3
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
- Not correct
- Not correct
- Correct == > Statements 1 and 3 accurately describe the fiduciary and the bailor/bailee relationships, respectively. Statement 2 is inaccurate as it states that the charge is over the customer’s liabilities, when in fact it would be over the customer’s assets.
- Not correct
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