sale of goods act & negotiable instruments act

8/12/2019 Sale of Goods Act & Negotiable Instruments Act

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Sale of Goods Act

&

Negotiable Instruments Act

Group 10

Shamik Mukherjee (129278007)Suvajyoti Bhattacharjee (129278078)

Sachin Chavare (129278104)

Sorabh Gambhir (129278108)

Nikhil Bansal (129278110)


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The law relating to sale of goods is contained in the Sale

of Goods Act, 1930

It has to be read as part of the Indian Contract Act, 1872

Came into force on 1st July, 1930

Initially, this was part of Indian Contract Act

Later these sections in Contract Act were deleted, and

separate Sale of Goods Act was passed in 1930

It is complimentary to Contract Act

Introduction


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Section 4 Sale and Agreement to Sale

Contract of sale of goods the seller transfers or agrees to

transfer the property in goods to the buyer for a price

A contract of sale may be absolute or conditional

Where under a contract of sale the property in the goods is

transferred from the seller to the buyer, the contract is called asale

Where the transfer of property in the goods is to take place ata future time or subject to some conditions thereafter to befulfilled, the contract is called an agreement to sell

An agreement to sell becomes a sale when the time elapses; allthe conditions are fulfilled subject to which the property in thegoods is to be transferred


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Section 4 Sale and Agreement to SaleExamples:

A agrees to buy a haystack from B on Bs land with liberty tocome on Bsland to take it away This is a sale and B cannot revoke the licence given to A to woo on his

land

Agreement for sale of a quantity of nitrate of soda to arrive at acertain ship This is an agreement to sell at a future date subject to the double

condition of the arrival of the ship with the specified cargo on board

A customer who picks up goods in a self-service shop ismerely offering to buy them and the sale is not completeuntil they are paid for


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Essentials of a contract of sale of goods

Bilateral contract

Transfer of property

Goods

Price or money consideration

All essential elements of a valid contract must be

present in a contract of sale


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Sale and Agreement to Sale

An agreement to sell, which is also called an executive contract of sale, is a

contract simply,

the property in the goods which forms subject matter of the contract remains in the

seller, so that they may be taken in execution of his debts, and belongs on his

bankruptcy to his trusty in bankruptcy

if they are destroyed the loss will, in the absence of excess agreement, have to be borne

by him

a breach by either party of the agreement will normally only give the other party a right

to sue for damages

The term contractof saleincludes both actual sales and agreement for sale.


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Basic requirements for contract of Sale

Offer and acceptance

Legally enforceable agreement

Mutual consent

Parties competent to contract

Free consent

Lawful object

Consideration ,etc


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Earnest

The conclusion of a contract of sale is sometimes marked by the

giving of earnest

Earnest whether given in money or not must be something of value

really given by the buyer and kept by the seller A mere symbolic

ceremony such as one party drawing a coin across the othershand

will not do

When a deposit in the nature of earnest is paid for the same of

immovable property in India, a vendor by whose default the sale

goes off must return the sum so paid, but if the default is the

purchasers the purchaser must loose it


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Section 11 Stipulation as to Time Unless a different intention appears from the terms of the contract, stipulation as to

time of payment are not deemed to be of the essence of a contract of sale

Whether any other stipulation as to time is of the essence of the contract or not

depends on the terms of the contract

Examples

Sale of some stacks of oak on the sellers ground, upon the terms that they might

remain there for four months and the buyer should pay within 12 weeks of the

contract. The seller on the expiration of 12 weeks demanded the price which the

buyer failed to pay. Later the buyer asked for further time which the seller refused

to give, and said that as the buyer had not paid he should not have the stacks. The

buyer later tendered the price, but the seller refused to accept it and subsequently

resold the stacks. The Buyer was held entitled to recover in an action of trover. (

Martin Dale V/s. Smith 1841)


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Stipulation as to Time of Payment As punctual payment does not go to the whole consideration of the sale, the

failure by the buyer to pay on the appointed day does not as a rule, entitle

the seller to treat the contract as repudiated, though he may be entitled to

withhold delivery until the price is paid and to resell the goods if the buyer

does not pay or tender the price within a reasonable time

Consequently, if before such resale the buyer tenders the price, even though

it be on a date after the date name in the contract the seller cannot, in the

absence of a stipulation to the contrary, treat the contract as at an end and

refuse to allow the buyer to have the goods; and a subsequent resale by him

will be tortious

The time cannot be taken to be the essence of the contract in case where the

contract itself does not stipulate the time for payment of the price.


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Stipulations as to time of performance ofother terms

If a man orders a suit of clothes, a promise by the tailor that he shall

have it by a certain date would not, generally speaking, be of the

essence of the contract, though it might be if he was ordering court

dress for the purpose of attending a court on a particular day

But in the case of commercial contracts, although occasionally

stipulations as to time may not be of the essence, the usual rule is that

they are

In contracts of sales of goods, the computation of the time of

performance from a particular date, act or event is prima facie exclusive

of the day, act or event and inclusive of the day of performance,

although this presumption may be displaced by a contrary intention

appearing from the contract and its surrounding circumstances


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Section 12. Condition and Warranty

1. A stipulation in a contract of sale with reference to goodswhich are subject thereof may be a condition or a warranty.

2. A condition is a stipulation essential to the main purpose ofthe contract, the breach of which gives rise to a right to treat

the contract as repudiated.

3. A warranty is a stipulation collateral to the main purpose ofthe contract, the breach of which gives rise to a claim fordamages but not to a right to reject the goods and treat thecontract as repudiated.

4. Whether a stipulation in a contract of sale is a condition or awarranty depends in each case on the construction of thecontract. A stipulation may be a condition, though called awarranty in the contract.


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Condition &Warranty

An additional definition or interpretation Uses the words condition, and warranty and

draws a distinction between the two

ExpressCondition

Essential condition, failing which means a totalfailure of the performance

ExpressWarranty

Auxiliary promises or undertakings of which thebreach is not intended to avoid the contract, butonly to give a remedy in damages


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Representation

An affirmation as regards the goods the untruth of which willnot, in the absence of fraud, give rise to an action for damages,though it may enable the other party to rescind the contract

ImpliedCondition &Warranty

Inferred from all the circumstances of the case, that the parties intendedto add such a stipulation to their contract, but did not put it into expressedwords

Puff

A vague and extravagant statement so preposterous in itsnature that nobody could believe that anyone was misled by


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Section 13 : When condition to be

treated as warranty,1. Where a contract of sale is subject to any condition to be fulfilled by

the seller, the buyer may waive the condition or elect to treat thebreach of the condition as a breach of warranty an not as a groundfor treating the contract as repudiate.

2. Where a contract of sale is not severable and the buyer has accepteda goods or part thereof, or where the contract is for specific goods,the property in which has passed to the buyer, the breach of anycondition to be fulfilled by the seller can only be treated as s breachof warranty and not as ground for rejecting the goods and treatingthe contract as repudiated unless, there is a term of a contract,expressed or implied to that effect

3. Nothing in this section shall affect the case of any condition orwarranty fulfilment of which is excused by law, by reason ofimpossibility or otherwise.


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Transfer of Property as Between Sellerand Buyer

Section 18 Goods must beascertained

Goods must be ascertained: where there is contractfor the sale of unascertained goods, no property inthe goods is transferred to the buyer unless anduntil the goods are ascertained

1. Transfer of property

2. Property cannot pass until the goods are identified3. Part of a specific whole4. Property and risk5. Identification of goods


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Section 18 Goods must be

ascertained

Transfer of property

When the transfer of theproperty in the goods tothe buyer has been affected

Identification ofgoods

Individuality of the thingto be delivered should beestablished

Part of a specificwhole

Ascertainment of the goodsdepends on being severed,weighed or measured orsome other process

Property and risk

The risk usually passeswith the property, but maypass independently of it

Identification of

goods The property shall pass on

the happening of somespecified event, sufficientto identify the goods


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Section 19. Property passes when

intended to pass1. Where there is a contract for the sale of specific or ascertained

goods the property in them is transferred to the buyer at suchtime as the parties to the contract intend it to be transferred.

2. For the purpose of ascertaining the intention of the partiesregard shall be had to the terms of the contract, the conduct ofthe parties and circumstances of the case.

3. Unless a different intention appears, the roles contained insection 20 to 24 are rules for ascertaining the intention of theparties as to the time at which the property in the goods is to

pass to the buyer.

1. Principles for determining whether the property is transferred2. Intention of the parties3. Ascertained goods


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Section 19. Property passes when

intended to pass

Whether the propertyis transferred

When it appearsthat the goods arespecific orascertained, so thatit is possible for theproperty to pass to

the buyer, itbecomes necessaryto determine

whether it hasactually passed

Intention of theparties

The governingprinciple should beto find out what isthe intention of theparties

Ascertained goods

Ascertained goodsmeans goodsidentified inaccordance with theagreement after thetime a contract of

sale is made


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Section 20 Specific goods in a

deliverable state

Where there is an unconditional contract for the sale ofspecific goods in a deliverable state, the property in the goodspasses to the buyer when the contract is made, and it isimmaterial whether the time of payment of or the time ofdelivery of goods, or both, is postponed.

Examples

Sale on the 4th January of a haystack on the sellers land atthe price of 145 to the paid on the 4th February, the hay to be

allowed to remain on the sellers land until the 1st May: nohay to be cut until the price was paid. The property in thehaystack passed on the making of the contract and on thestack being destroyed by fire, the buyer must bear the lossTarling Vs. Baxter (1827)


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Section 21 Specific goods to be putinto a deliverable state Where there is a contract for the sale of specific goods and the

seller is bound to do something to the goods for the purposeof putting them into a deliverable state, the property does notpass until such thing is done and the buyer has notice thereof.

ExampleSale of the whole contents of a cistern of oil, the oil to be putinto casks by the seller and then taken away by the buyer.Some of the casks are filled in the presence of the buyer, but

before any are removed, or the remainder are filled, firedestroys the whole of the oil. The buyer must bear the loss ofthe oil which had been put into the casks, the seller that of theremainder .Rugg Vs. Minett (1089)


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Section 22 : Specific goods in a

deliverable state , when the seller hasto do anything thereto in order toascertain price :

Where there is a contract for the sale of specificgoods in a deliverable state, but the seller is boundto weigh, measure, test or do some other act or thingwith reference to the goods for the purpose ofascertaining the price, the property does not passuntil such act or thing is done and the buyer hasnotice thereof.


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Section 22Examples1. Sale of a stack of bark at a certain price per ton, the bark

to be weighed by the sellersandbuyersagents. Part wasweighed and taken away, but before anything more was

done a flood carried away the remainder. The loss of thisfell on the seller. Simmons Vs Swift (1826)2. Sale of 289 specified bales of goatskin, containing 5

dozen in each bale, at a certain price per dozen. By theusage of the trade, it was the sellers duty to see whether

the bales contain the number specified in the contract.Before the seller had done this the bales were destroyedby fire. The loss fell on the seller. Zagury vsFurnell(1809)


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Section 23 : Sale of unascertainedgoods and appropriation.

1. Where there is a contract for the sale of unascertained orfuture goods by description and goods of that description andin a deliverable state are unconditionally appropriated to thecontractassent of the buyer or by the buyer with the assent ofthe seller, the property in the goods there upon passed to thebuyer. Such assent may be expressed or implied, and may begiven either before or after the appropriation made.

2. Delivery to the carrier - Where in pursuance of the contractthe seller delivers the goods to the buyer or to the carrier or

other bailee (whether named by the buyer or not) for thepurpose of transmission to the buyer, and does not reservethe right of disposal, he is deemed to have unconditionallyappropriated the goods to the contract.


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Section 23 : Sale of unascertainedgoods and appropriationExample1. Sale of 20 hogsheads of sugar out of a larger quantity.

The seller fills four hogsheads which the buyer takesaway. Subsequently the seller fills sixteen morehogsheads, and informs the buyer of this asking him tocome and take them away. The buyer promises to do so.The property has passed to the buyer.

2. Mr A contracts to sell to Mr B a certain quantity of liquorout of a big cask containing a much larger quantity. Therequired quantity is not separated or bottled. Theproperty in the liquor does not pass to the purchaser.


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Section 24 Goods sent on approval

or on sale or return When goods are delivered to the buyer on approval

or on sale or return or other similar terms, theproperty therein passes to the buyer

(a) when he signifies his approval or acceptance tothe seller or does any other act adopting thetransaction:

(b) if he does not signify his approval or acceptanceto the seller but retains the goods without giving

notice of rejection, then, if a time has been fixed forthe return of the goods, on the expiration of suchtime, and, if no time has been fixed, on theexpiration of a reasonable time.


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Section 24 Goods sent on approval

or on sale or return Examples The section may be illustrated by the following

examples:

1.Goods delivered on sale or return are pledged by thedeliveree. He thereby becomes the buyer of thegoods, and the original owner cannot recover thegoods from the pledgee.

2. Goods delivered on sale or return to the defendant

are delivered by him on similar terms to another.The latter in turn hands them to a fourth person,who loses them. The defendant, being unable toreturn the goods, must pay for them as if he hadactually agreed to become the buyer.


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Sect ion 26 Risk pr im a facie passes with

proper ty

Unless otherwise agreed, the goods remain at thesellersrisk until the property therein is transferredto the buyer, but when the property therein istransferred to the buyer, the goods are at thebuyersrisk whether delivery has been made or not.

Provided also that nothing in this section shall affect

the duties or liabilities of either seller or buyer as abailee of the goods of the other party.


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PERFORMANCE OF THE CONTRACT

Section 31. Duties of the seller and buyer It shall be the dutyof the seller to deliver the goods and of the buyer to accept and payfor them, in accordance with the terms of the contract of sale.

The general rule enunciated in this section follows from the nature ofthe contract of sale, by which the property in the goods is transferred,or agreed to be transferred, from the seller to the buyer in return forthe price.

There would be breach of the duty to accept when the buyerunjustifiably rejects the goods. Taking of delivery of the goods is animportant aspect of the duty to accept and refusal to do so willconstitute rejection of the goods and therefore , would amount to anon-acceptance of the goods.


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Sect ion 32 Payment and del ivery are

concurrent condi t ions : Unless otherwise agreed, delivery of the goods and payment of the

price are concurrent conditions, that is to say, the seller shall be readyand willing to give possession of the goods to the buyer in exchangefor the price, and the buyer shall be ready and willing to pay the pricein exchange for the possession of the goods.

The seller owes to the buyer as onerous a duty to deliver the goods, asthe buyer owes to the seller the duty to accept and pay for them.


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Sect ion 35 Buyer to app ly for del ivery

Apart from any express contract, the seller of the goods is not bound to deliver themuntil the buyer applies for the delivery

Even if there is an obligation on the part of the seller to inform the buyer when thegoods are in a deliverable state, it is not a specialpromise,though it may postpone

the obligation of the buyer to apply for delivery, and after the lapse of a reasonabletime, to enable the goods to be procured by the seller, the buyer would be entitledand bound to apply for delivery.

When the buyer applies for delivery and the seller then fails to deliver, the seller isguilty of a breach of contract.

Illustration: The contract provided for delivery in November on seven daysnotice fromthe buyer, and the buyer gave the notice early in November, it was held that by theterms of the contract the buyer had the right to fix the date in November on whichthe delivery should be made, and the seller having failed to deliver as required by thenotice, was guilty of breach of contract.


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Righ ts o f Unpaid Sel ler against goods

Section 45. Unpaidseller defined 1. The seller of goods is deemed to be an unpaidsellerwithin the

meaning of this Act (a) when the whole of the price has not been paid or tendered ; (b) when a bill of exchange or other negotiable instrument has been

received as conditional payment, and the condition on which it wasreceived has not been fulfilled by reason of the dishonour of theinstrument or otherwise.


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Section 46. Unpaid Sellers rights

1. Subject to the provisions of this Act and of and of any law for thetime being in force, notwithstanding that the property in the goodsmay have passed to the buyer, the unpaid seller of goods, as such, hasby implication of law

(a) a lien on the goods for the price while he is in possession of them; (b) in case of the insolvency of the buyer a right of stopping thegoods in transit after he has parted with the possession of them ;

(c) a right of resale as limited by this Act.

2. Where the property in goods has not passed to the buyer, the

unpaid seller has, in addition to his other remedies, a right ofwithholding delivery similar to and co-extensive with his rights of lienand stoppage in transit where the property has passed to the buyer.


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Section 46. Unpaid Sellers rights

Example The section may be illustrated by the following example : Sale of goods to be delivered by instalments, each

instalment to be paid for in cash fourteen days afterdelivery. During the currency of the contract, the buyerbecomes insolvent and the price of one instalment isunpaid. The seller need not make further deliveries unlessthe price of that instalment is paid and cash is paid againstdelivery of subsequent instalments.


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Section 47. Sellers lien

1. Subject to the provisions of this Act, the unpaid seller of goods whois in possession of them is entitled to retain possession of them untilpayment or tender of the price in the following cases, namely :

(a) Where the goods have been sold without any stipulation as tocredit ; (b) where the goods have been sold on credit, but the term of credit

has expired ; (c) where the buyer becomes insolvent. 2. The seller may exercise his right of lien notwithstanding that he is

in possession of the goods as agent or bailee for the buyer.


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Sect ion 49. Term inat ion of l ien

1. The unpaid seller of goods loses his lien thereon (a) when he delivers the goods to a carrier or other bailee

for the purpose of transmission to the buyer withoutreserving the right of disposal of goods;

(b) when the buyer or his agent lawfully obtainspossession of the goods;

(c) by waiver thereof.

2. The unpaid seller of goods, having a lien thereon, doesnot lose his lien by reason only that he has obtained adecree for the price of the goods.


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Sect ion 49. Term inat ion of l ien

Examples

Goods were sold and sent by the sellers at the request of the buyer toshipping agents of the buyer, and were put on board a ship by thoseagents. Subsequently, they were re-landed and sent back to the sellersfor the purpose of re-packing. While they were still in the possessionof the sellers for that purpose, the buyer became insolvent.Thereupon the sellers refused to deliver them to thebuyerstrustee inbankruptcy except upon payment of the price. Held, that the sellershad lost their lien by delivering the goods to the shipping agents, andtheir refusal to deliver the goods to the trustee was wrongful. Valpy

Vs. Gibson 1847


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Sect ion 50 Righ t of stoppage in trans i t

buyer become insolvent

unpaid seller already sent goods has the right of stopping them intransit

he may resume possession of the goods until payment recieved

can only be exercised by a seller or a person in a position analogousto that of a seller


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Sect ion 52. How stoppage to trans i t is

effected

Taking actual possession

Notice given to person in possession of goods

Notice given to principle by the exercise of reasonable diligence so ashe can in time to prevent a deliver to the buyer.

Possessor of goods shall redeliver the goods

The expenses of such re-delivery shall be borne by the seller.


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Sect ion 52. How stoppage to trans i t is

effected

Unpaid seller stops goods at a port short of their destination He is liable for the freight

port where the goods were actually landed also to the port of their ultimate destination.


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Sect ion 64. Auct ion sale

each lot is subject of a separate contract of sale

Announcement of completion by the fall of the hammer or in othercustomary manner

Until such announcement bidder may retract his bid

If 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 himself or to employ any person tobid at such sale

If the auctioneer knowingly take any bid from the seller or any such personsale may be treated as fraudulent by the buyer

Sale may by notified to be subject to a reserved or upset price

If seller makes use of pretended bidding to raise the price, if buyer disagrees

sale is voidable


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Work contracts or sale of goods

Illustrations X went to a carpenter shop and purchased the table

Sale

X brought raw material and paid carpenter to maketable Work and service

X got table made from carpenter, carpenter gaveseparate bill for material and services Work contract and Sale of goods

X wanted a particular type of table, got made fromcarpenter for a one-time unclassified payment On courts discretion


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Contract of sale The seller divests himself of all the proprietary right

in the thing sold

Main objective is the transfer of the property

The work and labour end in anything that can

properly become the subject of sale

If contract is primarily for supply of materials at aprice and the work or service rendered is incidentalto the execution of the contract


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Contract of work and labour If the main object is not mere transfer of

property the contract is of work and labour

If the materials have no separate identity as acommercial article and it is only by bestowing

work and labour upon them

Example making of windows or wooden doorsthat provides them the commercial identity


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Union of India v. Central India Machinery

Manufacturing Co. Ltd.

Indian Railways commissioned the central Indiamachinery manufacturing Co. Ltd.

For manufacturing wagons

The sales tax authorities taxed the transaction,

taking it as sale of wagons

The company contended that it was a contract ofwork and labour


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Judgement: Contract for sale of goods

Neither the ownership of material, nor the valueof the skill and labour as compared with the

value of material is conclusive.

But, the bulk of the material used in the

construction belongs to the manufacturer whichis sold at a price


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Vanguard Rolling Shutters v.

Commissioner of sales tax Business: fabricating and installing of customized

iron shutter

Sales tax authorities took transaction as sale of ironshutters.

Contract brief Full payment against delivery prior to despatch.

Material will be carried to the site of work at cost of the party. Responsibility ceaseswhen same leaves our premises.

No responsibility of structural damage. Masonry work to be done by party accordingto our instructions

No responsibility of non-delivery of goods or late despatch for reasons beyond ourcontrol


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Judgement: Contract of work The Process involves fabrication of a rolling

shutter and its actual fixing with masonry work

What was created at the end was a firmly fixedimmovable property.

The price charged was a lump-sum amount,without reference to material and work.


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Does hotel sell food? A person walks up to the counter of a restaurant, requests for a 200

ml of Tropicana juice in a tetra pack, pays money and goes out.

A person goes to a restaurant and orders from price list forTropicanajuice 200ml. Waiterbrings him a glass and tetra pack.When he finishes the drink, waiter brings the bill with the entryTropicana juice 200ml. The person pays bill and goes out.

Y is a person staying in the hotel. He comes to restaurant and ordersthe listed Tropicana juice. He informs waiter about his roomnumber and goes away.

Y orders the Tropicana juice from his room

Only first case is of sale of goods


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State of H.P. v. M/s. Associated Hotels

of India Ltd.

The hotel provides the services for stay and alsoruns a restaurant.

Separate bill for stay and for restaurant wasgenerated on the basis of price menu.

So should the sales tax be applied on food sold?


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Judgement: Contract not for sale of goods

Mere transfer of tangible things does not mean saleproceeds.

The intention or primary objective of the contract isaccounted for to determine

A number of amenities are provided during stay butare not sale

The transaction essentially is one of service andmeals is one of them


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Northern India Caterers v.

Lt. Governor of Delhi

Northern India caterers provide food and drinks

to its customers by its restaurant business

The case is regarding the sale of food and

beverages from a restaurant should beconsidered as a sale of goods, or as a service.


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Judgement: Contract not for sale of goods

Hotelier is similar to a inn keeper

Innkeeper does not lease his rooms

Does not sell the food he supplies to the guest and it is hisduty to supply such food as the guest need

Guest has no right to take the food from the table

The title to food never passes as a result of an ordinarytransaction of supplying food to a guest.


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United Breweries Ltd. V.

State of Andhra Pradesh Dispute with regards the crates and bottles in which the

beer was supplied

UB: beer was sold bottles and creates were not sold

The supplies were made to selling agents who depositedsecurity of Rs. 4.80 for the bottles and Rs. 5.00 for thecrates

Deposits were returned to the selling agents

High Court: bottle and crates were sold along with beerand had to be included in the sale price


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Supreme Court Judgement The intention was to get back the bottles from the consumers

through the customers

UB would get back the empties and these will be filled upagain for further supplies

This recycling of bottles will keep down the costs thus increasethe sales

Deposits merely ensured the return of the bottles and thecrates

The intention of UB or the retailer does not appear to havebeen to sell the beer bottles


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Introduction It is a commercial law

Common law developed and further written

down Negotiable Instrument (Section 13)

Promissory Notes

Bills of Exchange Cheques


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Concept of payable Payable to order

Payable to bearer

Payable on demand


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Promissory Note Section 4 Instrument in writing Not a bank-note or a currency-note Unconditional undertaking Signed by the maker To pay a certain sum of money To, or to the order of, a certain person, or to the

bearer I promise to pay B Rs 500 on demandA (signed)

Currency-note: Promissory note payable to bearer,issued by RBI


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Identify the Promissory Note(s) I owe B an amount of Rs 1000

I promise to pay B Rs 1000 and all the other

sums which shall be due to him I promise to pay B Rs 1000 after my wedding

I promise to pay the bearer the sum of one

thousand rupees


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Bill of Exchange Section 5 Instrument in writing

Unconditional undertaking Signed by the maker Directing a person to pay Certain sum of money

To a person or the bearer Only RBI or the Central Government can draw oraccept a bill of exchange, payable to bearer, ondemand Exception: Cheque drawn on a banker


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Identify the bill(s) of exchange To: A

I owe C a sum of Rs one thousand.

B (signed) To: A

Pay to bearer a sum of Rs one thousand, ondemand.

B (signed) To: A

Pay to C a sum of Rs one thousand.B (signed)


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Cheque Section 6

Bill of exchange drawn on a specified banker

Not expressed to be payable otherwise than ondemand


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Nuances Section 18

Amount different in words and figures

Amount in words Section 43

No obligation of payment without consideration


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Terminology Drawer - maker, Drawee bank (Section 7)

Holder (Section 8)

Holder in due course consideration (Section 9) Negotiation transfer (Section 14)


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Indorsement Maker or holder signs on a negotiable instrument

for the purpose of negotiation (Section 15)

Types of indorsement (Section 16) Indorsement in blank to bearer

Indorsement in full to order payee

Indorser becomes the drawer for all the subsequent

holders Maker, drawer, acceptor, and indorser are all liable

to a holder in due course, until the instrument ispaid up


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Crossing of cheques Sections 123-131

Open cheque payable at counter cash

Crossed cheque payable through collectingbanker

Parallel lines

A/c Payee

Not Negotiable

Pay Cash


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Dishonoured Cheque Sections 91-98

Banks refusal to pay

Instructions by drawer countermand Insufficient funds

Signature


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Noting Section 99

Dishonour of promissory note or bill of exchange

by non-acceptance or non-payment Holder gets a note on it from a notary public

Certificate Protest (Section 100)


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Bouncing of cheques Section 138

Dishonour of cheque due to insufficient funds

Offence Issue of cheque to settle certain liabilities

Cheque presented to the bank within 6 months andcheque dishonoured due to lack of sufficient funds

Notice to drawer within 30 days 15 days to make the payment

Failure to pay 2 years of punishment, fine up totwice the amount, or both


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Case: Kingfisher Airlines Ltd. Cheques issued by Kingfisher to the following

have bounced

GMR Hyderabad International Airport Limited(GHIAL) Chatrapati Shivaji International Airport (CSIA) Indira Gandhi International Airport

All these cases have been filed under Section 138 Local Hyderabad court has issued non-bailablewarrants against the airline chairman VijayMallya and three executives (Oct 13, 2012)

C M/ El i T d d T h l


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Case: M/s. Electronics Trade and Technology

Development Corporation Limited,

Securnderabad v. M/s. Indian Technologists &Engineers Supreme Court of India Cheque presented by complainant on Nov 28,

1990, through their Bankers M/s. HyderabadBank, Sarojini Devi Road, Secunderabad forrealisation

Accused had insufficient funds and had directed

stoppage of payment The accuseds contest that the stoppage ofpayment was instructed was not upheld

Judgement in favour of complainant


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Thank You

sale of goods act & negotiable instruments act

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