MODULE :-3

NEGOTIABLE INSTRUMENT ACT 1881

MEANING

Negotiable means “ transferable by delivery Instrument means “ written document by

which a right is created in favor of some person

DEFINITION OF A NEGOTIABLE INSTRUMENT [SECTION 13]

The word 'negotiable' means transferable from one person to another, and the term 'instrument' means 'any written document by which a right is created in favor of some person.' Thus, the negotia ble instrument is a document by which rights vested in a person can be transferred to another person in accordance with the provisions of the Negotiable Instruments Act, 1881.

The term 'negotiable instrument' has been defined as - A 'negotiable instrument' means a promissory note, bill of exchange or cheque payable either to order or to bearer."

TYPES OF NEGOTIABLE INSTRUMENTS PROMISSORY NOTE BILL OF EXCHANGE CHEQUE

PROMISSORY NOTE [SECTION 4] A promissory note is an instrument in writing (not being a bank

note or a currency note) containing an unconditional undertaking, signed by the maker to pay a certain sum of money to, or to the order of, a certain person or to the bearer of the instrument

Examples of Promissory Notes “A” signs instruments in the following terms: I acknowledge myself to be indebted to 'B' in Rs. 1000, to be

paid on demand, for value re ceived." Followings are Not Promissory Notes.

(i) "Mr. B, I.O.U. (I owe you) Rs. 1000."

(ii) "I promise to pay B Rs. 1500 on D's death, provided he leaves me enough to pay that sum,"

(iii) "I promise to pay B Rs. 500 seven days after my marriage with C."

PROMISSORY NOTE [SECTION 4]

ESSENTIALS OR CHARACTERISTICS OF A PROMISSORY NOTE

(1) In writing - A promissory note must be in writing. Writing includes print and typewriting.

(2) Promise to pay - It must contain an undertaking or promise to pay. Thus, a mere acknowledgement of indebtedness is not sufficient.

Notice that the use of the word `promise' is not essential to constitute an instrument as promissory note.

(3) Unconditional - The promise to pay must not be conditional. Thus, instruments payable on perfor mance or non-performance of a particular act or on the happening or non-happening of an event are not promissory notes.

(4) Signed by the Maker – The promissory note must be signed by the maker, otherwise it is of no effect.

(5) Certain Parties - The instrument must point out with certainty the maker and the payee of the promissory note

(6) Certain sum of money - The sum payable must be certain or capable of being made certain.

(7) Promise to pay money only - If the instrument contains a promise to pay something in addition money, it cannot be a promissory note.

(8) Number, place, date etc - These are usually found in a promissory note but are not essential in law. If a promissory note does not bear a date, it is deemed to have been made when it was delivered.

(9) It may be payable on demand or after a definite period - Payable 'on demand' means payable immediately or any time till it becomes time-barred. A demand promissory note becomes time barred on expiry of 3 years from the date it bears.

(10) Stamped :- The promissory note must be stamped. The stamp

duty is paid as per the stamp act

BILL OF EXCHANGE [SECTION 5]

A 'bill of exchange' is defined by as an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of, a certain person, or to the bearer of the instrument

BILL OF EXCHANGE [SECTION 5]

CHARACTERISTIC FEATURES OF A BILL OF EXCHANGE

1. It must be in writing.2. It must contain an order to pay and not a promise

or request.3. The order must be unconditional.4. There must be three parties, viz., drawer, drawee

and payee. 5. The parties must be certain.6. It must be signed by the drawer.7. The sum payable must be certain or capable of

being made certain.8. The order must be to pay money and money alone.9. It must be duly stamped as per the Indian Stamp Act. 10. Number, date and place are not essential

CHEQUE [SECTION 6]

A cheque is defined as 'a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand’.

Thus, a cheque is a bill of exchange with two added features, viz.:

(i) it is always drawn on a specified banker; and

(ii) it is always payable on demand and not other wise.

CHEQUE [SECTION 6]

FEATURES OF A CHEQUE

A Cheque is a bill of exchange with following features, viz., must be in writing; contain an unconditional order to pay drawn on a specified banker; for a certain sum of money; the payee must be a definite person; amount must be written both in figures and

words; it must be dated. it is always drawn on a specified banker; and it is always payable on demand and not

otherwise.

BILL OF EXCHANGE AND CHEQUE DISTINGUISHED

Cheque BILLS OF EXCHANGE

It must be drawn only on a banker

It can be drawn on any person including a banker.

The amount is always payable on demand.

The amount may be payable on demand or af ter a. specified time.

The cheque is not entitled to days of grace.

A usance (time) bill is entitled to three days of grace.

Acceptance is not needed. A bill payable after sight must be accepted

A cheque can be crossed Crossing of a bill of exchange is not possible.

Cheque BILLS OF EXCHANGE

A cheque is not to be noted or protested in case of dishonor.

A bill is noted or protested to establish dishonor

The protection given to the paying banker in respect of crossed cheques is peculiar to this instrument

No such protection is available in the case of bills.

PROMISSORY NOTE AND BILL OF EXCHANGE DISTINGUISHEDPromissory Note Bill of Exchange

There are only two parties – the maker (debtor) and the payee (creditor).

There are three parties – the drawer, the drawee and the payee- although any two of these capacities may be filled by one and the same person.

A note contains an unconditional promise by the maker to pay the payee.

It contains an unconditional order to the drawee to pay according to the drawer`s directors

No prior acceptance is needed.

A bill payable `after sight` must be accepted by the drawee or his agent before it is presented for payment

The liability of the maker or drawer is primary and absolute.

The liability of the drawer is secondary and conditional upon non-payment by the drawee

PARTIES TO NEGOTIABLE INSTRUMENTS

Promissory note Cheque Bill of exchange

DrawerPayeeHolderEndorserEndorseeEndorser

Drawer drawee PayeeAcceptorHolder endorseeDrawee in case of needAcceptor for honour

Maker DraweePayeeHolderEndorserEndorsee

PARTIES TO PROMISSORY NOTE

1. The Maker : He is the person who promises to pay the amount stated in the promissory note.

2. The Payee : The person named in the promissory note to whom the money is payable.

3. The Holder: He may be either the payee or someone else to whom the promissory note has been endorsed.

4. The Endorser : When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.

5. The Endorsee : The person to whom the bill is endorsed is called the endorsee.

PARTIES TO BILLS OF EXCHANGE Drawer : The person who draws a bill of exchange is

called the drawer. Drawee : The party on whom such bill of exchange is

drawn and who is directed to pay is called the drawee. Acceptor : The person who accepts the bill is known

as the acceptor. Normally the drawee is the acceptor. But a stranger can also accept a bill on behalf of the drawee.

Payee : The person to whom the amount of the bill is payable is called the payee.

Endorser : When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.

Endorsee : The person to whom the bill is endorsed is called the endorsee.

Holder : Holder of bill of exchange means any person who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. He is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.

Drawee in case of need : The drawer of a bill or even an endorser may write in the instrument the name of a person directing the holder to resort to such person in case of need. Such a person is called a drawee in case of need. He is merely in the position of a drawee who has not accepted the bill. The bill cannot be presented to him for acceptance but only for payment.

Acceptor for Honour : Any person may voluntarily become a party to a bill as an acceptor by accepting it for the honour of the drawer or of any person. When the original drawee refuses to accept or refuses to furnish better security when demanded by a notary, any person may step in to safeguard the honor of the drawer or any endorser and bind himself by an acceptance. The effect of such acceptance is that the bill is treated as alive and is not considered to be dishonored till it is dishonored by the acceptor for honor.

PARTIES TO A CHEQUE

1. Drawer : He is the person who makes the cheque.2. Drawee : The banker on whom the cheque is drawn.3. Payee : The person to whom the amount of the bill is

payable is called the payee.4. Holder : Holder of bill of exchange means any person

who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. He is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.

5. Endorser : When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.

6. Endorsee : The person to whom the bill is endorsed is called the endorsee.

 

DISHONOUR OF A CHEQUE ON GROUNDS OF INSUFFICIENCY OF FUNDS [SECTIONS 138 TO 142]

Section 138 to 142 of the Negotiable Instruments Act provide for criminal penalties in the event of dishonour of cheques for insufficiency of funds. The drawer, under Sec. 138, may be punished with imprisonment upto 2 years (earlier I year) or with a fine up to twice the amount of the cheque or with both. The enhancement in the penal provisions was made by Negotiable Instruments (Amendment) Act 2002 w.e.f. 5.2.2003.

(1). Insufficiency of funds The Courts have held the following amounting to dishonour

for insufficiency of funds: (i) Stop-payment instructions to the payee-bank [ET & TD

Corpn. Ltd. v. Id Technologies & En gross P. Ltd. (1996)].(ii) Request to the payee not to present the cheque till further

information [Modi Cement Ltd. v. Kuchil Kumar Nandi (1998)].

(iii) Cheque received back from the payee-bank with the remarks 'Account Closed' [G.M. Mittal Stainless Steel vs. Nagarjuna Investments (1997) and N.E.P. C. Micon Ltd. vs. Magna Leasing Ltd. (1999

(2).Payment against an enforceable debt(3). Cheque should be presented to the paying bank

within the validity period (generally 6 months from the date on which it is drawn)

(4). Payee to serve Default Notice, demanding payment within 30 days

(5). Drawer liable upon failure to pay within 30 days`Upon failure Complaint in writing; Offence triable by 1st

MagistrateThe payee having failed to receive the payment within

30 days` of notice of dishonour of the cheuqe, shall have to make a police complaint in this regard. This is a cognizable offence and shall be tried by a Metropolitan Magistrate or a Judicial Magistrate of the First Class

Offences by companies A director, manager, secretary or other offi cer of the

company shall be liable to be proceeded against and punished accordingly in case the offence has been committed with the consent or connivance, or is attributable to any neglect on his part in this regard. - Rajneesh Aggarwal v. Anil Bhalla (2001).

However, a person will not be liable in a case.(i) where such person proves that the offence was

committed without his knowledge, or(ii) where he had exercised all due diligence to

prevent the commission of such offence;(iii) where he is nominated as a Director of a company

by the Central Government or State Government or

LIABILITY OF PARTIES TO A NEGOTIABLE INSTRUMENT

Liability of drawer Liability of drawer of a cheque Liability of maker of pro-note and

acceptor of bill Liability of endorser Liability of prior parties Acceptor liability on a bill drawn in a

fictitious name Liability of acceptor in case of forged

endorsement

DISHONOR OF CHEQUES – SECTION 31 AND 138

Liability of drawee on dishonour 1. The drawer has sufficient funds in the

account 2. Such fund are properly applicable to

payment of the cheque 3. The drawee is duly required to pay the

cheque

LIABILITY OF DRAWER ON DISHONOR

The cheque was issued to discharge a legally enforceable debt

The cheque was returned or dishonored for insufficiency of funds

The cheque was presented within six month from which it was drawn or validity period of the cheque

The payee or the holder in due course has made a demand from the drawer within 30 days of dishonor

The drawer of cheque has failed to make a payment within 30 days of demand made

A complaint cab be made only by the payee or the holder within one month of expiry of 30 days of the receipt of notice by the drawer

MODULE :-3

Sale Of Goods Act 1930

CONTRACT OF SALES (SECTION 4)

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for price".

ESSENTIALS OF CONTRACT OF SALE

1. There must be at least two parties 2. Transfer or Agreement to transfer the

ownership of goods. 3. The subject matter of the contract must

necessarily be 'goods'. 4. The consideration is Price. 5. A Contract of sale may be absolute or

conditional 6. All other essentials of a valid contract

must be present.

DIFFERENCE BETWEEN SALES AND BAILMENT OF GOODS

Point of difference Sale Bailment of goods

Title and possession

In sale title and possession both get transferred.

bailment only possession get transferred. 

Returns of goods The buyer is under no obligation to returns the goods

The bailee is under an obligation to returns the goods

Rights to goods The buyer is always Is an absolute owner and he can deal with the goods he has purchased in any way he likes

The bailee can use the goods only according to the terms of bailment .he is supposed to follow the instructions or directions or directions of the bailor while dealing with the goods

Point of difference Sale Bailment of goods

Act applicable The sale is always governed by sales of goods act 1930

Sales of goods act does not apply to bailment of goods

DIFFERENCE BETWEEN SALE AND AGREEMENT TO SALE

Sale1) The Property in the

goods passes to the buyer and along therewith the risk.

2) It is an executed contract.

3) The seller can sue the buyer for the price of the goods because of the passage of the property therein to buyer.

4) A subsequent loss or destruction of goods is liability of buyer.

5) Breach on the part of the sellers gives the buyer double remedy; a suit for damages against the seller and a proprietary remedy of recovering the goods from third parties who bought them.

Agreement To Sale1) Since property in the

goods does not pass to buyer, the risk also does not pass to him.

2) It is an executory contract.

3) The aggrieved party can sue for damages only and not for the price, unless the price was payable at a stated date.

4) Such loss or destruction is the liability of the seller.

5) The seller, being still the owner of the goods, may dispose of them as he likes, and the buyer’s remedy would be to file a suit for damages only.

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DIFFERENCE BETWEEN A SALE AND A HIRE PURCHASE

Point of difference Hire purchase Sale

Transfer of ownership Ownership of goods is transferred from hire vendor to hire purchaser only when the last installment is paid

sales, ownership is transferred immediately to the buyer. 

Risk of loss In case of a hire-purchase agreement ,the risk of loss or deterioration of goods hired lies the owner , and the hirer will be absolved of any responsibility

In the case of a sale ,where the price in installment , the risk of loss or deterioration of the goods lies with the buyer

Mode of contract Hire purchase agreement is always done in writing

A contract of sale may be made orally or in writing

Act applicable A transaction of hire –purchase agreement is regulated by the hire purchase act ,1972

A transaction of sale is governed by the sale of goods act ,1930

Sales tax/vat Sales tax/VAT is not levied on a hire –purchase until it becomes a sale

Sales tax / vat is payable on the goods sold

GOODS:-MEANING

Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached and forming part of lands which are agreed to be served before sale or under the contract of sale. Section 2(7).

KINDS OF GOODS:

Existing goods- Section 6(1) These are the goods which are in existence and are physically present in the seller’s possession.

Specific goods- Section 2(14) – These are the goods identified and agreed upon at the time the contract is made.

Ascertained goods- These are identified after the formation of the contract.

Unascertained goods- These are the goods which are not specifically identified or agreed upon at the time of the contract of sale.

Future goods – Section 2(6) Goods which are to be manufactured or produced or acquired by the seller after making contract of sale.

Contingent goods- Section 6(2):- contingent goods are those whose acquisition by the seller depends on a contingency ,which may or may not happen [section 6(2)]

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EXAMPLES

Specific goods :- if a agrees to sell his car or watch to B,it shall be a sale of specific goods

Ascertained goods- A who deals in motor bikes , has 100 bikes in his showroom and agree to sell 40 bikes to Delhi police under an agreement to sell suppose the Delhi police, the buyer selects and sets aside 40 bikes out of the mass of 100 for the given contract , the contract I for ascertained goods because the quantity contracted has been indentified and appropriated towards the contract

Unascertained goods- Mohan, a timber merchant , agree to supply 50 chairs to a school out of the lot 200 chairs lying in his godown .it is sale of unascertained goods because which of the chairs shall be delivered to the buyer have not been identified at the time of the contract of sale

Future goods:- A enters into a contract with B to buy all the apples that would be produced in B ‘s orchard over next year .

Contingent goods- :- A agrees to sell the cargo loaded on the ship ‘victory’ which is coming from London to Bombay. The ship may or may not arrive .so, these goods will be called as contingent goods

CONDITION OR WARRANTIES

Condition: It is a stipulation essential to main purpose of the contract, the breach of which gives right to the repudiate the contract and to claim damages.

Warranty: It is a stipulation collateral to main purpose of the contract, the breach of which gives rise to claim for damages but not the right to reject the goods and treat contract as repudiated.

43

CONDITION EXAMPLE

X goes to Y , a horse dealer , and tell him that he wants a horse that can run 35km/hour. Y points to a particular horse and says that this will suit the purpose . X buys the horse relying on his representation . Subsequently , X finds that horse can run only at a speed of 25 km in an hour . There is a breach of conditions . X may reject the horse and get back the price paid by him

WARRANTY EXAMPLE

A buyer goes to a car dealer and asks for a good car . While selling the car , the dealer claims that the mileage of the car is 16 km per liter . But subsequently the buyer discovers that car gives a mileage of only 12 km per liter . Here the buyer cannot repudiate the contract but can only claim damages from the seller because the statement made by the seller amounts to a warranty

DIFFERENCE BETWEEN CONDITION AND WARRANTIES

Condition

1. A condition is essential to the main purpose of the contract.

2. The aggrieved party can repudiate the contract or claim damages or both in case of breach of condition.

3. A breach of condition may be treated as breach of warranty.

Warranty

1. It is only collateral to main purpose of contract.

2. The aggrieved party can claim only the damages in case of breach of warranty.

3. A breach of warranty cannot be treated as breach of condition.

46

TYPES OF CONDITIONS AND WARRANTIES

1) Express – which are expressly provided in the contract.

2) Implied- which the law implies into the contract unless the parties stipulate

to the contrary.

47

IMPLIED CONDITIONS

1. Condition as to title [sec.14(a)] - seller has the right to sell.

2. Sale by description (sec.15)- goods shall correspond with the description.

3. Condition as to quality or fitness [sec16(1)]

4. Condition as to merchantability [sec.16(2)]

5. Sale by sample (sec.17)

6. Condition as to wholesomeness

48

Condition as to title:- A bought a second hand car from B , a car dealer, and paid for it . After a few months, c the true owner, spotted the car and demanded it from A. A was deprived of the car because the seller had no title to it . It was held that A could recover the price from B and sue him for damages even though A had used the car for several months

Sale by description:- Ex:- A machine was sold .the buyer has not seen

the machine but the seller described it as a new one. However ,it was found to be a very old one .held , the machine was not according to the description

Condition as to quality or fitness:-Ex :- A purchased a hot bottle from a chemist .

While the bottle was being used by A’s wife ,it burst and injured A’s wife .held ,the seller was liable for damages as the bottle was not fit for the purpose for which it was meant

Condition as to merchantability:-Ex:- A radio set was sold to a layman .the set was

defective .it did not work in spite of repairs .held , the buyer could returns the set and claim refund

Condition as to wholesomeness:-Ex:- A purchased milk from B a milk dealer. The milk

contained typhoid germs .A’s wife on taking the milk got infected and died .held , A was entitled to get damages

IMPLIED WARRANTIES

1. Warranty of quiet possession [sec.14(b)].

2. Warranty of freedom from encumbrances [sec.14(c)].

3. Warranty as to quality or fitness by usage of trade [sec16(4)].

4. Warranty to disclose dangerous nature of goods.

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CAVEAT EMPTOR

In a contract of sale of goods the seller is under no duty to reveal unflattering truths about the goods sold. Therefore, when a person buys some goods, he must examine them thoroughly. If the goods turn out to be defective or do not suit his purpose, he cannot blame anybody excepting himself.

52

UNPAID SELLER

The seller of goods is deemed to be unpaid (Sec. 45-1)

I. When whole of the price has not been paid of tendered.

II. When the bill of exchange or negotiable instrument has been received as a condition of payment and the condition on which it was received has not been fulfilled by the reason on dishonor of the instrument or otherwise.

53

RIGHTS OF AN UNPAID SELLER

The unpaid seller has following rights:1) Rights against the goods.i. Rights of lienii. Right of stoppage of goods in transitiii. Right of rescale2) Rights against buyer personallyi. Suit for priceii. Suit for damages for non-acceptanceiii. Suit for special damages and interest

54

RIGHTS OF LIENThe right of lien means lawfully right to retain the

goods possession until the full price is received. An unpaid seller can exercise his right of lien in following cases. Sec 47-49 :

I. Where the goods have been sold on the cash basis.

II. Where the goods have been sold on credit basis and the term of credit has expired.

III. Where the buyer has become insolvent even if the period of credit has not been expired.

Other rules to satisfy the conditions for this right areI. The unpaid seller must be in actual possession of

the goods sold.II. It can be exercised even If the documents of title

have been delivered to the buyer.III. It can be exercised for the price and not for other

expensesIV. If the seller delivers some goods, it can be

exercised on the remaining.

55

TERMINATION OF RIGHT OF LIENSeller’s right of lien is terminated in following

cases.I. When he delivers the goods to the carrier or

other bailey for transmission to the buyerII. When the buyer or his agent lawfully obtains the

possession of the goodsIII. When seller waives his right of lien on the

goodsIV. The right of lien once lost will not be restoredV. When the buyer further sells the goods and the

seller agreesExample:A seller “S” sells a TV set to “B” and delivers it to

“B” and since the TV set was not functioning properly, “B” delivered it back to “S” for the repairs. It was held that “S” can not exercise his right of lien over TV set. 56

RIGHT OF STOPPAGE OF GOODS IN TRANSIT:It means stoppage of goods while they are

in transit to take possession until the price is paid (sec. 50-52). Unpaid seller can stop the goods in transit in the following cases.

I. While the buyer becomes insolvent.II. While the goods are out of actual

possession of seller, but have not reached buyer’s possession i.e. goods are in transit with career.

III. The unpaid seller can stop the goods in transit only for payment of the price of the goods and not for any other charges.

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THE UNPAID SELLER CAN NOT STOP GOODS IN TRANSIT IN FOLLOWING CASES:

I. When the goods reaches the destination.II. While the buyer or his agent takes possession

of delivery even if it is not reached destination.III. In case the carrier is agent of the buyer, the

transit comes to an end the instance carrier receives the goods and seller can not stop the transition

IV. Carrier’s wrongful refusal to deliver goods to the buyer.

Example:“A” sells TV set to “B”. “A” delivers the TV to the

carrier to carry it to “B”. Later on gets news that “B” has become insolvent; “A” can stop delivery.

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RIGHT OF RESALE:

If a buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to resell the goods in the following circumstances.

a) Where the goods are of perishable nature.b) Where the unpaid seller has exercised his

right of lien or stoppage in transit and gives a notice to buyer of his intension of resell the goods.

c) Where the unpaid seller has expressly reserved his right of resale.

d) Where seller gives notice to the buyer of his intension to resell and the buyer does not pay within a reasonable time, he can

a. Recover loss on resale of the goods, if anyb. Retain any surplus on resale of goods, if any59

RIGHT OF RESALE:

If a buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to resell the goods in the following circumstances.

a) Where the goods are of perishable nature.b) Where the unpaid seller has exercised his

right of lien or stoppage in transit and gives a notice to buyer of his intension of resell the goods.

c) Where the unpaid seller has expressly reserved his right of resale.

d) Where seller gives notice to the buyer of his intension to resell and the buyer does not pay within a reasonable time, he can

a. Recover loss on resale of the goods, if anyb. Retain any surplus on resale of goods, if any60

Breach of the Contract

SUIT FOR PRICE

Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.

Where under a contract of sale the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract.

DAMAGES FOR NON-ACCEPTANCE

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance

DAMAGES FOR NON-DELIVERY

Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.

SPECIFIC PERFORMANCE

Subject to the provisions of Chapter II of the Specific Relief Act, 1877, in any suit for breach of contract to deliver specific or ascertained goods, the Court may, if it thinks fit, one the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any time before the decree.

REMEDY FOR BREACH OF WARRANTY

1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may-

(a) Set up against the seller the Brach of warranty in diminution or extinction of the price; or

 (b) Sue the seller for damages for breach of warranty. (2) The fact that a buyer has set up a breach of warranty

in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage.

REPUDIATION OF CONTRACT BEFORE DUE DATE 

Where either party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contracts as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and use for damages for the breach.

INTEREST BY WAY OF DAMAGES AND SPECIAL DAMAGES

(1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case whereby law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.

 (2) In the absence of a contract to the contrary, the Court may

award interest at such rate a it think fit one the amount of the price-

 (a) to the seller in a suit by him for the amount of the price.- from

the date of the tender of the goods or from the date on which the price was payable.

 (b) to the buyer in a suit by him for the refund of the price in a

case of a breach of the contract on the part of the seller- from the date on which the payment was made

Performance of contract

DUTIES OF SELLER AND BUYER

It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale.

PAYMENT AND DELIVERY ARE CONCURRENT CONDITIONS

Unless otherwise agreed, delivery of the gods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods.

Delivery.- Delivery of goods sold may be made by doing

anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf.

EFFECT OF PART DELIVERY

A delivery of part of goods, in progress of the delivery of the whole has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole, but a delivery of part of the gods, with an intention of severing it from the whole, does not operate as a delivery of the remainder.

BUYER TO APPLY FOR DELIVERY

Apart from any express contract, the seller of goods in not bound to deliver them until the buyer applies for delivery.

RULES AS TO DELIVERY

(1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are to be delivered at the place at which they are the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, if not then in existence, at the place at which they are manufactured or produced.

 (2) Where under the contract of sale the seller is

bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.

 

(3) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf.

Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods.

 (4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.

 (5) Unless otherwise agreed, the expense of and incidental to putting the goods into a deliverable state shall be borne by the seller.

DELIVERY OF WRONG QUANTITY(1) Where the seller delivers to the buyer a quantity of good less

than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate.

 (2) Where the seller delivers to the buyer a quantity of goods larger

than he contracted to sell the buyer may accept the goods included in the contact and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate.

 (3) Where the seller delivers to the buyer the gods he contract to

sell mixed with goods of a different description not included in the contract., the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole.

 (4) The provisions of this section are subject to any usage of trade,

special agreement or course of dealing between the parties.

INSTALLMENT DELIVERIES

(1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments.

 (2) Where there is a contract for the sale of goods to be

delivered by stated installments which are to be separately paid for, and the seller makes no delivery or defective delivery in respect of one or more installments, or the buyer neglects or refuses to take delivery of or pay for one or more installments, it is a question in each cased depending on the terms of the contract and the circumstances of the case, whether the breach of contract is a repudiation of the whole contract, or whether it is a sever able breach giving rise to a claim for compensation, but not a right to treat the whole contract as repudiated.

DELIVERY TO CARRIER OR WHARFINGER(1) Where, in pursuance of a contract of sale, the seller is authorised or

required to send the goods to he buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the buyer.

 (2) Unless otherwise authorised by the buyer, the seller shall makes such

contract with the carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits so to do, and the goods are lost or damaged in course of transit or whilst in the custody of the wharfinger, the buyer made decline to treat the delivery to the carrier or wharfinger as a delivery to himself, or may hold the seller responsible in damages.

 (3) Unless otherwise agreed, where goods are sent by the seller to the buyer

by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea transit and if the seller fails so to do, the goods shall be deemed to be at his risk during such sea transit.

Where the seller of goods agrees to deliver them at his own risk at place other than that where they are when sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit.

 

BUYER’S RIGHT OF EXAMINING THE GOODS

(1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.

(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.

BUYER NOT BOUND TO RETURN REJECTED GOODS

Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient it he intimates to the seller that he refuses to accept them.

LIABILITY OF BUYER FOR NEGLECTING OR REFUSING DELIVERY OF GOODS

When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods , he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods.

Provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract

MODULE :-3

Consumer Protection Act, 1986

CONSUMER PROTECTION ACT, 1986• A person may be consumer of goods, or services. When I

purchase a fan, a gas stove or a refrigerator, I could be the consumer of goods. When I open a bank account, take an insurance policy, get my car repaired, I could be the consumer of services.

• The consumer protection Act, 1986 tries to help a consumer when for example, the goods purchased are defective or the services rendered to him are subject to so deficiency.

• Prior to the consumer Protection Act, 1986 for any consumer complaint one had to go to an ordinary Civil Court. He had to engage a lawyer, pay the necessary fee, and be harassed for years or decades before any outcome, positive or negative, was there in that litigation.

• Under the Consumer Protection Act, no Court fee has to be paid and the decision on the complaint is much quicker, as the Court can evolve a summary procedure in disposing off the complaint.

INTRODUCTION

Caveat emptor rule ( let the buyer beware) in sale of goods act of 1930, sprout the root of consumerinterest protection.

United nations passed resolution of consume protection in April 1985

In India 1986 was the enactment of consumer protection act Aimed at providing simple, quick, and cheaper protection of consumers interest

The law relating to consumer protection iscontained in the consumer protection Act ,1986.The Act applies to all goods and services.The central government may however bynotification published in the official Gazette

CONSUMER PROTECTION ACT, 1986

Consumer protection means safeguarding the interest and rights of consumers. In other words, it refers to the measures adopted for the protection of consumers from unscrupulous and unethical malpractices by the business and to provide them speedy redressal of their grievances.

MEANING OF CONSUMER PROTECTION

Consumer protection means the protection of the consumers from their exploitation by the unfair trade practices of the producers/sellers. In fact, providing proper protection of the fundamental rights and Interests of the consumers, freeing them from exploitation, creating consumer awareness, consumer providing the right to clean business environment to the consumers by means of Legal amendments Is all that protection mean

EXAMPLES

Bank of Maharashtra v/s Mrs Jyothi Satya When the locker facility is provided by the

bank, the relationship b/w the bank and hirer of a locker is not that of a landlord and tenant.

In event of loss of contents of lockers as a result of robbery, the bank will be liable for deficiency of service.

CONSUMER PROTECTION COUNCILS

Central Level State Level

Classification of Council

Central Consumer Protection Council

[SECTION 4]

State Consumer Protection Council

[SECTION 7]

District Council [SECTION 8A]

Estab. AuthorityComposition Chairman Other official or non-

official members.TermPlace of CouncilMeetings

Central Government Minister in charge in the Cent. Govt. (i) 8 M.P.—5 from LS, 3

from RS. (ii) Secy.-National Comm.

for SC & ST.(iii) 20 – Repr. Of Cent.

Govt.& Autonomous Org. with consumer interests

(iv) Registrar, National Consumer Disputes Redressal Commission

(v) 35 - Consumer Orgns.(vi) 10 – Women(vii) 20 – Trade & Industry(viii) 15 – Persons for

Consumer InterestMember-secretary -Secretary in-charge of Consumer Affairs in the Central Government. 3 yearsDelhiAt least one meeting every year

State GovernmentMinister in charge in the State Govt.(i) 8 – 5 MLA & 3MLC(ii) 10 – State Govt. Repr.(iii) 5 – Women Repr.(iv) 5 – Trade & Farmers

Repr.(v) 1 – Persons for

Consumer Interest.Generally 3 yearsState capitalAt least two meetings in a year

State Govt.Collector of the district(As per respective State Rules)Generally 3 yearsDistrict HQAt least two meetings in a year.

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CONSUMER DISPUTES REDRESSAL AGENCIES

Redressal Forums.

• District Forums - a Consumer Disputes Redressal Forum to be known as the "District Forum" established by the State Government in each district of the State by notification:

93

Each District Forum shall consist of,— 

• a person who is, or  has been, or is qualified to be a District Judge, who shall be its President;

• two other members, one of whom shall be a woman, who shall have the following qualifications, namely —

CONTINUED…

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– be not less than thirty-five years of age,– possess a bachelor's degree from a recognised

university,– be persons of ability, integrity and standing, and

have adequate knowledge and experience of at least ten years in dealing with problems relating to economics, law, commerce, accountancy, industry, public affairs or administration:

CONTINUED…

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JURISDICTION OF THE DISTRICT FORUM.

The District Forum shall have jurisdiction to

entertain complaints where the value of the goods or services and the compensation, if any, claimed ''does not exceed rupees twenty lakhs. 

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• State Commission - A Consumer Disputes Redressal Commission to be known as the "State Commission" established by the State Government in the State.

STATE COMMISSION

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Each State Commission shall consist of— 

• A person who is or has been a Judge of a High Court, appointed by the State Government, who shall be its President.

CONTINUED…

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• not less than two, and not more than such number of members, and one of whom shall be a woman, who shall have the following qualifications, namely:—

- be not less than thirty-five years of age;- possess a bachelor's degree from a recognised

university;- be persons of ability, integrity and standing, and

have adequate knowledge and experience of at least ten years in dealing with problems relating to economics, law, commerce, accountancy, industry, public affairs or administration:

CONTINUED…

JURISDICTION OF THE STATE COMMISSION

(i) complaints where the value of the goods or services and compensation, if any, claimed exceeds rupees 1[five lakhs but does not exceed rupees twenty lakhs;] and

(ii) appeals against the orders of any District Forum within the State; and

(b) to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any District Forum within the State where it appears to the State Commission that such District Forum has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested or has acted in exercise on its jurisdiction illegally or with material irregularity.

NATIONAL COMMISSION1) The National Commission shall consist of-(a) a person who is or has been a Judge of the Supreme Court, to

be appointed by the Central Government, who shall be its President:

2[PROVIDED that no appointment under this clause shall be made except after consultation with the Chief Justice of India;]

(b) four other members who shall be persons of ability, integrity and standing and have adequate knowledge or experience of, or have shown capacity in dealing with, problems relating to economics, law, commerce, accountancy, industry, public affairs or administration, one of whom shall be a woman:

2[PROVIDED that every appointment under this clause shall be made by the Central Government on the recommendation of a selection committee consisting of the following, namely,-

(a) a person who is a Judge of the Supreme Court, to be nominated by the Chief Justice of India-Chairman,

(b) the Secretary in the Department of Legal Affairs in the Government of India-Member.]

2[(3) Every member of the National Commission shall hold office for a term of five years or up to the age of seventy years, whichever is earlier and shall not be eligible for re-appointment.

(4) Notwithstanding anything contained in sub-section (3), a person appointed as a President or as a member before the commencement of the Consumer Protection (Amendment) Act, 1993, shall continue to hold such office as President or member, as the case may be, till the completion of his term.]

JURISDICTION OF THE NATIONAL COMMISSION

(i) complaints where the value of the goods or services and compensation, if any, claimed exceeds rupees 1[twenty lakhs]; and

(ii) appeals against the orders of any State Commission; and

(b) to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity.

Appellate Authority National Consumer Disputes Redressal Commission[SECTION 20]

State Commission[SECTION 16]

District Forum[SECTION 10]

CompositionPresident  Members (persons of ability, integrity and standing and have adequate knowledge or experience)Term Jurisdiction

Judge of the Supreme Court to be appointed by the Cent. Govt. in consultation with the Chief Justice of India.4 (1 Woman) – Appointed by Cent. Govt. on the recommendation of a selection committee.  5 years` or 70 years` (whichever earlier)   (i) Complaints - value of the goods or services and compensation, if any, claimed exceeds Rs. One crore and(ii) Appeals against the orders of any State Commission

Judge of the High Court to be appointed by State Govt. in consultation with Chief Justice of High Court.2 (1 Woman) – Appointed by State Govt. on the recommendation of a selection committee  5 years or 67 years (whichever earlier).Complaints - value of the goods or services and compensation, if any, claimed exceeds Rs. 25 lakhs upto Rs. One Crore.  

District Judge to be appointed by the State Govt. in consultation with the Chief Justice of State High Court.

who shall be its President;2 (1 Woman) – Appointed by State Govt. on the recommendation of a selection committee5 years or 65 years (whichever earlier).Complaints - value of the goods or services and compensation, if any, claimed upto Rs. 25 lakhs. The concerned State within which either of parties actually and voluntarily resides or carries on business or has a branch office or personally works for gain.

Penalty Time limit for completion of hearingJudicial Powers/Interim ReliefSummary TrialPrincipal BenchAppellate Authority   Enforcement powerLimitation period

Imprisonment up to 3 years` with or without fine upto Rs. 10,00090 days` or 150 days` (in case of lab. Tests)Vested with powers of 1st Class Judicial MagistrateEnabled; New Delhi; Circuit Bench Supreme Court within 30 days` with 50% of award money.

As arrears of Land & Revenue2 years` from the cause of action.

Imprisonment up to 3 years` with or without fine upto Rs. 10,00090 days` or 150 days` (in case of lab. Tests)Vested with powers of 1st Class Judicial MagistrateEnabled State CapitalNational Commission within 30 days` with 50% of award money or Rs. 35,000 (whichever less).State Capital; Circuit Bench at other cities. As arrears of Land & Revenue2 years` from the cause of action

Imprisonment up to 3 years` with or without fine upto Rs. 10,00090 days` or 150 days` (in case of lab. Tests)Vested with powers of 1st Class Judicial MagistrateEnabled District HQState Commission within 30 days` with 50% of award money or Rs. 25,000 (whichever less).As arrears of Land & Revenue2 years` from the cause of action