CONTRACT : DEFINITION AND CONCEPT

CONTENTS 1 CONTRACT : DEFINITION AND CONCEPT 1.1 Introduction 1 1.2 What is contract 2 1.2-1 Agreement 2 1.2-2 Legal enforceability of an agreement 3 1.2-3 All agreements are not contracts 5 1.3 Essential Elements of a valid contract 5 1.4 Writing and registration of contract 8 1.5 Classification of contracts 9 1.5-1 English law 9 1.5-2 Indian law 9 1.6 Some important comparisons 15 1.6-1 Agreement and Contract 15 1.6-2 Illegal and Void Agreements 15 1.6-3 Void and Voidable Contract 15 1.6-4 Void Agreement and Void Contract 16 2 AGREEMENT : OFFER AND ACCEPTANCE 2.1 Introduction 19 2.2 Offer/Proposal 20 2.3 Offer should be distinguished from 26 2.3-1 Cross offers 26 2.3-2 Counter offers 27 2.3-3 Invitation to offer 27 2.3-4 Standing offer 29 I-7

CONTENTS I-8 2.4 Termination of offer 30 2.4-1 Instances of termination of offer as per section 6 of the Act 30 2.4-2 Other instances when an offer gets terminated 32 2.5 Acceptance of an offer 32 2.6 Communication of offer, acceptance and revocation 37 2.6-1 Communication of offer - When complete 37 2.6-2 Communication of acceptance - When complete 38 2.6-3 Effect of delay or loss of letter of acceptance in postal transit 38 2.6-4 Communication of revocation - When complete 39 3 CONSIDERATION AND LEGALITY 3.1 Introduction 43 3.2 What is consideration 44 3.2-1 Essential elements of consideration 45 3.2-2 Rules regarding consideration 48 3.3 Exceptions to the doctrine of consideration 50 3.4 Stranger to contract vis-a-vis stranger to consideration 52 3.4-1 Stranger to the contract 52 3.4-2 Stranger to consideration 53 3.4-3 Exceptions to the Doctrine of privity to contract 53 3.5 Legality of object and consideration 56 3.6 Agreements opposed to public policy 57 3.7 Effect of unlawful object and consideration 61 3.7-1 Object and consideration wholly unlawful 61 3.7-2 Objects and consideration unlawful in part 62 4 CAPACITY OF PARTIES 4.1 Introduction 66 4.2 Minors 67 4.2-1 Who is a minor 67 4.2-2 Status of the contracts entered into by a minor 67 4.2-3 The status of a minor with respect to the agreements entered into by him 68

I-9 CONTENTS 4.2-4 Minor and Special Contracts/Agreements 72 4.3 Persons of unsound mind 74 4.3-1 Who is a person of unsound mind 74 4.3-2 Unsoundness of mind may take various forms 74 4.3-3 Effect of the agreement entered into by the persons of unsound mind 75 4.3-4 Burden of proof 75 4.4 Disqualified persons 75 5 FREE CONSENT 5.1 Introduction 79 5.2 Coercion 80 5.2-1 Acts amounting to coercion 80 5.2-2 Features of coercion 81 5.2-3 Special Points to be noted 81 5.2-3a Threat to commit suicide 82 5.2-3b Threat to prosecution 82 5.2-4 Effect of coercion 82 5.2-5 Burden of proof 82 5.3 Undue influence 83 5.3-1 What is undue influence 83 5.3-2 Features of undue influence 84 5.3-3 Special point : Transaction with Pardanashin woman 85 5.3-4 Effect of undue influence 85 5.3-5 Burden of proof 86 5.4 Fraud 86 5.4-1 Definition of fraud 86 5.4-2 Acts which constitute fraud 87 5.4-3 Mere silence is not Fraud 88 5.4-4 Effect of fraud 90 5.4-5 Burden of proof 90 5.5 Misrepresentation 91 5.5-1 What is misrepresentation 91 5.5-2 When a consent is said to be caused by misrepresentation 92

CONTENTS I-10 5.5-3 Effect of misrepresentation 92 5.5-4 Burden of proof 93 5.6 Limitations to the right of rescission 93 5.7 Mistake 93 5.7-1 Mistake of law 94 5.7-1a Mistake of Indian Law 94 5.7-1b Mistake of Foreign Law 94 5.7-2 Mistake of fact 94 5.7-2a Bilateral mistake 94 5.7-2b Unilateral Mistake 97 5.7-3 Effect of mistake 98 5.8 Some important comparisons 99 5.8-1 Fraud and misrepresentation 99 5.8-2 Coercion and undue influence 99 6 VOID AGREEMENTS 6.1 Introduction 102 6.2 Agreements in restraint of marriage 103 6.3 Agreements in restraint of trade 103 6.3-1 What is an agreement in restraint of trade 103 6.3-2 Exceptions to the rule that agreements in restraint of trade are void 104 6.3-2a Exception under the Indian Contract Act, 1872 - Sale of goodwill 104 6.3-2b Exceptions under the Partnership Act, 1932 105 6.3-2c Exceptions established by judicial decisions 106 6.4 Uncertain agreements 107 6.5 Agreements in restraint of legal proceedings 107 6.5-1 Restrictions must be absolute 107 6.5-2 Curtailing the period of limitation 108 6.5-3 Exceptions in the agreements against legal proceedings 108 6.6 Wagering agreements 109 6.6-1 What is a wager 109

I-11 CONTENTS 6.6-2 Essentials of a wager 109 6.6-3 Effect of wagering agreements 110 6.6-3a Main transaction 110 6.6-3b Collateral transaction 110 6.6-4 Exception in the wagering agreements 111 6.6-5 Special transactions resembling to wagering 111 6.7 Agreements contingent on impossible events 112 6.8 Agreements to do impossible acts 113 7 CONTINGENT CONTRACTS 7.1 Introduction 116 7.2 What is a contingent contract 117 7.3 Rules regarding a contingent contract 118 7.4 Effect of contingent contracts 120 7.5 An important comparison 120 7.5-1 Wagering agreement and contingent contract 120 8 QUASI CONTRACTS 8.1 Introduction 122 8.2 Various forms a quasi contract may take 123 8.2-1 Supply of necessaries 123 8.2-2 Payment of lawful dues by interested person 123 8.2-3 Obligation of a person enjoying benefit of a gratuitous act 125 8.2-4 Responsibility of finder of goods 126 8.2-5 Liability of a recipient of goods delivered by mistake or under coercion 127 8.3 Failure to discharge obligations created by quasi contracts 128 9 PERFORMANCE OF CONTRACTS 9.1 Introduction 130 9.2 Actual or attempted performance 131

CONTENTS I-12 9.2-1 Actual performance 131 9.2-2 Attempted performance 131 9.2-2a Essentials of a valid tender of performance 131 9.2-2b Effect of refusal to Tender of performance 133 9.3 When law excuses non-performance of contract 133 9.4 Who should perform the contract 133 9.5 Who can demand performance 135 9.6 Time and place for performance 135 9.6-1 Rules as to time and place for performance 135 9.6-2 Effect of failure to perform in time 137 9.7 Joint promises 138 9.7-1 What is a joint promise 138 9.7-2 Who can demand performance of joint promises 139 9.7-3 Who should perform a joint promise 139 9.7-4 Rights and liabilities amongst joint promisors 140 9.8 Reciprocal promises 141 9.8-1 What is reciprocal promise 141 9.8-2 Rules regarding performance of reciprocal promises 141 9.9 Appropriation of payments 143 9.10 Assignment of a contract 145 9.11 An important comparison 146 9.11-1 Succession and Assignment 146 10 DISCHARGE OF CONTRACT 10.1 Introduction 150 10.2 Discharge by performance 151 10.3 Discharge by impossibility of performance 151 10.3-1 Where impossibility is existent at the time of making contract 151 10.3-2 Where impossibility arises subsequently after the formation of contract 151 10.3-3 Factors causing impossibility to performance 152

I-13 CONTENTS 10.3.4 Effect of doctrine of supervening impossibility 153 10.3.5 Non-applicability of the Doctrine of Supervening Impossibility 154 10.4 Discharge by mutual agreement 155 10.4-1 Novation 155 10.4-2 Alteration 156 10.4-3 Rescission 156 10.4-4 Remission 156 10.4-5 Waiver 157 10.5 Discharge by lapse of time 157 10.6 Discharge by operation of law 157 10.7 Discharge by breach of contract 158 10.7-1 Actual breach 158 10.7-2 Anticipatory Breach 159 11 REMEDIES FOR BREACH OF CONTRACT 11.1 Introduction 163 11.2 Rescission of a Contract 164 11.2-1 What is Rescission 164 11.2-2 Consequences of rescission 164 11.2-3 Different options to avail relief in case of rescission 164 11.3 Suit for damages 165 11.3-1 Kinds of damages and rules to assess their quantum 165 11.3-2 Measuring interest damages 170 11.3-3 Other relevant provisions 171 11.4 Suit for specific performance 172 11.5 Suit for an injunction 173 11.6 Suit upon quantum meruit and restitution 173 11.6-1 Quantum Meruit 173 11.6-2 Restitution 174 11.6-3 Generalisations based upon the doctrine of Quantum Meruit and Restitution 174

CONTENTS I-14 12 INDEMNITY AND GUARANTEE 12.1 Introduction 178 12.2 Contract of indemnity 179 12.3 Contract of Guarantee 181 12.4 Kinds of Guarantee 182 12.4-1 Retrospective and prospective guarantee 182 12.4-2 Specific and continuing guarantee 182 12.5 Nature and Extent of Surety s liability 184 12.6 Rights of surety 185 12.6-1 Rights against the principal debtor 185 12.6-2 Rights against the creditor 186 12.6-3 Rights against co-sureties 187 12.7 Discharge of surety 188 12.8 An Important comparison 192 12.8-1 Contract of Indemnity and Contract of Guarantee 192 13 BAILMENT AND PLEDGE 13.1 Introduction 196 13.2 Basic elements of bailment 196 13.3 Types of Bailment 197 13.3-1 Classification on the basis of profit that each party to the transaction receives 197 13.3-2 Classification on the basis of expectation of reward by the parties 198 13.4 Duties of a bailor 198 13.5 Rights of a bailor 199 13.6 Duties of Bailee 200 13.7 Rights of bailee 203 13.8 Bailee s right of lien 204 13.8-1 Particular lien 205 13.8-2 General lien 206 13.8-3 How right of general lien is exercised by specified bailees 206 13.9 Termination of bailment 207

I-15 CONTENTS 13.10 Finder of lost goods 208 13.10-1 Duties of a finder of goods 208 13.10-2 Rights of a finder of goods 208 13.11 Pledge or pawn 209 13.11-1 What is a pledge 209 13.11-2 Essential features of a pledge 209 13.11-3 Who can make a pledge 210 13.11-4 Duties of a Pawnor 212 13.11-5 Rights of a Pawnor 212 13.11-6 Duties of a Pawnee 213 13.11-7 Rights of a Pawnee 213 13.12 Some important comparisons 214 13.12-1 Bailment and pledge 214 13.12-2 Particular lien and general lien of a bailee 215 13.12-3 Pledge and lien 215 14 AGENCY 14.1 Introduction 218 14.2 Contract of agency 219 14.3 Test of agency 220 14.4 Classification of agents 220 14.4-1 Classification based on the extent of agents authority 220 14.4-2 Classification based on the nature of work performed by agents 221 14.5 Creation of agency 222 14.5-1 Agency by express agreement 222 14.5-2 Agency by implied agreement 222 14.5-3 Agency by operation of law 225 14.5-4 Agency by ratification 225 14.6 Extent of agent s authority 227 14.6-1 Actual or real authority 227 14.6-2 Ostensible or apparent authority 228 14.6-3 Authority in emergency 228 14.7 Delegation of authority by an agent 229

CONTENTS I-16 14.7-1 An agent cannot delegate his authority 229 14.8 Sub-agent 229 14.8-1 Who is a sub-agent 229 14.8-2 Consequences of appointing a sub-agent 230 14.9 Substituted agent 230 14.10 Pretended agent 231 14.11 Duties of an agent 231 14.12 Rights of an agent 234 14.13 Rights of a principal 237 14.14 Duties of a principal 237 14.15 Position of principal towards third parties 237 14.15-1 Position of named principal 237 14.15-2 Position of unnamed principal 239 14.15-3 Position of undisclosed principal 239 14.16 Position of an agent towards third parties 240 14.16-1 Circumstances where an agent becomes personally liable to third parties 240 14.17 Termination of agency 241 14.17-1 Termination by act of the parties 241 14.17-2 Termination by operation of law 243 14.17-3 When termination of agency takes effect 244 14.18 Irrevocable agency 244 14.18-1 Agency coupled with interest [Section 202] 244 14.18-2 Agent incurs personal liability 245 14.18-3 Agent partly exercise the authority [Section 204] 246 14.19 Some important comparisons 246 14.19-1 Agent and servant 246 14.19-2 Agent and independent contractor 246 14-19-3 Agent and bailee 247 15 CONTRACT OF SALE OF GOODS 15.1 Introduction 250 15.2 Contract of sale 251 15.3 Sale and agreement to sell 253 15.3-1 Sale 253

I-17 CONTENTS 15.3-2 Agreement to sell 253 15.3-3 Comparison between sale and agreement to sell 254 15.4 Kind of Goods 255 15.4-1 Existing goods [Section 6(1)] 255 15.4-2 Future goods [Section 2(6)] 255 15.4-3 Contingent goods [Section 6(2)] 256 15.5 Perishing of goods 256 15.5-1 When goods are considered to be perished 256 15.5-2 Effect of perishing of the subject-matter of a contract 256 15.6 Determination of price of goods 259 15.6-1 How to fix the price 259 15.6-2 Situation when price fixation is to be done by third party [Section 10] 260 15.6-3 Earnest money and Security deposit 260 15.7 Consequences of not adhering to the time in a sales contract 261 15.7-1 When time is stipulated regarding the payment of price 261 15.7-2 When time is stipulated regarding delivery of goods 261 15.8 Documents of title to goods [Section 2(4)] 261 15.9 Some important comparisons 262 15.9-1 Sale and hire purchase 262 15.9-2 Agreement to sell and hire purchase 263 15.9-3 Sale and bailment 264 15.9-4 Sale of goods and contract for work and labour 264 15.9-5 Barter, Exchange and Sale 265 16 CONDITIONS AND WARRANTIES 16.1 Introduction 268 16.2 Condition and warranty defined 269 16.2-1 Condition 269 16.2-2 Warranty 269 16.3 Implied conditions and implied warranties 270 16.3-1 Implied Conditions 270

CONTENTS I-18 16.3-2 Implied Warranties 275 16.4 Change of a condition into warranty 276 16.5 Exclusion of implied conditions and warranties 277 16.6 Doctrine of caveat emptor 278 16.6-1 Meaning 278 16.6-2 Exceptions to the doctrine of caveat emptor 278 16.7 Some important comparisons 279 16.7-1 Condition and warranty 279 16.7-2 Condition as to Fitness of goods for buyer s purpose and condition as to Merchantability 280 17 TRANSFER OF PROPERTY 17.1 Introduction 283 17.2 Significance of transfer of ownership 284 17.3 Rules regarding transfer of property 285 17.3-1 Transfer of ownership in the sale of specific goods 285 17.3-2 Transfer of ownership in the sale of unascertained or future goods 288 17.4 Transfer of title 290 17.4-1 No one can transfer better title then he himself possess 290 17.4-2 Exceptions to the rule 290 18 PERFORMANCE OF CONTRACT OF SALE 18.1 Introduction 295 18.2 Delivery of goods by seller 296 18.2-1 What is the meaning of delivery 296 18.2-2 Modes of delivery 296 18.2-3 Rules regarding effective delivery of goods 297 18.3 Acceptance of delivery by the buyer 301 18.3-1 What is meant by acceptance of delivery of goods 301 18.3-2 Rules regarding acceptance of delivery of goods 301 18.4 Duties of the buyer 302

I-19 CONTENTS 19 REMEDIES 19.1 Introduction 306 19.2 Buyer s breach 307 19.3 Unpaid seller s remedies 307 19.3-1 Who is an unpaid seller 307 19.3-2 Rights of an unpaid seller 308 19.3-2a Right of an unpaid seller against the goods 308 19.3-2b Rights of unpaid seller against the buyer 312 19.4 Seller s breach : Buyer s remedies 313 19.4-1 Ways in which a seller may breach 313 19.4-2 Remedies available to a buyer 314 19.5 Anticipatory breach of contract 315 19.6 Auction sale 315 19.6-1 Meaning 315 19.6-2 Rules 315 19.6-3 Some important terms used in an auction sale 316 19.7 An important comparison 317 19.7-1 Seller s right of lien and seller s right of stoppage in transit 317 20 PARTNERSHIP : AN INTRODUCTION 20.1 Introduction 320 20.2 What is a partnership 321 20.2-1 Definition 321 20.2-2 Essential elements of a partnership 321 20.3 Test of partnership 324 20.3-1 How to test existence of partnership 324 20.3-2 Sharing profits is not a conclusive evidence of a partnership 325 20.3-3 The mutual agency test is an important test of partnership 326 20.4 Partners, firm and firm name 326 20.5 Some important comparisons 327

CONTENTS I-20 20.5-1 Partnership and Joint Stock Company 327 20.5-2 Partnership and Hindu Undivided Family (HUF) 328 20.5-3 Partnership and co-ownership 329 20.5-4 Partnership and a Club 330 21 FORMATION OF PARTNERSHIP 21.1 Introduction 333 21.2 Partnership Deed 334 21.3 Registration of firms 334 21.3-1 Registration of a firm is discretionary 334 21.3-2 Procedure for registration of a firm 335 21.3-3 Recording of alterations 335 21.3-4 Penalty for furnishing false particulars [Section 70] 336 21.3-5 Register of firms 336 21.4 Effects of Non-Registration 336 21.4-1 Disabilities of a firm due to non-registration 336 21.4-2 Exceptions as to disabilities of non-registration 337 21.5 Kinds of Partnership 338 21.6 Kinds of Partners 339 22 RIGHTS AND OBLIGATIONS OF PARTNERS 22.1 Introduction 343 22.2 Mutual rights of partners 344 22.3 Mutual duties and limitations of partners 345 22.3-1 Absolute duties 345 22.3-2 General duties 346 22.4 Minor as a partner 348 22.4-1 General Status 348 22.4-2 Rights of a minor partner 348 22.4-3 Limitations and liabilities of minor partner 349 22.4-4 Position of a minor on attaining majority 349 22.5 Relations of partners with third parties 349 22.5-1 A partner binds himself and his firm provided he acts within his authority 349

I-21 CONTENTS 22.5-2 Authority of a partner 350 22.6 Liabilities of a firm and its partners to third parties 353 22.6-1 Liability of a partner for acts of the firm 353 22.6-2 Liability of a firm for acts of the partners 353 22.6-3 Liability of a firm for misapplication by partners 353 22.7 Reconstitution of a firm 354 22.7-1 Admission of a partner 354 22.7-2 Retirement of a partner 355 22.7-3 Expulsion of a partner 357 22.7-4 Insolvency of a partner 357 22.7-5 Death of a partner 357 22.7-6 Transfer of partner s interest 357 22.8 Effect of change in firm on mutual rights and duties of partners 358 22.9 Effect of change in firm on continuing guarantee 358 22.10 Partnership property 358 23 DISSOLUTION OF A PARTNERSHIP FIRM 23.1 Introduction 363 23.2 Modes of dissolution of a firm 364 23.2-1 By agreement [Section 40] 364 23.2-2 By notice [Section 43] 364 23.2-3 On the happening of certain contingencies [Section 42] 364 23.2-4 Compulsory dissolution [Section 41] 365 23.2-5 By court [Section 44] 365 23.3 Consequences of Dissolution 367 23.3-1 Continuing liability of partners after dissolution of a firm 367 23.3-2 Rights of partners after dissolution of the firm 368 23.4 Settlement of accounts upon dissolution 369 23.5 Sale of goodwill after dissolution 371 23.6 Public notice 371

CONTENTS I-22 24 NEGOTIABLE INSTRUMENTS 24.1 Introduction 375 24.2 What is a negotiable instrument 376 24.3 Characteristics of a Negotiable Instrument 377 24.4 Kinds of negotiable instruments 378 24.5 Hundis 379 24.6 Classification of Negotiable Instruments 380 24.7 Presumptions as to the negotiable instruments 384 24.8 Law overriding the provisions of the Negotiable Instruments Act, 1881 385 25 PROMISSORY NOTES, BILLS OF EXCHANGE AND CHEQUES 25.1 Introduction 388 25.2 Promissory Note 389 25.2-1 Definition 389 25.2-2 Parties to a Promissory Note 389 25.2-3 Essentials of a valid Promissory Note 389 25.2-4 Specimen of a Promissory Note 395 25.3 Bill of exchange 395 25.3-1 Definition 395 25.3-2 Parties to a bill of exchange 395 25.3-3 Essentials of a valid bill of exchange 396 25.3-4 Specimen of a bill of exchange 397 25.3-5 Different kinds of Bill of Exchange 397 25.4 Cheque 402 25.4-1 Definition 402 25.4-2 Parties to a cheque 402 25.4-3 Essentials of a valid cheque 403 25.4-4 Specimen of a cheque 403 25.5 Some important comparisons 403 25.5-1 Promissory Note and Bill of Exchange 403 25.5-2 Bill of Exchange and Cheque 404

I-23 CONTENTS 26 PARTIES TO A NEGOTIABLE INSTRUMENT 26.1 Introduction 410 26.2 Holder 411 26.2-1 Definition 411 26.2-2 Status of a holder 411 26.2-3 Who is not a holder 412 26.3 Holder in due course 412 26.3-1 Definition 412 26.3-2 Essentials to become a holder in due course 413 26.4 Privileges of being of a holder in due course 414 26.5 Capacity of parties 418 26.5-1 Minor s position as a drawer, indorser, etc. 419 26.5-2 Persons of unsound mind 419 26.5-3 Insolvent 419 26.5-4 Corporations and companies 420 26.5-5 Agents 420 26.5-6 Legal Representative 421 26.6 Liability of parties 421 26.6-1 Liability of drawer of the instrument [Section 30] 422 26.6-2 Liability of a banker as a drawee [Sections 31 & 77] 422 26.6-3 Liability of maker of note and acceptor of bill [Section 32] 422 26.6-4 Liability of indorser [Section 35] 423 26.6-5 Liability of prior parties [Section 36] 423 26.6-6 Liability inter se [Sections 37 to 40] 423 26.7 Important Comparison 425 26.7-1 Holder and holder in due course 425 27 HOW TO NEGOTIATE AN INSTRUMENT 27.1 Introduction 430 27.2 What is negotiation 431 27.3 Assignment 431 27.4 Who may negotiate an instrument 432 27.5 When a negotiable instrument stops to be negotiable 432

CONTENTS I-24 27.6 Methods of negotiation 433 27.6-1 Negotiation of bearer instruments 434 27.6-2 Negotiation of order instruments 434 27.7 Delivery of a negotiable instrument 434 27.7-1 What constitutes delivery of an instrument 434 27.7-2 Kinds of delivery 434 27.7-3 Who can make delivery to whom 435 27.8 Indorsement 435 27.8-1 What constitutes an indorsement 435 27.8-2 Essentials of a valid indorsement 436 27.8-3 Effect of indorsement 436 27.8-4 Types of indorsements 436 27.9 Negotiation back 440 27.10 Negotiation by unauthorized parties 440 27.11 Negotiation of dishonoured and overdue instruments 442 27.12 Important comparison 443 27.12-1 Negotiation and assignment 443 28 DISCHARGE, PRESENTMENT AND DISHONOUR OF A NEGOTIABLE INSTRUMENT 28.1 Introduction 447 28.2 Discharge 448 28.2-1 How to get a discharge on a negotiable instrument 448 28.2-2 What is payment in due course 452 28.3 Presentment 453 28.3-1 Presentment for acceptance 454 28.3-2 Presentment for sight 456 28.3-3 Presentment for payment 457 28.4 Dishonour 460 28.4-1 Dishonour by non-acceptance [Section 91] 460 28.4-2 Dishonour by non-payment [Section 92] 460 28.4-3 Effect of dishonour of a negotiable instrument 460 28.4-4 Notice of dishonour 461 28.5 Noting 463

I-25 CONTENTS 28.6 Protest 464 28.7 Rules as to compensation in case of dishonour 466 29 BANKER AND CUSTOMER 29.1 Introduction 471 29.2 Banker and customer 472 29.2-1 Who is a banker 472 29.2-2 Who is a customer 473 29.2-3 Legal relationship between a banker and a customer 473 29.3 Crossing of a cheque 473 29.3-1 General crossing 473 29.3-2 Special crossing 474 29.3-3 Not negotiable crossing 475 29.3-4 Restrictive crossing 476 29.3-5 Who can cross the cheque 477 29.3-6 Opening or cancellation of a crossing 477 29.4 Rights and obligations of a banker 477 29.4-1 When banker must refuse payment on his customer s cheques 478 29.4-2 When banker may refuse payment on his customer s cheques 479 29.4-3 Special provisions relating to electronic cheques 480 29.5 Protection granted to bankers 481 29.5-1 Protection given to a paying banker 481 29.5-2 Protection given to a collecting banker 482 29.6 Wrongful dishonour of cheques by a banker 483 29.6-1 Liability towards the drawer of the cheque 483 29.6-2 Liability towards the payee (or holder) of the cheque 484 29.7 Obligations of a customer 484 29.8 Bouncing of cheques 485 29.8-1 When an offence under section 138 is constituted 485 29.8-2 Procedure to seek redressal 487 29.8-3 Parties punishable for offence under section 138 489 29.8-4 Presumption in favour of holder 489 29.8-5 Defence which is specifically barred 490

CONTENTS I-26 30 SOME IMPORTANT PROVISIONS 30.1 Introduction 493 30.2 Maturity of negotiable instruments 493 30.2-1 When negotiable instruments payable on demand mature 494 30.2-2 When negotiable instruments payable on or after specified date mature 494 30.2-3 Computation of date of maturity 494 30.3 What is meant by acceptance of a bill of exchange 495 30.3-1 Essentials of a valid acceptance 495 30.3-2 Types of acceptance 496 30.4 Acceptance for honour 497 30.4-1 Certain conditions must be satisfied for accepting the bill for honour 497 30.4-2 Rights and liabilities of acceptor for honour 497 30.5 Payment for honour 497 30.6 Consideration in a negotiable instrument 498 30.6-1 Effect of absence or failure of consideration in a negotiable instrument 498 30.6-2 Partial absence or failure of consideration 499 30.7 Payment of interest 500 30.8 Applicability of international law 500 30.9 Important comparison 502 30.9-1 Acceptance for honour and payment for honour 502 31 CONSUMER PROTECTION ACT : A MUCH NEEDED LEGISLATION 31.1 Introduction 505 31.2 Who is a consumer 506 31.2-1 Consumer of goods 507 31.2-2 Consumer of services 508 31.3 Complaint 510 31.3-1 What Constitutes a complaint [Section 2(1)(c)] 510 31.3-2 Who can file a complaint [Sections 2(b) & 12] 510

I-27 CONTENTS 31.3-3 What a complaint must contain [Section 2(1)(c)] 511 31.3-4 Time frame within which a complaint can be filed 513 31.3-5 Relief available against complaint [Section 14] 513 31.3-6 When a complaint cannot be filed 514 31.3-7 Dismissal of frivolous and vexatious complaints [Section 26] 515 31.4 Unfair Trade Practice and Restrictive Trade Practice [Section 2(1)(r) & (nnn)] 515 31.4-1 What is an Unfair Trade Practice 515 31.4-2 What is a Restrictive Trade Practice 517 31.5 Goods and Defect [Section 2(1)(i) & (f)] 518 31.5-1 Goods 518 31.5-2 Defect 518 31.6 Service and Deficiency [Section 2(1)(o) & (g)] 519 31.6-1 What can be termed as a service 519 31.6-2 What is meant by deficiency in service 521 31.7 Trader and Manufacturer [Section 2(1)(q) &(j)] 522 31.7-1 Trader 522 31.7-2 Manufacturer 522 31.7-3 Who should be sued by a consumer - Manufacturer or seller 523 32 CONSUMER PROTECTION COUNCILS 32.1 Introduction 526 32.2 Objects of the Councils [Sections 6, 8, & 8B] 527 32.3 Central Council 528 32.4 State Consumer Protection Councils (State Councils) [Section 7] 529 32.5 District Consumer Protection Councils (District Councils) [Section 8A] 530 32.6 Working Groups [Rule 3] 530 33 CONSUMER FORUMS 33.1 Introduction 533

CONTENTS I-28 33.2 Constitution of the Forums 533 33.2-1 Constitution of District Forum [Section 10] 534 33.2-2 Constitution of State Commission [Section 16] 535 33.2-3 Constitution of National Commission [Section 20] 537 33.3 Jurisdiction 540 33.3-1 Jurisdiction of District Forum [Section 11] 540 33.3-2 Jurisdiction of State Commission [Section 17] 541 33.3-3 Jurisdiction of National Commission 542 33.4 Procedures Relating to Consumer complaints [Sections 12 & 13] 543 33.4-1 How a complaint is dealt by Consumer Forums 544 33.4-2 Procedure to be followed by the National Commission [Sections 22 & 22A] 546 33.5 Service of Notice [Section 28A] 546 33.6 Powers of the Consumer Forums [Sections 13(4), 14(1) & Rule 10] 547 33.7 Sitting of the Forums 549 33.7-1 Sitting of the District Forum [Section 14(2)] 549 33.7-2 Sitting of the State Commission 549 33.7-3 Sitting of the National Commission 550 33.8 Orders of the Forums 550 33.8-1 Signing of orders of the Forums 550 33.8-2 Appeals against orders 551 33.8-3 Finality of orders 552 33.8-4 Penalties for non-compliance of orders 552 34 ARBITRATION AND CONCILIATION ACT, 1996 34.1 Background of the Act 554 34.1-1 Scheme of the Act 555 34.2 Domestic Arbitration 556 34.2-1 Arbitration Agreement 557 34.3 Court must refer the matter to arbitration in some cases 557 34.3-1 Matter not to be split if partly covered under agreement 558

I-29 CONTENTS 34.3-2 Consumer Forum can entertain complaint irrespective of arbitration 559 34.3-3 Application for winding up cannot be referred 559 34.3-4 Matter can be referred even if appeal is pending 559 34.3-5 Unregistered partnership firm can apply for arbitration 559 34.3-6 Challenge to jurisdiction or validity of arbitration agreement 560 34.4 Arbitration clause in agreement 560 34.5 Formation of Arbitral Tribunal 561 34.5-1 Appointment of Arbitrator 561 34.5-2 Challenge to appointment of Arbitrator 562 34.5-3 Termination or substitution of Arbitrator 563 34.6 Conduct of Arbitral Proceedings 563 34.6-1 Cost of Arbitration 564 34.6-2 Settlement during arbitration 565 34.7 Arbitral Award 565 34.7-1 Law applicable to Arbitration 565 34.7-2 Requirement of Award 565 34.7-3 Stamp Duty on Arbitration Award 566 34.7-4 Finality and enforcement of arbitration award 566 34.7-5 Termination of arbitration proceedings 566 34.8 Intervention by Court in Arbitration proceedings 567 34.9 Setting aside arbitral award by Court 568 34.9-1 Setting aside if contrary to law 570 34.9-2 Appeal against order of District Court 570 34.10 Conciliation 570 34.11 Enforcement of Foreign Awards 572