LAB_UNIT-3_OTHER_ACT.ppt

The Sales of Goods Act, 1930
Prepared by Dr. Seema H. Kadam,Associate
Prof.,TMES-MBA,GTU

Introduction
 The law as sale of goods was originally embodied in
section 76 to 123 of the Indian contract act, 1872.
 Due to inadequacy of this sections to meet the complexities
of growing mercantile transactions the Sale of Goods Act,
1930 is developed.
 Sale of Goods Act,1930 is re-production of the English
Sale of Goods Act, 1893
 General principal of contract of law are applicable to
contracts of sales of goods.
 Sale of Goods has two elements, one is the sale and the
other is delivery of goods.
 Contract of sale of goods and contract of work and labour.
Prof.,TMES-MBA,GTU

Goods [Sec. 2(7)
 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. For
e.g. timber
 Immovable's are covered in transfer of property act,
1882.
 Actionable claims mean 'chose in action 'or ‘thing in
action’.
 Goods may be (i) Existing, or (ii) future.
Prof.,TMES-MBA,GTU

Contd..
 Existing goods are further classified into-
a. Specific goods- identified and agreed upon at the time a
contract of sale is made.
b. Generic or un-ascertained goods-indicated by
description and not separately identified. For example,
sale of one kg. of oil from 100 kgs. of oil with the
merchant.
 Future goods means goods to be manufactured or
purchased or acquired by the seller after the making of
the contract of sale.E.g. A agrees to sell B a sofa-cum bed
which he would manufure.It is a case of future goods.
Prof.,TMES-MBA,GTU

Contd..
 Goodwill, copyright , trade mark, patent etc. are goods
 Gas and electricity though not governed by sale of
goods act, has been held to be goods by supreme court
in avtarsingh v. state of Punjab AIR 1965 SC 666
 Money is only consideration in sale of goods act.
Money means current money which is not goods.
 Goods sold for goods is ‘exchange’.
 Price means ‘money consideration’
 Sale of old coins or notes for money is sale of goods.
Prof.,TMES-MBA,GTU

Documents of title to goods[sec. 2(4)
 A document of title to goods is a proof of possession or
control over the goods.
 Bill of lading , dock warrant, warehouse keeper’s
certificate, wharfinger’s certificate , railway receipt,
delivery warrent are some document of title to goods.
 A delivery order is a document of title to goods and its
possessor has the right not only to receive goods but also to
transfer it to another by endorsement or delivery.
 A bill of lading is a writing signed on behalf of the owner
of the ship in which goods are embarked acknowledging
the receipt of goods, and undertaking to deliver them at the
end of the voyage subject to such conditions mentioned in
bill of lading.
Prof.,TMES-MBA,GTU

Property [sec. 2 (11)
 Property means general property in goods and
not merely a special property.propertty under the
act means ‘ownership’.
 General property means ownership of the goods.
 Special property means special interest in the
goods.
 For e.g. A who owns the goods pledges them to B
. A has a general property in goods while B has
special interest in property.
Prof.,TMES-MBA,GTU

Contract of sale-Sale and agreement
to sell (sec.4)
 A contract to sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in goods to the
buyer for a price.
 It can be absolute or conditional(condition precedent or
condition subsequent).
 Contract of sale includes sale and agreement to sell.
 Contract of sale between one part-owner and another.
 Both above terms has given single generic name contract of
sale but in sale there is transfer of property in goods from
seller to buyer, there is none in agreement to sell.
 Re-sale of goods is also sale of goods.re-sale may be to a
third person or to the original person
Prof.,TMES-MBA,GTU

Essential of valid sale
 Property-there must be transfer of general property in
the goods.
 Movable goods- transfer of goods must be that of
movable goods.
 Price-price means the money consideration for the sale
of goods.[sec.2(10)]
 Parties-there must be two parties.E.g buyer and seller.
 Form –no particular form is necessary to constitute a
contract of sale it can be expressed or implied.
Prof.,TMES-MBA,GTU

sale and agreement to sell distinguished
Sale Agreement to sell
 It is an ‘executed contract’.
 It creates ‘jus –in-rem’.
 The property in the goods is
passes to buyer with risk.
 The seller is entitle to sue for
the price of the goods and also
has a right of a lien, stoppage in
transit and re-sale.
 Risk of loss is to buyer.
 insolvency of buyer- seller have
to deliver goods and can claim
ratable dividend for the price.
 insolvency of seller- the buyer is
entitled to receive goods
 It is an ‘executory contract’.
 It creates ‘jus-in-personam’.
 Risk and property does not
pass to the buyer
immediately.
 The seller has the right only
to sue for damages for non-
performance of the contract.
 Risk of loss is to seller.
 Incase of buyer insolvency
seller may refuse to deliver
goods.
 In case of seller’s insolvency
the buyer can claim ratable
dividend.
Prof.,TMES-MBA,GTU

Formalities of contract
 Contract of sale how made?(sec. 5)- it can be expressed or
implied. It is made in any of the following three ways:
1. Offer and acceptance.
2. Delivery – the contract may provide for immediate
delivery of the goods or delivery by installments or
delivery at a future date.
3. Ascertainment of price(sec.9)- the contract may provide
for immediate payment of the price or payment by
installments or payment may be postponed. Price must be
money consideration for sale of goods.
 Price to be fixed when agreement is to sell at
valuation?(sec.10)- where price fixed by the valuation of
third party and if they fail, agreement become void.
Prof.,TMES-MBA,GTU

Contd..
4. Goods- may be existing or future goods.
5. Contract-must possess all essential of ordinary
contract.
6. Amount of increased or decreased taxes to be
added or deducted.
Prof.,TMES-MBA,GTU

Hire-Purchase agreement
 The possession of goods passes to the buyer who
promises to pay the price of the goods in certain
instalments.unless full price is paid, the ownership of
the goods remains with the seller.
 It is both a contract of bailment and an agreement to
sell.
 In a hire- purchase agreement, the hirer becomes a the
possessor or bailee of the goods immediately and at
the same time has a right to terminate the agreement at
his pleasure, E.g he has an option to return goods.
 Hire –purchase is regulated by hire- purchase act, 1972
Prof.,TMES-MBA,GTU

Subject matter of contract(sec.6)
 Section 6 provides that the goods which form the
subject of a contract of sale may be either:
I. Existing goods owned or possessed by the seller- if a
condition to be complied with before the seller
comes into the possession of goods, then the contract
of sale of goods is performed only when the
condition happens.
II. Future goods.-the contract operates as agreement to
sell. It creates only a personal obligation.
Prof.,TMES-MBA,GTU

Goods perishing-effect of
destruction of goods(sec. 7 & 8)
 Goods perishing before making of contract(sec.7)-
where there is a contract for the sale of specific goods,
the contact is void if the goods without the knowledge
of the seller have , at the time the contract is made,
perished or damaged w.r.t description given.
 Goods perishing before sale but after agreement to
sell.(sec.8)- where there is an agreement to sell specific
goods, and subsequently the goods without ant fault on
the part of the seller or buyer perish or become
damaged w.r.t description in agreement, the agreement
there by avoided.
Prof.,TMES-MBA,GTU

Conditions & warranties
 What is a condition? [sec.12(2)]- a condition is a stipulation
essential to the main purpose of the contract, breach of
which gives rise to a right to treat the contract a as
repudiated or broken.
 What is Warranty?[sec.12(3)]- a warranty is a stipulation
collateral to the main purpose of the contract the breach of
which gives rise to a claim for damages but not a right to
reject the goods and treat the contract as repudiated or
broken.
 Stipulation as to time, except as regards time of payment
are usually not depends on the terms of the contract.E.g A
places an order on B for supply of machine parts strickely
according to the sample , delivery to be made within three
months.
Prof.,TMES-MBA,GTU

Contd..
 Circumstances under which a breach of condition
would be held as a breach of warranty only(sec.
13)
 Remedies available to buyer incase of breach of
condition:
I. Repudiate the contract and reject the goods
II. Elect to treat the breach of condition as breach
of warranty and claim damages.
III. Waive the condition
 Incases of breach of warranty by seller,
remedies to buyer:
I. To file a suit in diminution or extinction of the
prices.
Prof.,TMES-MBA,GTU

Condition and warranty
distinguished.
condition warranty
 It is essential term
which must be fulfilled
for the performance of
contract.
 Breach of condition
gives right to
repudiate contract
and right to claim
damages.
 Breach of condition
may be treated as
breach of warranty.
 It is a collateral or
incidental stipulation
to the main purpose
of contract.
 Breach of warranty
gives right to claim
damages.
 A breach of warranty
cannot be treated as
breach of condition.
Prof.,TMES-MBA,GTU

Implied warranties and conditions
1. Warranty as to title(sec.14)
2. Sale by description (sec. 15)
3. Sale by sample (sec.17)
4. Sale by sample as well as by description (sec. 15)
5. Warranty as to quality or fitness.(sec. 16)
6. Warranty as to quiet possession free from encumbrances-
the buyer shall have and enjoy quiet possession of goods
[sec. 14 (b)].the buyer shall have right to sell the
goods.[sec.14(a)]. The goods shall be free from any
charge or encumbrances in favor of any third party not
declared or known to the buyer before or at the time
when the contract made.[sec.14 (c)]
Prof.,TMES-MBA,GTU

CAVEAT EMPTOR (buyer
beware)
 Caveat emptor means ‘let the buyer beware'. as a
general rule, the buyer purchases goods after satisfying
himself as to quality and fitness and, the buyer
purchases the goods at his own risk.
 Exceptions to doctrine of caveat emptor-
I. Custom or usage of trade.
II. Fraud by seller
III. For specific purpose goods where buyer relies on
seller for skill and judgment.
IV. Mercantile quality i.e. commercially saleable
quality.
Prof.,TMES-MBA,GTU

TRANSFER OF TITLE BY NON-
OWNERS:
 The general rule is that only the owner of goods can
transfer a good title. This rule is expressed by the maxim
"Nemo dat quod non habet" which means "that no one can
give what he himself has not".
 If the seller, therefore, has no title, or a defective title, the
buyer's title will be equally wanting or defective as the case
may be, though he may be a purchaser - bonafide and for
value.
 e.g. A finds a ring of B and sells it to a third person who
purchases it for value and in good faith. The true owner,
i.e., B can recover from that person, for A having no title
could pass none the better.
Prof.,TMES-MBA,GTU

Exceptions to the Rule
TRANSFER OF TITLE BY NON-OWNERS
 Sale by a Mercantile Agent: Where a mercantile
agent is, with the consent of the owner, in possession
of the goods or documents of title of the goods, any
sale made by him, when acting in the ordinary course
of business of mercantile agent, gives a good title to
the buyer provided the buyer acts in good faith and has
no notice that the agent had no authority to sell.
 Thus, a buyer who buys from a factor, broker or
auctioneer gets a goods title to the goods even though
the agent has exceeded his authority.
Prof.,TMES-MBA,GTU

Contd..
 Sale by a Co-owner : If one of the joint owners of the
goods has the sole possession of them by permission of the
co-owners the property in goods passes to any person who
buys them in good faith and no notice, at the time of the
contract, that the seller had no authority to sell.
 A, one of the joint owners of a diamond, holds it in his safe
custody. He sells it to B who buys in good faith. B gets
good title to the diamond.
Prof.,TMES-MBA,GTU

Contd..
 Sale by a person in possession under a voidable
Contract : Where a person in possession of the goods
under a voidable contract (through coercion or mis-
representation)sells them, before the contract is avoided, to
a buyer who buys in good faith and without notice of the
seller’s defective title to the goods, the buyer gets a good
title to the goods (The rule does not apply to a contract
which is originally void).
 Sale by an unpaid seller - a seller who has exercised his
right of lien or stoppage in transit can, resell the goods and
convey a valid title to another buyer, though no notice of
re-sale has been given to the original buyer.
Prof.,TMES-MBA,GTU

Contd..
 Sale by seller in possession after sale: Where a seller,
after having sold the goods, continues to be in possession
of the goods, or a document of title to the goods and again
sells them or pledges the same either himself or through an
agent to a person who acts in good faith and without notice
of the previous sale such a person gets a good title to the
goods .
 A buys a picture from shop and leaves it with the
shopkeeper. The shopkeeper sells it to B who has no
knowledge of the sale to A. B gets a good title to the
picture. A cannot get the picture from B. His only remedy is
to sue the shopkeeper for damages.
Prof.,TMES-MBA,GTU

Unpaid Seller
 “One who has not been paid or tendered the whole of the price or
one who receives a bill of exchange or other negotiable instrument as
conditional payment and the condition on which it was received has
not been fulfilled by reason of dishonor of the instrument or
otherwise.”
 Who is an unpaid seller-
a) An unpaid seller of goods is a person who has not been paid the
whole of the price or to whom the whole of the price has not been
tendered. The term "seller" includes an agent of the seller.
b) The seller of goods is deemed to be an "unpaid seller" if:
 The whole of the price, has not been paid or tendered;
 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.
Prof.,TMES-MBA,GTU

Rights against the goods
 Right of Lien – The right of lien means the right to retain
the possession of goods until the full price is paid or
tendered.
When can lien be exercised :
(a) Where the goods have been sold without any stipulation as
to credit.
(b) Where the goods have been sold on credit, but the term of
credit has expired,
(c) Where the buyer becomes insolvent.
Prof.,TMES-MBA,GTU

Contd..
 Termination of lien – The right gets terminated
under following circumstances:
(a) When the goods are delivered to a carrier or
bailee but without reserving the right of disposal.
(b) When the possession is acquired by the buyer or
his agent lawfully.
(c) When the right of lien is waived by the seller.
(d) When the buyer has disposed of the goods by
sale of in any manner with the consent of the seller.
Prof.,TMES-MBA,GTU

Contd..
 Right of stoppage of goods in transit – The right of
stoppage in transit means the right to stopping the goods
while they are in transit, to regain possession and to retain
them until the price is paid. The essential feature of
stoppage in transit is that the goods should be in the
possession of someone intervening between the seller and
the buyer.
 The unpaid seller can exercise the right of stoppage in
transit if:
(a)The seller has parted with the possession of the goods.
(b)The buyer has not taken possession of goods.
(c)Buyer has become insolvent.
Prof.,TMES-MBA,GTU

Contd..
 The unpaid seller may exercise the right to stoppage in transit in
any one of the following 2 ways :
(a)by taking actual possession of the goods, or
(b)By giving notice of his claim to the carrier or other bailee in
whose possession the goods are.
 The right to stoppage in transit is lost under the following
circumstances:
(a)If the buyer or his agent obtains possession.
(b)If after arrival of the goods at the appointed destination, the
carrier or the bailee acknowledges to the buyer that he holds the
goods on his (buyer’s) behalf.
(c)If the carrier or bailee wrongfully refuses to deliver the goods to
the buyer or his agent.
Prof.,TMES-MBA,GTU

Contd..
(d)Where the part delivery of the goods has been made to the
buyer or his agent, the remainder of goods may be stopped
in transit. But if such part delivery has been given in such
circumstances as to show an agreement to give up
possession of the whole of the goods the transit comes to an
end at the time of part delivery.
 Right of resale – Where the unpaid seller has exercised his
right of lien or resumes possession of the goods by
exercising his right of stoppage in transit upon insolvency
of the buyer, he can re-sell the goods under the following
circumstance –
 where the goods are of perishable nature.
Prof.,TMES-MBA,GTU

Contd..
 Where the seller has given notice of his intention to re-
sell the goods and yet the price remains unpaid.
 Where the seller expressly reserves a right of resale if
the buyer commits a default in making the payment.
Prof.,TMES-MBA,GTU

Rights of an unpaid seller against
the buyer personally
 Suit for Price – Generally the seller can sue for the price of
the goods only when the property in the goods has passed
to the buyer and the price is not paid as per the terms of the
contract. In cases where the property in the goods has not
passed to the buyer, suit for price generally, cannot be
maintained, unless under the contract, price is payable on a
certain date irrespective of the delivery of passing of the
ownership of the goods.
 Suit for damages – The unpaid seller can bring an action
for damages where the buyer wrongfully refuses to accept
the goods or repudiates the contract.
Prof.,TMES-MBA,GTU

Contd..
 Suit for interest – In case of breach of contract on the part
of the buyer, the unpaid seller can claim for interest from
the date of tender of the goods or from the date, the price
becomes payable along with a suit for price.
Prof.,TMES-MBA,GTU

SALE BY AUCTION:
 Auction sale is special mode of sale. The sale is made in open
after making public announcement. Buyers assemble and make
offers on the spot. Person offering to pay highest price gets the
goods. Rules during Auction:
 When the goods are put up for sale in lots, each lot is deemed,
prima facie, to be the subject matter of a separate contract of
sale;
 At an auction, the sale is complete when the auctioneer
announces its completion by the fall of the hammer or in other
customary manner; until such completion any bidder may
withdraw his bid.
 A right to bid may be reserved expressly by or on behalf of the
seller and where such right is expressly so reserved, but not
otherwise, the seller or any person on his behalf may bid at the
auction;
Prof.,TMES-MBA,GTU

Contd..
 Where the sale is not notified to be subject to a right to bid
on behalf of the seller, it shall not be lawful for the seller to
bid for himself or to employ any person to bid at such sale,
or for the auctioneer knowingly to take any bid from the
seller or any such person, Any sale contravening this rule
shall be treated as fraudulent;
 The sale may be notified to be subject to a reserved or
upset price;
 If the seller makes use of pretended bidding to raise the
price, sale is voidable at the option of the buyer.
Prof.,TMES-MBA,GTU

Contd..
 Implied warranties in Auction
 Auctioneer warrants his authority to sell.
 He warrants that he knows of no defects in principal’s
title.
 He warrants to give quiet and peaceful possession of
goods against payment of the price.
Prof.,TMES-MBA,GTU

The Negotiable Instruments Act,1881
Prof.,TMES-MBA,GTU

Introduction
 Negotiable : -Negotiable Means Transferable.
 Instrument : -Instruments means a Document.
 It does not mean that an instrument in order to be valid
must be negotiable. Instrument may be marked ‘not
negotiable’ yet they are valid instrument and governed by
the provisions of the Act.
 It regulates only three types of instruments, viz..,
promissory note, bill of exchange and cheques.Bill of
exchange drawn in vernacular language (called hundis) are
covered by the Act.
 In, India the Act merely regulates the issue and negotiation
of bills, promissory notes and cheques, but does not
provide for the transmission of rights in such instruments
by operation of law or by transfer inter vivos.
Prof.,TMES-MBA,GTU

What is Negotiable Instrument?
 Section13 of the Negotiable Instrument Act1881, defines a
negotiable instrument as “A negotiable instrument means a
promissory note, bill of exchange or cheque payable either to
order or to bearer(Sec.13(1))
 It Deals with
-Promissory Note
-Bills of Exchange
-Cheques
 A negotiable instrument is one which entitles the holder to the
receipt of money.
 It gives him the right to transfer the same by mere delivery or
endorsement there on.
 The negotiable instrument continue till its maturity.
Prof.,TMES-MBA,GTU

Characteristics of a Negotiable
Instrument
 Property
 Defects in title
 Remedy
 Rights
 Payable to order
 Payable to bearer
 Payment
 Consideration
 Presumptions
Prof.,TMES-MBA,GTU

Contd..
Property:
 The Possessor of the instrument is the holder and owner
thereof.
 The Negotiable instrument does not merely give possession
of the instrument ,but also right to property.
 Whosoever gets possession of the instrument becomes its
owner and is entitled to the sum mentioned therein as the
holder.
Prof.,TMES-MBA,GTU

Contd..
 Defects in Title : The holder in good faith and for value
called the holder in due course gets the instrument free
from all defects of any previous holder.
 Remedy : The holder can sue upon the negotiable
instrument in his own name. All prior parties are liable to
him. A holder in due course can recover the full amount of
the instrument.
Prof.,TMES-MBA,GTU

Contd..
 Rights: the holder in due course is not affected by certain
defenses which might be available against previous holder,
for e.g.Fraud,to which he is not a party etc.
 Payable to order :a promissory note, bill of exchange or
cheque is payable to order which is expressed to be so
payable, or which is expressed to be payable to a particular
person.
 Payable to Bearer :A promissory note, bill of exchange or
cheque is payable to bearer which is expressed to be so
payable or
 It specifies that the person in possession of the bill or note
is bearer of the instrument which is to expressed payable to
bearer.
Prof.,TMES-MBA,GTU

Contd..
 Payment : A negotiable instrument may be made
payable to two or more payee jointly or it may be
made payable in the alternative to one or two or some
of several payees.
 Consideration :
Consideration in the case of a negotiable instrument is
presumed.
 Presumptions
Prof.,TMES-MBA,GTU

Characteristics of a Promissory
Notes
 Writing
 Undertaking to Pay
 Unconditional
 Signed
 Certain Person
 Specific Sum
 Promise to pay must be money only
 Stamping
Prof.,TMES-MBA,GTU

Promissory Notes
 “I acknowledge to pay on demand Rs.1000 for value
received”
 “I Promise to B Rs.500 and to deliver him my black horse”
 “I Promise to pay B Rs.1000 on demand”
 “I owe You Rs.100”
 “Received from X Rs.1000,which I promise to pay on
demand with interest”
 “I acknowledge myself to be indebted to B in Rs.1000 to be
paid on demand for Value Received”
 “I promise to pay B Rs.500 in Government Bonds”
 “I promise to pay B Rs.100 in cash & Rs.100 worth of
cosmetics”
Prof.,TMES-MBA,GTU

Contd..
 “I acknowledge to pay on demand Rs.1000 for value
received". True
 “I Promise to B Rs.500 and to deliver him my black horse".
False
 “I Promise to pay B Rs.1000 on demand” True
 “I owe You Rs.100” True
 “Received from X Rs.1000,which I promise to pay on
demand with interest” True
 “I acknowledge myself to be indebted to B in Rs.1000 to be
paid on demand for Value Received” True
 “I promise to pay B Rs.500 in Government Bonds” False
 “I promise to pay B Rs.100 in cash & Rs.100 worth of
cosmetics” False
Prof.,TMES-MBA,GTU

Bill of Exchange
 According to section 5 of Negotiable Instrument
Act:
“A Bill Of Exchange is an instrument in writing
containing an unconditional order, signed by the
maker, directing a certain person to pay a sum of
money only to or to the order of a certain person
or to the bearer of the instrument”
Prof.,TMES-MBA,GTU

Specimens of bill of exchange
Mumbai
Date: 21 October, 2011
Three months after date pay to ABC, or order the sum of five
thousand rupees for value received.
To,
PQR, Mumbai Signed
XYZ
STAMP
Prof.,TMES-MBA,GTU

Characteristics of Bills of
Exchange
1. A Bill Of Exchange is an instrument in writing
2. It must be signed by the maker
3. It contains an unconditional order
4. The order must be to pay money and money only
5. The sum payable must be specific
6. The amount must be paid within a stipulated time
7. The name of the drawee must be clearly mentioned
8. It must be dated and stamped
Prof.,TMES-MBA,GTU

Parties to a Bill Of Exchange
 Drawer: The person who draws or writes the Bill Of
Exchange is called the Drawer. The Drawer must be
the seller or creditor to whom the money is owing.
 Drawee: The Drawee is the person on whom the bill is
drawn. He is the purchaser or debtor who is ordered by
the Drawer to pay the amount.
 Payee : The person who has the right to receive the
amount of the bill is called the Payee, the Payee may
be a third person or the Drawer himself.
Prof.,TMES-MBA,GTU

Distinction Between Promissory Note
& Bill of Exchange
Prof.,TMES-MBA,GTU

Cheque
 Section6 of the Negotiable Instrument Act, defines a
cheque as a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.
 Truncated Cheque: means a cheque which is truncated
during the course of a clearing cycle, either by the clearing
house or by the bank whether paying or receiving payment,
immediately on generation of an electronic image for
transmission, substituting the further physical movement of
the cheque in writing.
Prof.,TMES-MBA,GTU

Crossing of Cheques
 General Crossing
 Special Crossing
 Restrictive Crossing
 General Crossing
-The words “and company” or any abbreviation thereof,
between two parallel transverse lines, either with or
with out the words “not negotiable” or
-Two parallel transverse lines simply, either with or
without the words, "not negotiable”(Sec.123)
Prof.,TMES-MBA,GTU

Contd..
 Special Crossing :
-Where a cheques bears across its face an addition of the
name of a banker, either with or without the words “not
negotiable", the cheque is deemed to be crossed specially
(Sec.124). Transverse lines are not necessary in case of a
special crossing.
-The payment of a specially crossed cheque can be obtained
through the particular banker whose name appears across
the face of the cheque or between the transverse lines if
any.
 Restrictive Crossing :
-In this type of crossing the words A/c Payee are added to the
general or special crossing.
Prof.,TMES-MBA,GTU

Prof.,TMES-MBA,GTU

Contd..
 A Cheque is q species of a bill of exchange, but it
has the following two additional qualification
-It is always drawn on a specified banker &
-It is always payable on demand.
 All Cheque are Bills of Exchange but all bills of
exchange are not cheques.
 When banker is justified in dishonoring the
cheque?
Prof.,TMES-MBA,GTU

Types of Instrument
 Inland & Foreign Instruments: A promissory note, bill of
exchange or cheque drawn or made in India and made
payable in, or drawn upon any person resident of India
shall be deemed to be an inland instrument(Sec. 11). Any
such instrument not so drawn, made or made payable shall
be deemed to be a foreign instrument.(sec.12).
 The following instrument are foreign instrument-
1. Instruments drawn and made payable outside India.
2. Instruments drawn in India, upon persons resident outside
India and payable outside India.
 Foreign bills of exchange must be protested for dishonour
when such protest is required by the law of the place
where they are drawn.(sec. 104)
Prof.,TMES-MBA,GTU

Contd..
 Accommodation Bills: An accommodation bill is one which has
been signed by a person, as a drawer, against acceptor or
endorser without any consideration or for a consideration which
fails with a view to oblige some other person to provide him with
funds.
 Fictitious Bill: A bill is fictitious when both the drawer and
payee are fictitious person. Where the drawer is also the payee
on the bill, without any intention that payment shall be made in
conformity with the instrument, the instrument is fictioius.Also
when payee is non-existing, the instrument is fictitious.
 Escrow: A bill delivered conditionally is called ‘Escrow'.
Where bill or note is delivered conditionally , the liability of the
party delivering does not commence till the happening of the
event or the fulfillment then condition. The rights of holder in
due course are not affected.
Prof.,TMES-MBA,GTU

Contd..
 Ambiguous Instruments – An instrument which is vague and
cannot be clearly identified either as a promissory note or as a
bill of exchange, is an ambiguous instrument.
 Inchoate Instruments- it is an incomplete instrument. When
one person signs and delivers to another paper stamped in
accordance with the law relating to the negotiable instrument
then in India, and either wholly blank or having written thereon,
he thereby gives prima facie authority to the holder thereof to
make or complete, as the case may be, upon its negotiable
instrument, for any amount specified therein and not exceeding
the amount covered by the stamp.
 Bills in Sets- Bill of exchange may be drawn in parts, each part
being numbered and containing a provision that it shall continue
payable so long as the other parts remain unpaid.
Prof.,TMES-MBA,GTU

Parties to negotiable instruments
 Holder (Sec.8)
 Holder in due course (Sec. 9)
 Rights or promises of a holder in due course
 Drawer, Drawee in case of need (sec. 7)
 Payee
 Acceptor (Sec.7)
Prof.,TMES-MBA,GTU

Discharge of parties
 Parties may be discharged from liability on a negotiable
instrument in any following ways:
1. By payment
2. By cancellation
3. By release
4. By default of holder
5. By material alteration
 Where the cheque is an electronic image[Sec. 89 (2) and
(3)]
6. Discharge of drawee (banker) of a cheque.
7. By operation of law
Prof.,TMES-MBA,GTU

THE CONSUMER PROTECTION
ACT, 1986
Prof.,TMES-MBA,GTU

Introduction
 In the trade, there are two parties - one is buyer and the other is
seller. But when the buyer becomes the ultimate user of goods
and services then buyer will be called consumer.
 The buyer must get the full satisfaction from the goods or
services under the consideration of the payment of price. But
sometimes with the intension to earn maximum profit and
perfect competition, the trader manufacturer or retailer have not
provided the quality, quantity or the basic characteristic of the
goods or services. Hence the consumer cannot able to get the full
satisfaction from the product or service and he may feel that he
has been cheated by the trader, manufacturer or retailer. Under
this situation he may get justice under consumer protection act
formed by Central Govt. of India in 1986.
 Objects of the Act: The act has been mainly made to create
awareness among the consumers about their rights and to
provide simple and speedy redressal (solution) of consumer's
disputes.
Prof.,TMES-MBA,GTU

Rights of consumer
1. Protection against the marketing of Goods and Services
which are Hazardous to the life and property.
2. Right to be informed about the quality, quantity, purity,
potency, standard and price of the goods or service.
3. Right of protection against unfair trade practices.
4. Right to have access to variety of goods and services at
reasonable or competitive rates.
5. Right to seek redressal against unfair trade practice or
restrictive trade practice or exploitation of consumers.
6. Right to be heard and to be assured that the consumer's
interest will receive due consideration in the appropriate
forum.
7. Right to have, consumer education.
Prof.,TMES-MBA,GTU

Consumer and Consumer Disputes
 Consumer: A consumer for the purpose of goods means,
Any person, who
a) Buys any goods for consideration which has been paid or
promised or partly paid and partly promised or under any
system of deferred payment.
b) Includes, any user of such goods other than the person
who buys them, when such is made with the approval of
the buyer.
Prof.,TMES-MBA,GTU

Contd..
 The person claiming himself as ' consumer' should satisfy that
I. There must be a sale transaction between the seller and the
buyer,
II. The sale must be of goods,
III. The buying of goods must be for consideration.
IV. The consideration has been, paid or promised or partly paid
and partly promised or under any system of deferred payment.
V. The user of the goods may also be a consumer, when such use
is made with the approval of the buyer.
 Consumer for the purpose of 'service' means any person who
hires or avails the services of any expert in that particular field or
facility from an expert for the consideration.
Prof.,TMES-MBA,GTU

Who is not a consumer?
 A person is not a consumer if he obtains goods for resale or
for any commercial purpose.
 When the manufacturer sells the goods to the wholesaler,
who in turn sells the goods to a retailer, the wholesaler will
be excluded from the definition of the word consumer as he
has brought the goods for resale or for commercial purpose.
 "A person buying the goods for resale or for commercial
purposes, even if for consideration, is not a consumer’’.
 Commercial purpose is a mercantile activity, having profit
as the main aim. It includes all business activities. E.g. A
purchase of a car by a company for use by its business, by
director and employees is purchased for commercial
purpose.
Prof.,TMES-MBA,GTU

Contd..
 "Person" includes:
1. A firm whether registered or not
2. A Hindu undivided family
3. A co-operative society.
4. Every other association or persons whether registered or
not.
 Any person has to be consumer first as per definition of the
word, ‘consumer’ as given under the Consumers Protection
Act to get remedy.
 "Goods" meaning of the word "Goods'' under the Consumer
Protection Act are the same as defined in the sale of goods
Act of 1930.
Prof.,TMES-MBA,GTU

Contd..
 "Service" means service of any description which is made
available to potential users and includes the provision of
facilities in connection with banking, financing, insurance,
transport, processing supply of electrical or other energy,
board or lodging or both, (housing construction)
entertainment, amusement or the purveying of news or
other information but does not include the rendering of any
service free of charge or under a contract of personal
service.
 Contract of personal services is excluded from the
definition, A service offered by an Advocate to the client or
service rendered by a private tutor is therefore not included
the definition.
Prof.,TMES-MBA,GTU

Consumer dispute
 Sec 2 (1) (e) "Consumer Dispute" means a dispute where the
person against whom a complaint has been made, denies or
disputes the allegations contained in the complaint.
 "Complainant" means
1. A consumer or,
2. Any voluntary consumer association registered under the
Companies Act or under any other law or the time being in
force or
3. The Central Government or the State Government, or
4. One or more consumers, having the same interest,
 A person seeking redressal of his complaint, must come within
any of the above mentioned categories, otherwise he has no
‘Locus Standi’ to proceed with the case before i.e. consumer
Redressal Forum.
Prof.,TMES-MBA,GTU

Contd..
 "Complaint" means any allegation in writing made by a
Complaint In regard to one or more of the following:
1. Any unfair trade practices or a restrictive trade practice has
been adopted by any trader.
2. The goods bought by him or agreed to be bought by him,
suffer from one or more defects,
3. The service hired or availed of or agreed to be hired or availed
of him suffer from deficiency in any respect,
4. A tracer has charged for the goods mentioned in the complaint
a price in excess of the price fixed by law or displayed on the
goods or any packing containing such goods.
5. Goods which will be hazardous to life and safety when used or
being offered for sale to the public in contravention of the
provision of any law.
Prof.,TMES-MBA,GTU

Contd..
 "Manufacturer” means a person who
1. Makes or manufacturers any goods or part of it or
2. Assembles parts of any goods which are made or
manufactured by others and claims the end product to be
goods manufactured by himself or
3. Puts his own mark on any goods made or manufactured
by any other manufacturer and claims such goods to be
goods made or manufactured by himself.
 Where a manufacturer dispatches any goods or parts
thereof to any branch office maintained by him, such
branch office is not the manufacturer, even though the parts
dispatched are assembled at such branch office and are sold
or distributed from such branch office.
Prof.,TMES-MBA,GTU

Scope of different complaints
 unfair trade practice (UTP)- Meaning: As per definition no. 9,
the trader has committed unfair trade practice in the following
circumstances.
a) Making statements:
i. When trader makes false representation that the goods or
services are of a particular standard or quality,
ii. A trader falsely represents any second hand goods as new
goods,
iii. Trader makes a false or misleading representation concerning
the need of any goods.
iv. A trader gives false warranty of a product.
v. A trader materially misleads the public concerning the price at
which a product gives false or misleading facts.
b) Publication: When a trader permits the publication or any
advertisement whether in any newspaper or otherwise for the
sale of supply at a bargain price of goods or services that are
not intended to be offered for sale or supply at the bargain
price.
Prof.,TMES-MBA,GTU

Contd..
c) Gift and prizes: When a trader permits the offer of
gift, prize other items with the intention of creating
impression that something is being given or offered
free of charge when it is fully or party covered by the
amount.
d) Sale or Supply of goods: When a trader permits
the sale or supply of goods knowing that the goods
do not comply with the standards prescribed by
competent authority relating to its performance.
e) Hoarding of goods: When a trader permits the
hoarding or destruction of goods if such hoarding or
destruction is intended to raise the cost of goods.
f) Spurious goods: Manufacture of spurious goods or
offering such goods for sale or adapting deceptive
practices in the provision of services.
Prof.,TMES-MBA,GTU

Contd..
2. Restrictive Trade Practice (RTP): It means a trade
practice- which tends to bring about manipulation of
price or its conditions of delivery or to affect the flow of
supply in the market relating to goods or services in such
a manner as to impose on the consumer unjustified cost
due to delay beyond the period or any trade practice
which requires a consumer to buy, hire or avail of any
goods or services.
 For e.g.: The retailer charged more price from the
consumer mentioned under maximum retail price printed
on the goods.
Prof.,TMES-MBA,GTU

Contd..
3. "Defect" {Sec. 2 (1) (f)}means any fault, imperfection or
shortcoming in the quality, quantity, potency, purity or standard
which is required to be maintained by or under any law for the
time being in force or under any contract, express or implied or
as is claimed by the trader in relation to any goods.
Appropriate Laboratory is a laboratory or organization
recognized by the Central Govt., or the state Govt., to analyze
the test of any goods with a view to determining whether such
goods suffer from any defects or not.
4. “Deficiency": {Sec. 2 (1) (g)} Deficiency means any fault,
imperfection or shortcoming or inadequacy in the quality,
nature and manner of performance which is required to be
maintained or has been undertaken to be performed by a
person in pursuance of a contract or otherwise in relation to
any service.
5. Excessive price
6. Hazardous goods
Prof.,TMES-MBA,GTU

Central Consumer Protection
Council
 As per common introduction, Framed by Central Govt, of
India by notification for the Protection of consumer, is
called Central Consumer Protection Council.
1. The Central Govt., shall establish a Council by
notification known as C.C.P.C.
2. The Central Council shall consists of the following
members-
a) The minister in charge of the consumer affairs in the
Central Govt., who shall be called Chairman.
b) Other members official or non-official as may be
prescribed provided it should not be exceeded 150
members.
Prof.,TMES-MBA,GTU

Contd..
 The Minister In charge, Minister of state, 8 members of
parliament, secretary of national commission, representative of
Central Govt., not exceeding 20, the registrar the representative
of the consumer organizations not less than 35 representative of
women not less than 10, representative of farmers not exceeding
20 and persons capable of representing consumers interest not
exceeding 15.
 The term of the council shall be 3 years and any member may
resign from the council by writing under his hand to the
Chairman of Central Council.
 The vacancies so caused shall be filled by the Central Govt., and
Central Govt. May constitute among the member of the council,
a standing working group not exceeding 30 members.
Prof.,TMES-MBA,GTU

Contd..
 Procedure for meetings: The Central Council shall meet at
least once every year. Meetings shall be held of such time
and place as the chairman may think fit and he shall
observe the procedure in regard to the transaction of its
business as may be prescribed.
 Objects: The objects of the Central Council shall be to
promote and protect the rights of consumers which are as
follows:
1. The right to be protected against the marketing of goods
and services which are hazardous to life and property.
2. The right to be informed about the quality, quantity,
potency, parity, standard and price of goods or services so
as to protect the consumer against unfair trade practices.
Prof.,TMES-MBA,GTU

Contd..
3. The right to be assured to a variety o£ goods and services
at competitive prices.
4. The right to be heard and to be assured that consumer's
interest will receive due consideration at appropriate
forum.
5. The right to seek redresses or restrictive trade practices or
exploitation of consumer.
6. The right to consumer education.
 The CCPC is an institution or council is working
exclusively, for the protection of the basic rights of
consumers. Such councils, Assure to the consumer' about
their basic rights and requirements.
Prof.,TMES-MBA,GTU

Consumer dispute redressal
agencies
 To provide simple, speedy and inexpensive redressal of
consumer grievances, the Act envisages a three tier quasi-
judicial machinery at the district, state and national level.
 At the district level there will be "District Forum" to
entertain consumer complaints where the value of goods or
services and compensation does not exceed rupees twenty
lakhs (Rs.20, 00,000).
 At the state level there will be 'State Commission' to deal
with the complaints where the claim exceeds rupees twenty
lakhs but does not exceed rupees one crore.
 At the national level there is a 'National Commission for
complaints exceeding Rupees one crore.
Prof.,TMES-MBA,GTU

District Forum
 Meaning: A judicial authority appointed under any law for
the protection the consumer and to give justice to even,
consumer under consumer protection act 1986 is called
district forum.
 Composition: Each district forum shall consist of a person
who is qualified to be a district judge who shall be its
president and two other members. One of them shall be a
woman, shall have the following qualification.
1. Not less than 35 years of age.
2. Posses a bachelor degree from a recognized university.
3. Persons of ability, integrity and have knowledge and
experience of at least 10 years in dealing with problems
relating to economics law commerce, accountancy
industry public affairs or administration.
Prof.,TMES-MBA,GTU

Contd..
 Appointment: Every appointment shall be made by State Govt.
on the recommendation of selection committee consisting of the
following:
1. President of State commission Chairman.
2. Secretary of law department of the state – member.
3. Secretary in charge of the department dealing with consumer
affairs in the state members.
 Every member of the district forum shall hold office for a term
of five years or up to the age of 65 years whichever is earlier.
 A member shall be eligible for reappointment for another term of
five years or up to the age of 65 years whichever is earlier.
 The salary payable of the members of the district forum may be
prescribed by the state govt.
Prof.,TMES-MBA,GTU

Contd..
 Disqualification :A person shall be disqualified for
appointment as member if he,
1. Has been convicted and sanctioned to imprisonment for
an offence involving moral turpitude.
2. Is insolvent.
3. Is of unsound mind and declared by a competent court.
4. Has been removed as dismissed from the service of the
govt.
5. Has such other disqualification as may be prescribed by
the state govt.
Prof.,TMES-MBA,GTU

Contd..
 Complaint Against service : The district forum shall refer
a copy of complaint to the opposite party directing him to
give his version within a period of 30 days and where the
opposite party denies or disputes the allegations or fails to
take any action to represent his case then the district forum
shall proceed to settle the consumer dispute on the basis of
evidence.
 Jurisdiction of the district forum: The District Forum
shall have jurisdiction to entertain complaints where the
goods or services and the compensation, or any claimed
does not exceed rupees twenty lakhs.
Prof.,TMES-MBA,GTU

Contd..
 Territorial Jurisdiction:- Section 11 sub sec. 2) provides
that a complaint shall be instituted in a District Forum
within the local limits of whose jurisdiction.
a) The opposite party or each of the opposite parties at the
time of institution of the complaint - (i) actually and
voluntarily resides or (ii) carries on business or (iii) has a
branch office or (iv) personally works for gain.
b) Where there are more than one opposite parties, any of
the opposite parties at the time of the institution of the
complaint - (i) actually and voluntarily resides or. (ii)
Carries on business or (iii) have a branch office or (iv)
personally works for gain.
c) The cause of action, wholly or in part arises.
Prof.,TMES-MBA,GTU

Contd..
 Procedure on receipt of complaint: The provisions of sec. 13
lay down the procedure which is to be followed by the District
Forum on the receipt of a complaints under the Act, where a
complaint does not require analysis or testing of the goods, it
should be decided as far as possible within a period of 90 days
trap- the date of the notice received by the opposite party and
within 150 days if it requires analysis or testing of goods.
 Power of district forum: The district forum shall have the same
powers as the civil court is carrying which are as follows:
1. Give summons for attendance of any defendant or witness.
2. Discover any documents or other material objects as evidence.
3. Reception of evidence on affidavits.
Prof.,TMES-MBA,GTU

Contd..
4. If the district forum is satisfied that the goods complained
suffer from any of the defects then it shall issue order to the
opposite party to do following things:
i. To remove the defect pointed out by the appropriate
Laboratory.
ii. To replace the goods with the new goods of the similar
description.
iii. To return to the complainant the prices and the charges paid
by complainant.
iv. To remove the defects in goods or deficiencies in the service.
v. To discontinue the unfair trade practice or restrictive trade
practice.
vi. Not to affirm hazardous goods or services for sale.
 Appeal: Any person aggrieved by an order made by the district
forum may prefer an appeal to the state commission within a
period of 30 days. No appeal shall be entertained unless the
appellant had deposited 50% of that amount or Rs. 25000
whichever is less.
Prof.,TMES-MBA,GTU

state commission
 Meaning A forum or commission of members established by
state Govt. to provide justice to the aggrieved person from the
order of district forum is called state commission or state forum.
 Composition-Each state commission shall consists of a person
who is a judge of high court as president of commission by the
state govt. and not less than two members out of which one shall
be a woman who shall have the following qualifications.
1. Not less than 35 yeas of age.
2. Possess a bachelor degree from a recognized university.
3. Person of ability, integrity.
4. Have adequate knowledge and experience of last 10 years in
dealing with problems relating to economies, law commence;
accounts, and industry.
5. Not more than 50% of the members shall be from judicial
background.
Prof.,TMES-MBA,GTU

Contd..
 Appointment-Every, appointment shall be made by state
Govt., on the recommendation of a selection committee
consisting of the following.
 President of the State Commission Chairman
 Secretary of the law department of the state - member,
 Secretary in charge of department dealing with consumer
affairs in state member.
 Resignation-A member may resign his office in writing
under his hand addressed to the state govt. after acceptance
his office shall become vacant and vacancy may be filled
up by a qualified person.
Prof.,TMES-MBA,GTU

Contd..
 Disqualification as member-A person shall be disqualified
as member if he:
 Has been convicted to imprisonment for an offence,
 Is a discharged insolvent?
 is of unsound mind,
 Has been removed or dismissed from the service of
Government.
 Powers: The jurisdiction powers and authority of the state
commission may be exercised by benches, constituted by.
president with one or more members and if the opinion of
member differs then president shall refer the case and give
his best judgment, They can exercise the case of appellant
who is aggrieved from the order of district forum.
Prof.,TMES-MBA,GTU

Contd..
 The State Commission shall have jurisdiction
a) To entertain (i) complaints where the value of the goods or
services and compensation, if any claimed exceeds rupees
twenty lakhs but does not exceed rupees one crore 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 the
jurisdiction not vested in it by law, or has failed to exercise a
jurisdiction so vested or has acted in exercise of it's
jurisdiction illegally or with material irregularity. Thus, the
State Commission has been vested with three types of
jurisdiction namely: Original jurisdiction, Appellate
jurisdiction, & Revisional jurisdiction.
Prof.,TMES-MBA,GTU

Contd..
 Salary and term of the office-The salary and other allowances
of the members of the state commission shall be prescribed by
the state commission. Every member of the state commission
shall hold office for a term of five years or up to the age of 67
years whichever is earlier and member, shall be eligible to
reappoint for another team of five years or the age of 67 years
whichever is earlier.
 Appeal-If the appellant aggrieved from state commission order
then they can apply to the national commission within 30 days'
from the order received from state commission.
 State commission is a judicial authority ahead them district
forum established by state Govt. for the time being gives the
protection under consumer protection act -1986 by passing the
order which may be conferred to national commission.
Prof.,TMES-MBA,GTU

The National Commission
 Composition of the national commission
(1) 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,
provided that no appointment under this clause shall be made
after consulting the Chief Justice of India.
b. Four members who shall be persons of ability, integrity and
standing and has 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. Provided that
every appointment made under the clause shall be made by the
Central Government on the recommendation of a selection
committee consisting of the following, namely:
 A person who is a Judge of the Supreme Court, to be nominated
by the Chief Justice of India – Chairman.
Prof.,TMES-MBA,GTU

Contd..
 The Secretary in the Department of Legal Affairs in the
Government of India- Member,
 Secretary of the Department dealing with consumer affairs
in the Government of India - member.
(2) The salary or honorarium and other allowances payable to
and the other terms and conditions of service of the
members of the National Commission shall be such as may
be prescribed by the Central Government.
(3)Every member of the National Commission shall hold
office for a term of five years or up to the age of seventy
years, which ever is earlier and shall not be eligible for
reappointment.
Prof.,TMES-MBA,GTU

Contd..
 Terms and conditions of service of the president and
members of the national commission-Before
appointment, the president and the member of the National
Commission shall have to take an undertaking that he does
not and will not have any such financial or other interest as
is likely to "affect pre judicially his functions as a member.
The terms and conditions of service of the President and the
members shall not be varied to their disadvantage during
their tenure of office.
 Vacancies in office-A vacancy in the office of the President
or member may occur by the expiry of the term, or by
death, resignation, or by removal. A vacancy so caused
shall be filled up by fresh appointment by the central
government.
Prof.,TMES-MBA,GTU

Contd..
 The jurisdiction of the National Commission may be classified
into three categories namely.
1. Original jurisdiction: - to entertain complaints where the value
of the goods or, services and compensation, if any, claimed
exceeds rupees one crore.
2. Appellate Jurisdiction: - to entertain appeals against the order
of any State Commission.
3. Revisional Jurisdiction - This is limited to consumer disputes
where in, a state commission.
I. (i) Has exercised a jurisdiction not vested in it by law or
II. (ii) Has failed to exercise jurisdiction so vested or
III. (iii) Has acted in the exercise of its jurisdiction illegally or
with material irregularity -
 The National Commission can exercise its power in revision
only under the above stated situations.
Prof.,TMES-MBA,GTU

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