Is Banking fractional reserve system of conducting business a matter of Contract Law?

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RabHab

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Hi All,

I was wondering if any of you have any experience on contract law? There doesnt seem to be much about it online.

The reason i ask is with regards to the practice of the banks in recent years, in particular the fractional reserve system of conducting business which allowed them to created money out of nothing.

When you take out a bank load, mortgage etc, under contract law both parties need to put up consideration which i interpret as anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions etc

My question is, if you were to stick to the rigid letter of the law how could the banks have put up valid consideration when the money they created never existed?

Thanks
 
Hi Padraigb,

Could you explain your reply in a bit more detail please?

Cheers
 
Hi jhegarty,

My query is simple really. I just wanted someone who knows something about law to verify the following:
1 - Is consideration part of contract law and if so is it necessary for the contract to be legal
2 - If so to the above, was my understanding of consideration correct
3 - If it was correct then due to fractional reserve banking practices did the banks put up consideration on all the loan, mortgage contracts etc?

Cheers
 
Hi Padraigb,

To me they are clearly connected. Can you please explain why you think they are not?

Thanks
 
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