LML4807
EXAM PACK
,LML4807 – BANKING LAW AND USAGE
MAY/JUNE 2026 TAKE HOME
EXAM ANSWERS
QUESTION 1
1.1 Contract of mutuum and the two transactions
A mutuum is a loan for consumption. It occurs where money or another fungible thing is
transferred to another person with the intention that the recipient becomes owner and
must return an equivalent amount of the same kind and quality. The ordinary bank
deposit and an overdraft facility can both be explained by reference to the principles of
mutuum, although the parties occupy different positions in each transaction.
(a) Thabo's R5 000 deposit
When Thabo deposits R5 000 into his bank account, the money becomes the property
of Zenith Bank. It is not held by the bank merely in safekeeping for Thabo. The money
becomes mixed with the bank's other funds and ownership passes to the bank.
Thabo therefore does not retain ownership of the particular R5 000 notes or coins.
Instead, he acquires a personal right against Zenith Bank to claim payment of an
equivalent amount in accordance with the terms of the banking contract.
The legal relationship is therefore:
Zenith Bank = debtor, because it owes Thabo the amount standing to his credit.
Thabo = creditor, because he has a personal claim against the bank for
repayment.
Ownership = Zenith Bank, subject to its contractual obligation to repay Thabo.
,This is consistent with the South African common-law position that money deposited
into a bank account becomes the property of the bank and creates a debtor-creditor
relationship between the bank and customer.
(b) The R2 000 overdraft
The overdraft operates in the opposite direction. Zenith Bank makes R2 000 available to
Thabo, allowing him to use money which he does not currently have in his account.
To the extent that Thabo uses the overdraft, the bank effectively advances money to
him. Ownership of the money passes to Thabo when it is advanced, while Thabo
assumes an obligation to repay the equivalent amount, together with any agreed
interest and charges.
The legal relationship is therefore:
Thabo = debtor, because he must repay the amount borrowed.
Zenith Bank = creditor, because it has a claim against Thabo for repayment.
Ownership = Thabo, once the money is advanced to him.
Conclusion
The two transactions therefore create opposite debtor-creditor relationships:
Transaction Owner of money Debtor Creditor
R5 000 deposit Zenith Bank Zenith Bank Thabo
R2 000 overdraft Thabo Thabo Zenith Bank
The essential feature of the mutuum is that ownership of the money passes to the
recipient, while the recipient assumes an obligation to return an equivalent amount.
1.2 The Home Builders Group and The Quick Wealth Group
, Section 11(1) of the Banks Act 94 of 1990 prohibits a person from conducting the
business of a bank unless authorised or registered to do so. The definition of the
business of a bank includes, among other things, accepting deposits from members of
the public as a regular feature of a business and certain activities declared by notice to
constitute banking business.
Certain activities are, however, excluded from the definition by exemption notices
issued under the Banks Act. The Reserve Bank recognises exemptions for certain
stokvels and groups with a qualifying common bond, subject to conditions.
(a) The Home Builders Group
The Home Builders Group has characteristics of a stokvel/common-bond group.
The members:
belong to the same church;
contribute regularly to a common pool;
contribute a fixed amount;
rotate the benefits among members; and
use the money for specified purposes, namely building and home improvements.
A common bond may exist where members have common membership of a religious,
social, co-operative, labour or educational group. A stokvel is also recognised as a
formal or informal rotating credit scheme based on mutual support and contributions by
members.
The scheme therefore has a strong basis for qualifying under the Banks Act exemption
applicable to stokvels/common-bond groups.
The exemption is not unconditional. The group must comply with the requirements of
the applicable exemption notice. For example, stokvels whose aggregate member
contributions do not exceed R100 000 need not register with an approved self-
EXAM PACK
,LML4807 – BANKING LAW AND USAGE
MAY/JUNE 2026 TAKE HOME
EXAM ANSWERS
QUESTION 1
1.1 Contract of mutuum and the two transactions
A mutuum is a loan for consumption. It occurs where money or another fungible thing is
transferred to another person with the intention that the recipient becomes owner and
must return an equivalent amount of the same kind and quality. The ordinary bank
deposit and an overdraft facility can both be explained by reference to the principles of
mutuum, although the parties occupy different positions in each transaction.
(a) Thabo's R5 000 deposit
When Thabo deposits R5 000 into his bank account, the money becomes the property
of Zenith Bank. It is not held by the bank merely in safekeeping for Thabo. The money
becomes mixed with the bank's other funds and ownership passes to the bank.
Thabo therefore does not retain ownership of the particular R5 000 notes or coins.
Instead, he acquires a personal right against Zenith Bank to claim payment of an
equivalent amount in accordance with the terms of the banking contract.
The legal relationship is therefore:
Zenith Bank = debtor, because it owes Thabo the amount standing to his credit.
Thabo = creditor, because he has a personal claim against the bank for
repayment.
Ownership = Zenith Bank, subject to its contractual obligation to repay Thabo.
,This is consistent with the South African common-law position that money deposited
into a bank account becomes the property of the bank and creates a debtor-creditor
relationship between the bank and customer.
(b) The R2 000 overdraft
The overdraft operates in the opposite direction. Zenith Bank makes R2 000 available to
Thabo, allowing him to use money which he does not currently have in his account.
To the extent that Thabo uses the overdraft, the bank effectively advances money to
him. Ownership of the money passes to Thabo when it is advanced, while Thabo
assumes an obligation to repay the equivalent amount, together with any agreed
interest and charges.
The legal relationship is therefore:
Thabo = debtor, because he must repay the amount borrowed.
Zenith Bank = creditor, because it has a claim against Thabo for repayment.
Ownership = Thabo, once the money is advanced to him.
Conclusion
The two transactions therefore create opposite debtor-creditor relationships:
Transaction Owner of money Debtor Creditor
R5 000 deposit Zenith Bank Zenith Bank Thabo
R2 000 overdraft Thabo Thabo Zenith Bank
The essential feature of the mutuum is that ownership of the money passes to the
recipient, while the recipient assumes an obligation to return an equivalent amount.
1.2 The Home Builders Group and The Quick Wealth Group
, Section 11(1) of the Banks Act 94 of 1990 prohibits a person from conducting the
business of a bank unless authorised or registered to do so. The definition of the
business of a bank includes, among other things, accepting deposits from members of
the public as a regular feature of a business and certain activities declared by notice to
constitute banking business.
Certain activities are, however, excluded from the definition by exemption notices
issued under the Banks Act. The Reserve Bank recognises exemptions for certain
stokvels and groups with a qualifying common bond, subject to conditions.
(a) The Home Builders Group
The Home Builders Group has characteristics of a stokvel/common-bond group.
The members:
belong to the same church;
contribute regularly to a common pool;
contribute a fixed amount;
rotate the benefits among members; and
use the money for specified purposes, namely building and home improvements.
A common bond may exist where members have common membership of a religious,
social, co-operative, labour or educational group. A stokvel is also recognised as a
formal or informal rotating credit scheme based on mutual support and contributions by
members.
The scheme therefore has a strong basis for qualifying under the Banks Act exemption
applicable to stokvels/common-bond groups.
The exemption is not unconditional. The group must comply with the requirements of
the applicable exemption notice. For example, stokvels whose aggregate member
contributions do not exceed R100 000 need not register with an approved self-
