business law.pptx

Unit II: Contract of Sales and Consumer Laws.
Meaning of contract of sale, Essentials of contract of sale, Definition of Goods, Types of goods,
Condition and warranties-(CASE LAWS-Vorley vs. Whipp, Difference between Condition and
Warranties. Unpaid seller and his rights
Definition of a consumer, Rights of a consumer, Consumer protection councils, Redressal
Mechanism.

Sale of Goods Act, 1930 is an Act to define and amend the law relating to the
sale of goods. It extends to the whole of India. It came into force on 1st July,
1930
SCOPE OF THE ACT
The provisions of the Act are applicable to the contracts related to the sale of
goods which means movable properties. The Act is not applicable for the sale
of immovable properties like land, shop or house etc.

Buyer and Seller:
• ‘Buyer’ means a person who buys or agrees to buy goods [Section 2(1)].
• ‘Seller’ means a person who sells or agrees to sell goods [Section 2(13)].
Definition of a Contract of Sale
Section 4(1) of the Sale of Goods Act defines a contract of sale of goods as "a contract
whereby the seller transfers or agrees to transfer the property in goods to the buyer for a
price."

Essential characteristics of a contract
1. Two parties.
• There must be two distinct parties to a contract of sale, viz., a buyer and a seller, as a
person cannot buy his own goods.
• There may be a contract of sale between one part-owner and another, e.g., if A and B
jointly own a computer, A may sell his ownership in the computer to B, thereby making
B sole owner of the goods. Similarly, a partner may buy the goods from the firm in
which he is a partner and vice-versa.
• EXCEPTION: a person may buy his own goods. Where a person's goods are sold in
execution of a decree, he may himself buy them, so as to save them from a transfer of
ownership to someone else.
(“execution” means implementing or enforcing or giving effect to an order or a judgment passed by the court of justice)

2. Transfer of property.
• 'Property' here means 'ownership'. Transfer of property in the goods is another essential of
a contract of sale of goods.
• A mere transfer of possession of the goods cannot be termed as sale. To constitute a
contract of sale the seller must either transfer or agree to transfer the property in the goods
to the buyer.
3. Goods. The subject-matter of the contract of sale must be 'goods’
“Goods” means every kind of movable property other than actionable claims and money; and
includes stock and shares, growing crops, grass, and things attached to or forming part of the
land, which are agreed to be severed before sale or under the contract of sale. [Section 2(7)]

• “Goods” include both tangible goods and intangible goods like goodwill, copyrights, patents,
trademarks etc. Stock and shares, gas, steam, water, electricity and decree of the court are also
considered to be goods.
• Example: where trees were sold so that they could be cut out and separated from the land and
then taken away by the buyer, it was held that there was a contract for sale of movable
property or goods
• Sale of things ‘forming part of the land itself’ are not contracts for sale of goods. For example, a
contract for the sale of coal mine or building-stone quarry is not a contract of sale of goods.
"Actionable claims' means claims which can be enforced by a legal action or a suit.
The right of a partner to sue for an account of a dissolved firm is an actionable claim.
Similarly, a bill of exchange or a promissory note represents a debt, i.e., an actionable claim and implies
the right of the creditor to recover its amount from the debtor. But since these can be transferred under
Negotiable Instruments Act by mere delivery or indorsement and delivery, such instruments cannot be
sold.

4. Price.
• The consideration for a contract of sale must be money consideration the good called the
'price.'
• If goods are sold or exchanged for other goods, the transaction is barter, governed by the
Transfer of Property Act and not a sale of goods under this Act.
• But if goods are sold partly for goods and partly for money, the contract is one of sale.
5. Includes both a 'sale' and 'an agreement to sell.'
Sale:
• When the property in the goods is immediately transferred at the time of making the
contract from the seller to the buyer, the contract is called a 'sale'.
• It refers to an 'absolute sale', e.g., an outright sale on a counter in a shop.
• There is immediate conveyance of the ownership and mostly of the subject-matter of the
sale as well (delivery may also be given future).
• It is an executed contract.

An agreement to sell.
• When the transfer of property in goods is to take place at a future time or subject to some
condition thereafter to be fulfilled, the contract is called 'an agreement to sell'.
• It is an executory contract and refers to a conditional sale.
'An agreement to sell' becomes a sale' when the time elapses or the conditions are fulfilled
subject to which the property in the goods is to be transferred [Sec. 4(4)].
6. No formalities to be observed (Sec. 5).
• No particular form.
• Can be made by mere offer and acceptance.
• The offer may be made either by the seller or the buyer
• Neither payment nor delivery is necessary at the time of making the contract of sale.
• May be either orally or in writing or partly orally and partly in writing or implied.

1. Existing goods.
• Goods which are physically in existence and which are in seller's ownership and/or
possession, at the time of entering the contract of sale are called 'existing goods.’
• Existing goods may again be either 'specific' or 'unascertained.'
(a) Specific goods.
• Goods identified and agreed upon at the time of the making of the contract of sale are called
'specific goods'
• For example, where A agrees to sell to B a particular DVD player bearing distinctive number,
there is a contract of sale of specific or ascertained goods.
CLASSIFICATION OF GOODS

(b) Unascertained goods.
• The goods which are not separately identified or ascertained at the time of the making of
the contract are known as 'unascertained goods.
• They are indicated or defined only by description.
• Example: A agrees to sell one bag of sugar out of the lot of one hundred bags lying in his
gowdown, it is a sale of unascertained goods because it is not known which bag is to be
delivered. As soon as a particular bag is separated from the lot for delivery, it becomes
ascertained or specific goods.

2. Future goods.
• Goods to be manufactured, produced or acquired by the seller after making of contract of
sale.
• These goods may be either not yet in existence or be in existence but not yet acquired by the
seller.
• There can be no present sale of future goods because property cannot pass in what is not
owned by the seller at the time of the contract. Law it operates only as an agreement to sell.
EXAMPLES
(a) A agrees to sell to B all the milk that his cow may yield during the coming year - contract
for the sale of future goods
(b) X agrees to sell to Y all the mangoes which will be produced in his garden next year. It is
contract of sale of future goods, amounting to an agreement to sell
(c) P contracts on 1 January 1990, to sell to 10 ton bales of Egyptian cotton to be delivered
and paid for on 1 March, 1990. This is a valid contract of sale, amounting to an agreement to
sell, even though P has no cotton bales with him at the time of making the contract.

3. Contingent goods.
• Goods, the acquisition of which by the seller depends upon an uncertain contingency
• They are a type of future goods and therefore a contract for the sale of contingent goods also
operates as an agreement to sell and not a sale. In the case of contingent goods also the
property does not pass to the buyer at the time of making the contract.
• Contract of sale of contingent goods is enforceable only if the event on the happening of
which the performance as of the contract is dependent happens, otherwise the contract
becomes void.

CONDITIONS AND WARRANTIES
A 'condition' is a stipulation essential to the main purpose of the contract, the breach of which
gives the aggrieved party a right to repudiate the contract itself.
In addition, he may maintain an action for damages for loss suffered, if any, on the footing
that the whole contract is broken and the seller is guilty of non-delivery.
A 'warranty' is a stipulation collateral to the main purpose of the contract, the breach of
which gives the aggrieved party a right to sue for damages only, and not to avoid the contract
itself.

Eg: A man buys particular horse which is warranted quiet to ride and drive. If the horse turns
out to be vicious, buyer's only remedy to claim damages.
But if instead of buying particular horse, a man asks a dealer to supply him with a quiet horse
and the dealer supplies a vicious one, the stipulation is condition, and the buyer can return
the horse and can also claim damages for breach contract.
CONDITION AND WARRANTY DISTINGUISHED
1. As to value. A condition is a stipulation which is essential to the main purpose of the
contract, whereas a warranty is a stipulation which is collateral to the main purpose of the
contract.
2. As to breach. The breach of a condition gives the aggrieved party the right to repudiate the
contract and also to claim damages, whereas the breach of warranty gives the aggrieved
party a right to claim damages only.
3. As to treatment. A breach of condition may be treated as a breach of warranty. But a breach
of warranty cannot be treated as a breach of condition.

When Breach of Condition is to be Treated as Breach of Warranty (Section 13)
The buyer loses his right to rescind the contract and has to be content with a claim for damages
only.
1. Voluntary waiver by buyer. Although on a breach of condition by the seller, the buyer has
a right to treat the contract as repudiated and reject the goods, but he is not bound to do so.
He may instead elect to waive the condition, i.e., to treat the breach of condition as a breach
of warranty and accept the goods and sue the seller for damages for breach of warranty.
Eg: A agrees to supply B 10 bags of first quality sugar @ 1625 per bag but supplies only
second quality sugar, the price of which is 1500 per bag. There is a breach of condition and the
buyer can reject the goods. But if the buyer so elects, he may treat it as a breach of warranty
accept the second quality sugar and claim damages @ 125 per bag.

2. Acceptance of goods by buyer. Where the buyer has accepted the goods and subsequently
he comes to know of the breach of condition, he cannot reject them but can only maintain an
action for damages.
Acceptance of only part of the goods.
• If the buyer has accepted only part if the goods and the contract is indivisible, he will have
to treat the breach of condition as a breach of warranty and accept the remaining part also.
• But in case of divisible contracts, he can repudiate as regards remaining goods, if he has
accepted only part thereof.
(Indivisible contracts are those where price for a lot, consisting goods different qualities, as
such is fixed and not fixed per unit or per bag or per ton, etc.)
Repudiate – refuse to accept/reject

Meaning of acceptance.
According to Section 42, the buyer is deemed to have accepted the goods:
a. When he intimates to the seller that he has accepted them; or
b. when he does any act in relation to goods which is inconsistent with the ownership of the
seller, eg., consumes, uses, pledges or resells the goods or puts his mark on them, etc.
c. when, after the lapse of reasonable time, he retains the goods without intimating the seller that
he has rejected them. On rejection of goods, however, mere informing the seller is enough and
the buyer is not bound to return the rejected goods actually (Sec. 43).
Express and Implied Conditions and Warranties
Conditions and warranties may be either express or implied.
Implied conditions and warranties may, however, be negatived or varied by express agreement,
or by course of dealing between the parties, or by usage of trade (Sec. 62).

Implied Conditions
1. Condition as to title [Sec. 14 (a)].
Seller has the right to sell the goods and that, in the case of an agreement to sell, he will have a
right to sell the goods at the time when the property is to pass.
Ordinarily the seller has the right to sell the goods if either he is the owner of the goods or he is
owner's agent.
If the seller's title turns out to be defective, the buyer is entitled to reject the goods and to
recover his price.
In the case of breach of condition as to title the buyer has no option to treat the breach of
condition as breach of warranty and accept the goods and sue the seller for damages. He must
return the goods to the true owner.
Eg: R purchased a car from D and used the same for several months. D had no title to the car
and, therefore, R was compelled to return the car to the true owner. R sued D to recover back
the price which he had already paid. He was held entitled to recover the whole of the price paid
by him despite the fact that he had used the car for some months.

 Implied condition as to title makes it obligatory upon the seller that he must not only be the
owner but also must be able to uphold the validity of the contract. Thus if the goods sold
bear labels infringing the trade mark of another, the seller is guilty of breach of this
condition although he had full ownership of the goods.
 ‘Where a seller having no title to the goods at the time of the sale, subsequently acquires
the title (e.g., by paying off the true owner) before the buyer seeks to repudiate the
contract, that title feeds the defective titles of both the original and subsequent buyers and
it will then be too late for the buyer to repudiate the contract.

2. Condition in a sale by description.
• "Where there is a contract of sale of goods by description, there is an implied condition that
the goods shall correspond with the description....." (Sec. 15).
• Goods must correspond with the description whether it is a sale of specific goods or of
unascertained good.
• Further, the fact that the buyer has examined the goods will not affect his right to reject the
goods, if the deviation of the goods from the description is such which could not have been
discovered by casual examination, i.e., if the goods show any latent defects.
• The description may be in terms of the qualities or characteristics of the goods, eg basmati
rice or may simply mention the trade mark, brand name or the type of packing, etc.

Example:
(a) Where there was a contract for the supply of 'new singer cars' and one of the cars supplied
having already run a considerable mileage was not new, there was a breach of condition on
the part of the seller and the buyer was held entitled to reject the car.
(b) M agreed to supply to L 3,000 tins of canned fruit, to be packed in cases each containing
30 tins. M tendered a substantial portion in cases containing 24 tins. It was held that the mode
of packing constituted a part of the description and, therefore, L was entitled to reject the
whole consignment.

3. Condition in a sale by sample (Sec. 17).
(1)that the bulk shall correspond with the sample in quality;
(2)that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;
(3) that the goods shall be free from any defect, rendering them unmerchantable, which would not
be apparent on reasonable examination of the sample. In other words, there should not be any latent
defect in the goods. If the defect is patent one, that is, easily discoverable by the exercise of ordinary
care, and the buyer takes delivery after inspection, there is no breach of implied condition and the
buyer has no remedy.
Eg:
(a) Two parcels of wheat were sold by sample. The buyer went to examine the bulk a week after.
One parcel was shown to him but the seller refused to show the other parcel which was not there in
the warehouse. Held, the buyer was entitled to rescind the contract.
(b) Some mixed worsted coatings were sold by sample. The goods when supplied corresponded to
the sample but it was found that owing to a latent defect in the cloth, coats made out of it would not
stand ordinary wear and were therefore unsaleable. The same defect existed in the sample also but
could not be detected on a reasonable examination. Held, the buyer was entitled to reject the cloth.

4. Condition in a sale by sample as well as by description (Sec. 15).
Implied condition that the bulk of the goods shall correspond both with the sample and with the
description.
If the goods supplied correspond only with the sample and not with the description or vice versa,
the buyer is entitled to reject the goods.
Eg: A agreed with B to sell certain oil described as refined sunflower oil, warranted only equal to
sample. The goods tendered were equal to sample but contained a mixture of hemp oil. B can
reject the goods.

5. Condition as to quality or fitness [Section 16(1)]: Ordinarily, there is no such implied
condition.
There is implied condition of the part of the seller that the goods supplied shall be
reasonably fit for the purpose for which the buyer wants them, provided the following
conditions are fulfilled:
1. The buyer should have made known to the seller the particular purpose for which
goods are required.
2. The buyer should rely on the skill and judgement of the seller.
3. The goods must be of a description dealt in by the seller, whether he be a manufacturer or
not.
• Implied condition as to fitness applies only in the case of sale of goods to a normal buyer. If
the buyer is suffering from an abnormality; say, is allergic to particular foods, medicines,
dust, etc., and it is not made known to the seller at the time of sale, this condition does not
apply.

Eg: A buyer ordered for the hessian cloth, which is generally used for packing purposes,
without specifying the purpose for which he wanted the same. The cloth was supplied
accordingly. On receiving the cloth the buyer found that it was not suitable for packing
food products as it had an unusual smell. Held, that the buyer had no right to reject the
cloth as it was suitable for packing purposes alright. The buyer ought to have disclosed his
particular purpose to the seller in order to make him liable for the breach of implied
condition as to fitness.
• This implied condition will not apply if the goods have been sold under a trademark or
a patent name.
• In some cases, the purpose may be ascertained from the conduct of the parties or from
the nature of the goods sold.
• Where the goods can be used for only one purpose, the buyer need not tell the seller the
purpose for which he requires the goods.(hot water bottle, fruit juice example)

6. Condition as to Merchantability [Section 16(2)]:
There are two requirements for this condition to apply:
1. Goods should be bought by description, the seller should be a dealer in goods of that
description (whether he be manufacturer or not)
2. The buyer must not have any opportunity of examining the goods or there must be some
latent defect in the goods which would not be apparent on reasonable examination of the
same.
• If the buyer had an opportunity of making the examination but he avoids to examine, or if
he has examined the goods, there is no implied condition as to merchantability as regards
defects which such examination ought to have revealed.
• The phrase 'merchantable quality' means that the goods are of such quality and in such
condition that a reasonable man, acting reasonably, would accept them.
Eg: Where the T-shirts supplied contained certain chemicals which could cause skin disease to
a person wearing them next to skin, it was held that because of such a defect the T-shirts were
not of merchantable quality and the buyer was entitled to reject the goods

7. Condition as to wholesomeness.
This condition is implied only in a contract of sale of eatables and provisions. In such cases
the goods supplied must not only answer to description and be merchantable but must also
be wholesome, i.e., free from any defect which render them unfit for human consumption.
Eg: F bought milk from A, a dairy owner. The milk was contaminated with germs of typhoid
fever. F's wife, on taking the milk, became infected and died of it. A, was held liable in
damages.
Eg: The plaintiff bought a bun at a baker's and confectioner's shop. The bun contained a
stone which broke one of the plaintiffs teeth. Held, the seller was liable in damages because
he violated the condition of wholesomeness.

Implied Warranties
1. Warranty as to undisturbed/quiet possession [Section 14(b)]:
An implied warranty that the buyer shall have and enjoy quiet possession of the goods. That
is to say, if the buyer having got possession of the goods, is later on disturbed in his
possession, he is entitled to sue the seller for the breach of the warranty.
Eg: X buys a laptop from Y. After the purchase, X spends some money on its repair and uses
it for some time. Unknown to the parties, it turns out that the laptop was stolen and was
taken from X and delivered to its rightful owner. Y shall be held responsible for a breach and
X is entitled to damages of not only the price but also the cost of repairs.

2. Warranty as to free from encumbrances [Section 14(c)]:
Goods shall be free from any charge or encumbrance in favour of any third party not
declared or known to the buyer before or at the time the contract is entered into.
Eg: A pledges his computer to B against a loan of Rs. 30,000. “A” also promises B that
A will produce the laptop and give it to B the next day. Later that day, A goes on to sell
the laptop to C who is unaware of the course of dealings between A and B. In this case,
C can ask A to clear the loan immediately or clear the loan by himself or herself and
then proceed to file a suit against A for the recovery of the money spent including the
interest

3. Warranty of disclosing the dangerous nature of goods to the ignorant buyer.
In case the goods sold are of dangerous nature he will warn the ignorant buyer of the
probable danger.
If there breach of this warranty the buyer is entitled to claim compensation for the
injury caused to him.
Eg: C purchases a tin of disinfectant powder from A. A knows that the lid of the tin is
defective and if it is opened without special care it may be dangerous, but tells nothing
to C. C opens the tin in the normal way whereupon the disinfectant powder flies into
her eyes and causes injury. A is liable in damages to C as he should have warned C of
the probable danger.

Doctrine of Caveat Emptor
• The maxim of caveat emptor means "let the buyer beware."
• According to the doctrine of caveat emptor it is the duty of the buyer to be
careful while purchasing goods of his requirement and, in the absence of any
enquiry from the buyer, the seller is not bound to disclose every defect in goods
of which he may be cognizant.
• If, therefore, while making purchases of goods the buyer depends upon his own
skill and makes a bad choice, he must curse himself for his own folly, in the
absence of any misrepresentation or fraud or guarantee by the seller.

Seller of goods is deemed to be an ‘Unpaid Seller’ when-
1. The whole of the price has not been paid or tendered and the seller had an immediate
right of action for the price.
2. When a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has not been fulfilled
by reason of the dishonour of the instrument or otherwise.
The term ‘seller‘ here includes any person who is in the position of a seller, as, for
instance, an agent of the seller to whom the bill of lading has been endorsed, or a
consignor or agent who has himself paid, or is directly responsible for, the price
Eg: X sold certain goods to Y for ` 50,000. Y paid ` 40,000 but fails to pay the balance. X
is an unpaid seller.

RIGHT OF UNPAID SELLER AGAINST THE GOODS
I. Right of Lien (Section 47):
The unpaid seller of goods who is in possession of them is entitled to retain possession of
them until payment or tender of the price in the following cases –
1. where the goods have been sold without any stipulation as to credit (cash sale);
2. where the goods have been sold on credit, but the term of credit has expired;
3. where the buyer becomes insolvent.
The unpaid seller’s lien is a possessory lien i.e. the lien can be exercised as long as the
seller remains in possession of the goods.
Eg: A sold certain goods to B for a price ` 50,000 and allowed him to pay the price within
one month. B becomes insolvent during this period of credit. A, the unpaid seller, can
exercise his right of lien.

Part delivery (Section 48): Where an unpaid seller has made part delivery of the goods,
he may exercise his right of lien on the remainder, unless such part delivery has been
made under such circumstances as to show an agreement to waive the lien.
Termination of lien (Section 49): The unpaid seller of goods loses his lien thereon-
1. when he delivers the goods to a carrier or other bailee for the purpose of transmission
to the buyer without reserving the right of disposal of the goods;
2. when the buyer or his agent lawfully obtains possession of the goods;
3. by waiver thereof.
Eg: A, sold a car to B for ` 1,00,000 and delivered the same to the railways for the
purpose of transmission to the buyer. The railway receipt was taken in the name of B and
sent to B. Now A cannot exercise the right of lien.

II. Right of stoppage in transit (Section 50 to 52):
Right of stoppage in transit (Section 50):
1. when the buyer of goods becomes insolvent
2. the property has passed to the buyer
3. goods are in the course of transit
The unpaid seller who has parted with the possession of the goods has the right of
stopping them in transit, he may resume possession of the goods as long as they are in
the course of transit and may retain them until paid or tendered price of the goods.
Eg: A of Mumbai sold certain goods to B of Delhi. He delivered the goods to C, a
common carrier for the purpose of transmission of these goods to B. Before the goods
could reach him, B became insolvent and A came to know about it. A can stop the
goods in transit by giving a notice of it to C.
DURATION??

How stoppage in transit is effected: There are two modes of stoppage in transit-
Where the notice of stoppage in transit is given by the seller to the carrier or other
bailee in possession of the goods, he shall re-deliver the goods to, or according to the
directions of, the seller. The expenses of such re-delivery shall be borne by the seller

Lien and Stoppage in Transit Distinguished
Lien Stoppage in Transit
The seller's lien attaches when the buyer is in
default, whether he be solvent or insolvent
The right of stoppage in transit arises only
when the buyer is insolvent
Lien is available only when the goods are in
actual possession of the seller
Right of stoppage is available when the seller
has parted with possession and the goods are in
the custody of an independent carrier
Right of lien comes to an end once the seller
hands over the possession of the goods to the
carrier for the purpose of transmission to the
buyer.
Right of stoppage in transit commences after
the seller has delivered the goods to a carrier
for the purposes of transmission to the buyer
and continues until the buyer has acquired their
possession
Right of lien consists in retaining the
possession of the goods
Right of stoppage consists in regaining
possession of the goods

III. Right of Resale
Section 54, therefore, gives to the unpaid seller a limited right to resell the goods in the
following cases:
(a) where the goods are of a perishable nature; or
(b) where such a right is expressly reserved in the contract in case the buyer should make a
default; or
(c) where the seller has given a notice to the buyer of his intention to resell and the buyer
does not pay or tender the price within a reasonable time.
• If on a resale there is a loss to the seller, he can recover it from the defaulting buyer.
• But if there is a surplus on the resale, the seller can keep it with him because the buyer
cannot be allowed to take advantage of his own wrong.
• If, however, no notice of resale [as required in case (c) above] is given to the buyer, the
right of seller to claim loss and retain surplus, if any, is reversed.
• Giving of notice to the buyer is very necessary to make him liable for the breach of
contract.

RIGHT OF UNPAID SELLER AGAINST THE BUYER PERSONALLY
In addition to his rights against the goods as discussed –
1. Suit for price (Sec. 55).
Where property in goods has passed to the buyer: or
where the sale price is payable 'on a day certain, although the property in goods has not
passed;
and the buyer wrongfully neglects or refuses to pay the price according to the terms of the
contract, the seller is entitled to sue the buyer for price irrespective of the delivery of
goods.

2. Suit for damages for non-acceptance (Sec. 56).
• Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may
sue him for damages for non-acceptance.
• The seller's remedy in this case is a suit for damages rather than an action for the full price of
the goods.
• Where the goods have a ready market the principle applicable is that the seller may recover
from the buyer damages equal to the difference between the contract price and the market price
on the date of the breach of the contract.
Thus, if the difference between the contract price and market price is nil, the seller can get
only nominal damages.
• But where the goods do not have any ready market, the measure of damages will depend upon
the facts of each case.

3. Suit for special damages and interest (Sec. 61).
• Seller can sue the buyer for 'special damages' also for such loss "which the
parties knew, when they made the contract, to be likely to result from the
breach of it."
• The Section is only declaratory of the principle regarding 'special damages'
laid down in Section 73 of the Indian Contract Act.
• The Section also recognises unpaid seller's right to get interest at a
reasonable rate on the total unpaid price of the goods sold, from the time it
was due until it is actually paid.

Case: The Ford Automobiles India Ltd. V. The Delhi Motor and Engineering Co.

THE CONSUMER PROTECTION ACT, 2019 (CPA)
• OBJECTIVE: To provide better protection of consumers’ interest.
• THROUGH: Speedy and in-expensive redressal of consumer grievances.
• BY: A 3-tier adjudicative machinery, set up at the District, State, and National levels.
• The Act was passed in December, 1986, and came into force in April, 1987.
• The Act was amended in 1991, 1993, and 2002 (w.e.f. 15.03.2003)
• Latest Amendment in 2019 i.e. 9 August 2019-aims to provide the timely and effective
administration and settlement of consumer disputes
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ORGANISATIONAL SET-UP
ADVISORY BODIES
(Consumer Protection Councils)
ADJUDICATIVE BODIES
(Consumer Disputes Redressal Agencies)
Central
Consumer
Protection
Council
State
Consumer
Protection
Councils
District
Consumer
Protection
Councils
National
Commission
(NCDRC)
State
Commission
District
Forum
48

CONSUMER PROTECTION COUNCILS
To deliberate and advise the Government for promoting and protecting the basic rights of consumers.
CONSUMER RIGHTS
Right to protection against marketing of hazardous
goods and services.
 Right to information about the quality, quantity,
potency, purity, standard, and price of goods or
services, so as to protect him against unfair trade
practices.
Availability of a variety of goods and services at
competitive prices.
Hearing at appropriate grievance-redressal forum.
Consumer education.
49

Consumers’ Duties and Responsibilities
1. Duty to buy only safe and standard products.
2. Duty to gather product information.
3. Duty to obtain proof of purchase.
4. Duty to organise, speak, and participate.
5. Duty to lodge a complaint.
6. Duty not to lodge a frivolous or vexatious complaint.
7. Duty to take up class-action cases.
50

CONSUMER DISPUTES REDRESSAL AGENCIES
 COMPOSITION
1. District Consumer Disputes Redressal Forum (‘District Forum’)
President + 2 Members
2. State Consumer Disputes Redressal Commission (‘State Commission’)
President + 4 or more Members
3. National Consumer Disputes Redressal Commission (‘National
Commission’) President + 4 or more Members
51

PROCESS OF GRIEVANCE REDRESSAL
Filing of complaint
before the
appropriate
redressal forum
Hearing by
the
forum
Passing of
appropriate
order providing
suitable
relief
Compliance of
the
order
Appeal against the order
by the aggrieved party
52

Who Can File a Complaint?
Sec 2(b) “Complainant” means-
 A Consumer
 Any Registered Consumers’Association
 The Central Government or any State Government
 One or more consumers on behalf of numerous consumers (‘Class Action’)
 Legal heir or representative of the deceased consumer
CONSUMER
a) One who buys (or uses) any goods for personal consumption and not for re-sale or
commercial purpose.
b) One who hires or avails of any service, irrespective of whether payment is actually made or
deferred.
NOTE: Buying or using the goods or availing services exclusively for earning livelihood, by
means of self-employment, is not a ‘commercial purpose’. [Sec. 2 (1) (d)]
53

ONLY FOR ‘CONSUMERS’
• Section 2(d): Consumer means any person who:
i. buys any goods for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any
user of such goods other than the person who buys such goods for consideration paid
or promised or partly paid or partly promised, or under any system of deferred
payment when such use is made with the approval of such person, but does not
include a person who obtains such goods for resale or for any commercial purpose;
or
ii. hires or avails of any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred
payment and includes any beneficiary of such services other than the person who
'hires or avails of the services for consideration paid or promised, or partly paid and
partly promised, or under any system of deferred payment, when such services are
availed of with the approval of the first mentioned person; but does not include a
person who avails of such services for any commercial purpose; or

After Amendment 2019
“consumer” means any person who—
• (i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and
includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under
any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale
or for any commercial purpose; or
• (ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred
payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly
paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but
does not include a person who avails of such service for any commercial purpose.
Explanation.—For the purposes of this clause,—
• (a) the expression “commercial purpose” does not include use by a person of goods bought
and used by him exclusively for the purpose of earning his livelihood, by means of self-
employment;
• (b) the expressions “buys any goods” and “hires or avails any services” includes offline
or online transactions through electronic means or by teleshopping or direct selling or
multi-level marketing;
55

CASES - Consumer
1. Abhijit bought a television set for using it at home from an electronics store. The television
was defective. Is Abhijit a consumer?
Abhijit is a consumer under the first part of clause (i), which states that a buyer is a person who
‘buys any good for a consideration
2. Sumit, on a holiday with his family, hired a taxi service. The taxi was in poor condition, and
the driver hadn’t had adequate rest and drove rashly. The taxi broke down on two occasions and
eventually even bust in the middle of the hills. As a result, Sumit and his family could not reach
the airport in time to catch their flight. Is Sumit a consumer?
Sumit is a consumer under Sec 2(d)(ii) as he has availed a service for a consideration.

3. Baman bought an electric iron for using it at home for his family. In the first use itself, while
his wife Simi was using it, there was a spark from the iron, injuring Simi. Is Baman a
consumer? Is Simi a consumer?
4. Anand runs a laundry shop. He bought a washing machine from an electronics shop for
using in his shop. The machine was installed in his shop. The machine was defective from the
time it was delivered. Is Anand a consumer?
Anand is not a consumer as he is using the washing machine for a commercial purpose.
Baman is a consumer under the first part of clause (i).
However, Simi is also a consumer as the definition of ‘consumer’ includes ‘any user of good
other than the person who buys such goods for consideration … when such use is made with
the approval of the person’.

5. Arvind bought cycles for the purpose of hiring it out to tourists visiting the area. Santosh
was a tourist who had hired a cycle. The cycles were defective. The handle of the cycle
broke injuring Santosh. Are Arvind and Santosh consumers?
Arvind is not a consumer as he has bought the cycles for commercial use.
Santosh is also not a consumer of cycles under Sec 2(d)(i) because if Arvind is not a
consumer, the question of others being consumers through him does not arise. However,
under Sec 2(d)(ii), Santosh is a consumer as he has availed the service of hiring from
Arvind.
6. Abhijit bought a pressure cooker for using it at home. He had paid only 30% of the price
will buying it. The remaining 70% was to be paid a week later. The pressure cooker was
defective. It burst in the second use. Is Abhijit a consumer?
Abhijit is a consumer as the price has been ‘part paid and part promised’.

7. Sujit bought a pressure cooker for using it at home. The money for it was to be paid next
week. The pressure cooker was defective. It burst in the second use. Is Sujit a consumer?
Sujit is a consumer as the price is ‘promised’ to be paid.
8. Suman bought a cell phone for personal use. The payment for the phone was to start next
month. The payment was to be done in six monthly instalments. The phone was defective. Is
Suman a consumer?
Suman is a consumer as the price is to be paid under a ‘system of deferred payment’
9. A manufacturer of pens was distributing its pens free to the visitors of an exhibition. The pens
were defective and leaking. The pens spoilt the clothes of several persons. Sweta is one of the
persons who has spoilt her clothes. Is she a consumer?
Sweta is not a consumer as there is no consideration for the pen

GROUNDS OF COMPLAINTS
• Defect in goods
• Deficiency in service
• Excess price charged
• Unfair trade practice
• Restrictive trade practice
• Offering of hazardous or unsafe goods
• Offering of hazardous services
60

Unfair Trade Practice
Adopting any unfair method or deceptive practice for promoting sale of goods
or provision of service, including –
1. Misleading advertisements or false claims.
2. Advertisements falsely offering goods or services at bargain price.
3. Offering pseudo-gifts and conducting sales contests.
4. Supply of unsafe or hazardous goods.
5. Hoarding or destruction of goods or refusal to sale.
6. Withholding of information from participants of sale promotion scheme.
7. Manufacturing or offering of spurious goods/deceptive practice in
providing service.
[Section 2 (1) (r)]
61

Restrictive Trade Practice
A trade practice, which tends to –
• Bring about manipulation of prices, or conditions of delivery, or
• Affect flow of supplies in the market in a manner as to impose on consumers unjustified
costs or restrictions.
• It includes:
• Delay in supply of goods or services, leading to price rise etc.
62

Where to File a Complaint?
1. District Forum, having territorial jurisdiction, if the claim is upto Rs. 20
lakhs.(Amendment – 1 Crore)
2. State Commission, having territorial jurisdiction, if the claim exceeds Rs. 20
lakhs, but not Rs. 1 crore. (Amendment : 1 -10 Crore)
3. National Commission, if the claim exceeds Rs. 1 crore. (Amendment : above 10
Crore)
• ‘Claim’ includes the value of goods/services and compensation.
63

Procedure for Filing a Complaint
1. Simple Procedure
- Written complaint
- To be filed by complainant or his authorised agent
- Either in person or by registered post
- Full facts and cause of complaint
- Supporting documents (cash memo, warranty card, etc.)
- Relief sought
- No advocate necessary
2. Prescribed fee to be paid
3. Complaint can be admitted or rejected by DF, ordinarily within 21 days
4. Hearing to be given before rejection
64

PROCEDURE OF THE HEARING (After Admission)
• Notice to the opposite party, within 21 days of admission of complaint.
• His version to be given within 30 days
• Reference to appropriate laboratory, in case of defective goods; report to be submitted
within 45 days
• Copy of test report to the complainant
• Reasonable opportunity of hearing to both parties
• ex parte order in the absence of either party
• Proceedings not to be questioned by any court on the ground of principles of natural
justice
• Expeditious hearing; disposal within 3 months (5 months in case of laboratory test)
• Ordinarily, no adjournment
• Reasons for adjournment/delay in disposal to be recorded and cost to be awarded
65

POWERS OF DISTRICT FORUM
• Powers same as vested in a civil court under CPC, 1908 S. 13 (4)
- Summoning any defendant or witness
- Examining the witness on oath
- Discovery and production of any document as evidence
- Requisitioning test report from laboratory or other source
- Appointing any commission for examining witness
• Proceedings deemed as judicial proceedings under IPC, 1960 S. 13 (5)
• Requisitioning production of books, accounts, documents, and commodities
• Requisitioning necessary information
• Power of entry, search, and seizure, through any officer
• Enforcement of orders — attachment of property; recovery as arrears of land revenue
• Power of judicial magistrate of 1st class, under CrPc, for trial of offences
• Power to pass interim order
STATE AND NATIONAL COMMISSIONS
• Similar procedure and powers
66
The Code of Criminal Procedure commonly
called Criminal Procedure Code (CrPC)

Relief Available/Nature of Order to be Passed
• Removal of defect in goods or deficiency in service
• Replacement of defective goods with new ones
• Refund of price/service charges
• Compensation for loss or injury suffered
• Also, punitive damages*
• Cease-and-desist order against RTP/UTP
• Cease-and-desist order against supply of spurious goods/hazardous services*
• Withdrawal of hazardous goods from sale
• Compensation for unidentifiable consumers*
• Corrective Advertisement*
• Costs (to either party)
[Section 14 (1)]
67

APPEAL
• By whom? – Any aggrieved person
• To which authority? – State Commission, National
Commission, and Supreme Court
• Time limit: 30 days from the date of order; delay to be
condoned for sufficient cause
• If the appellant is required by DF to pay any amount, he
has to deposit 50% of that amount or Rs. 25,000,
whichever is less
• In the case of appeal before NC, or supreme Court:
50% of the amount or Rs. 35,000
50% of the amount or Rs. 50,000, whichever is less
68

TIME LIMIT FOR DECIDING COMPLAINT/APPEAL
COMPLAINT
- 3 months, where the case does not require product testing/analysis, from the date of
receipt of notice by OP.
- 5 months, if it requires test/analysis
APPEAL
State Commission and National Commission: 90 days, from the date of first hearing
Supreme Court: not specified
LIMITATION PERIOD FOR FILING COMPLAINT
2 years from the date of cause of action.
The delay can be condoned by DF, SC or NC, for sufficient cause – reasons to be recorded
69

FRIVOLOUS OR VEXATIOUS COMPALINT
- Dismissal, by DF, State Commission or NC
- Reasons to be recorded
- Cost upto Rs. 10,000/-, to be paid to the opposite party
Penalties
Non-compliance of any order a punishable offence
- Imprisonment (1 month to 3 years)
- Fine (Rs. 2000 to Rs. 10,000)
- Or both
- DF/SC/NC have powers of Judicial Magistrate, 1st Class for trial of offences
Offences to be tried summarily.
Appeal against offence: within 30 days
No appeal before any court
70

71
Refer Word Doc : Amendments in CPA

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