Prof.(CMDE) P. K. Goel

Law of Contract
“The law of contract is intended to ensure that what a man has been led to expect shall come to pass; that what has been promised to him shall be performed”
- Sir William Anson
Prof.(CMDE) P. K. Goel


What is a Contract? “Every agreement and promise enforceable at law is a contract”
-Sir Federick Pollock

“An agreement creating and defining obligations between the parties”
-Sir William Anson

“An Agreement enforceable by law is a contract”
- Sec.2(h) of the Indian Contract Act,1872
Prof.(CMDE) P. K. Goel


K.(CMDE) P.Contract Agreement Offer (or proposal) Acceptance of offer (or proposal 1/26/2014 Enforceability of an agreement Legal obligation arising out of an agreement Prof. Goel 4 .

Goel 3) 4) Binding 1/26/2014 5 .(CMDE) P. K.Prof. Every Agreement need not necessarily be a contract Agreement is not concluded or binding contracts A Contract Agreement and its enforceability constitute a contract A Contract necessarily creates a legal obligation. All Contacts are necessarily agreements. Contact is concluded and binding on the concerned parties.Distinction between an Agreement and a Contract An Agreement differs from a contract in the following respects: Basis of distinction An Agreement 1) What constitute Offer and its acceptance constitute an agreement 2) Creating of legal obligation One in other An Agreement may or may not create a legal obligation.

is an Agreement” -Sec. K.(CMDE) P. Goel 6 . forming the consideration for each other. 2(e) of the Act a) Offer b) Acceptance 1/26/2014 Prof.What is an Agreement? “Every Promise and every set of Promises.

(CMDE) P.Plurality of Persons .Characteristics of an Agreement . K. Goel 7 .Consensus – ad – idem 1/26/2014 Prof.

Goel 8 . K. becomes a promise.” -Section 2 (b) 1/26/2014 Prof.(CMDE) P.What is a Promise? “Proposal when accepted.

(CMDE) P. K. nor is it the whole law of obligations. and those obligations which have their source in agreements. It is the law of those agreements which create obligations.“The law of contract is not the whole law of agreements.” -Salmond 1/26/2014 Prof. Goel 9 .

e. 2. Intention to create legal relations. K.Undue Influence . Goel 1/26/2014 10 . Agreement i. 3. Free Consent .Coercion . Offer & Acceptance.Mistake .(CMDE) P.Essential elements of a valid contract 1. Competence of parties 5.Misrepresentation Prof.Fraud . Lawful consideration 4.

Possibility of Performance 10.Not Expressly declared void. Goel 11 .(CMDE) P. 1/26/2014 Prof. Certainty 9. Lawful object 7. Writing & Registration 8. K.Essential elements of a valid contract 6.

K. On the basis of enforceability • • • • • Valid Void Voidable Unenforceable Illegal 2.(CMDE) P. Goel 12 .Classification of contracts 1. On the basis of mode of creation • Express • Implied • Constructive or Quasi 1/26/2014 Prof.

On the basis of the extent of execution • Executed • Executory 4.(CMDE) P. 3.Classification of contracts………. K. On the basis of form of the contract • Formal • Simple Prof.. Goel 1/26/2014 13 .

with a view to obtaining the assent of that other to such act or abstinence. Goel 14 .What is an Offer (PROPOSAL) “When one person signifies to another his willingness to do or to abstain from doing anything.(CMDE) P. K. he is said to make proposal” Sec 2(a) of the Act 1/26/2014 Prof.

It must be an EXPRESSION OF WILLINGNESS to do or to abstain from doing some thing. 3. This must be made WITH A VIEW TO OBTAINING THE ASSENT OF THE OTHER PERSON. 1/26/2014 Prof. The expression must be TO ANOTHER PERSON. Goel 15 .(CMDE) P. 2.Essentials of a Proposal 1. K.

Subject to any terms and conditions.Legal Rules Regarding a Valid Offer 1. 4. Goel 16 . 1/26/2014 Prof. Legal Relations. 2. K. Certain. 6. 3. Invitation to offer is no offer. Express or Implied Legal consequences. 5. 7. Specific or general Communicated to the offeree Non-compliance of the term-would amount to acceptance-not valid 8.(CMDE) P.

(CMDE) P. Acceptance must be given only by the person to whom the offer is made. 3. Acceptance must be absolute & unqualified. 1/26/2014 Prof. unless the proposal prescribes the manner in which it is to be accepted. K. Goel 17 . A Valid Acceptance 1. 2.Legal Rules Reg. Acceptance must be expressed in some usual & reasonable manner.

Goel 18 . 6. Rejected offers can be accepted only.(CMDE) P. Acceptance must be given within a reasonable time and before the offer lapses and/or is revoked. K. A Valid Acceptance… 4. 1/26/2014 Prof.Legal Rules Reg. 5. 7. if renewed. Acceptance must be communicated by the acceptor. Acceptance must succeed the offer.

K. the promisee or any other person has done or abstained from doing. or does or abstains from doing. something. Goel 19 .(CMDE) P.Consideration DEFINITION: “When at the desire of the promisor. such act or abstinence or promise is called consideration for the promise” Sec 2(a) 1/26/2014 Prof. or promises to do or abstain from doing.

Pollock 1/26/2014 Prof. K.. Consideration is the “Price for which a promise is bought” -Sir F.(CMDE) P. Goel 20 .Consideration…….

3. K. Consideration may move from the promisee or any other person. 6. Consideration may be a promise to do something or abstain from doing something. 2.Essentials of a valid consideration 1. 1/26/2014 Prof. Goel 21 . Consideration must move at the desire of the promisor. It may be past. It must be „Something of value‟. 5. present or future. Consideration must be legal 4.(CMDE) P.

Agreement to pay a time barred debt.No Consideration Necessary 1. K. 5. Goel 22 . Guarantee 1/26/2014 Prof. Contracts of agency. Completed gifts. 2. 4. 6. 3. 7. Remission of the promisee of performance of the promise. To compensate for past voluntary service. Made on account of natural love & affection.(CMDE) P.

Goel 23 .(CMDE) P. and is not disqualified from contracting by any law to which he is subject” 1/26/2014 Prof. K. and who is of sound mind.Capacity of Parties MEANING “Every person is competent to contract who is of the age of majority according to the law to which he is subject.

Goel 24 .(CMDE) P. K. No Ratification 3. Absolutely Void 2. Minor Beneficiary 6. Minor Promisee 1/26/2014 Prof. No Estoppels 5. Minor‟s Liability for Necessities 7.Minor’s Agreement 1. No Restitution 4.

(CMDE) P. K.Surety for a Minor 11. 1/26/2014 Prof.A minor cannot be declared as an insolvent 13.Minor as a member of a company 12.Minor’s Agreement……….. 8. Minor Partner 10.Minor‟s Liability for Tort. Minor Agent 9. Goel 25 .

Goel 26 . if at the time when he makes it.(CMDE) P.Persons of Unsound Mind “A Person is said to be of sound mind for the purpose of making a contract. K.” 1/26/2014 Prof. he is capable of understanding it. and of forming a rational judgment as to its effect upon his interests.

(CMDE) P. Goel 27 . K. 13 1/26/2014 Prof. Insolvent -Sec. Company or corporation 5.Disqualified Person 1. Foreign Sovereigns & ambassadors 3. Alien Enemy 2. Convict 4.

1/26/2014 Prof.(CMDE) P. Goel 28 .Free Consent DEFINITION: “Two or more persons are said to consent when they agree upon the same thing in the same sense”. K.

Free Consent Consent is said to be „Free‟ when it is not caused by: 1) Coercion 2) Undue Influence 3) Fraud 4) Misrepresentation 5) Mistake 1/26/2014 Prof. Goel 29 .(CMDE) P. K.

Goel 30 . to the prejudice of any person whatever with the intention of causing any person to enter into an agreement” 1/26/2014 Prof.(CMDE) P. any act forbidden by the Indian Penal Code. or the unlawful detaining or threatening to detain. K.Coercion “Coercion is the committing or threatening to commit. any property.

Undue Influence “A contract is said to be induced by undue influence where. Goel 31 . K. and 2) He uses the position to obtain an unfair advantage over the other” 1/26/2014 Prof.(CMDE) P. 1) The relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other.

or with his connivance.Fraud “Fraud means & includes any of the following acts committed by the party to a contract. to enter into the contract: 1/26/2014 Prof. or by his agent. K.(CMDE) P. with intent to deceive or to induce another party there to or his agent. Goel 32 .

c) A promise made without any intention of performing it. e) Any such act or omission as the law specifically declares to be fraudulent.Fraud a) A suggestion as to a fact of that which is not true by one who does not believe it to be true.(CMDE) P. Goel 33 .” 1/26/2014 Prof. K. d) Any other act fitted to deceive. b) An active concealment of a fact by one having knowledge or belief of the fact.

though he believes it to be true. Goel 34 .Misrepresentation Misrepresentation means & Includes: a) The positive assertion. K. of that which is not true. or 1/26/2014 Prof. in a manner not warranted by the information to the person making it.(CMDE) P.

without an intent to deceive. gains an advantage to the person committing it. or Prof.Misrepresentation means & Includes: b) Any breach of duty which. K. Goel 1/26/2014 35 . or any one claiming under him. by misleading another to his prejudice or to the prejudice of any one claiming under him.(CMDE) P.

(CMDE) P. to make a mistake as to the substance of the thing which is the subject of the agreement.Misrepresentation means & Includes: c) Causing however innocently. Goel 36 . 1/26/2014 Prof. K. a party to an agreement.

Goel Mistake 37 .(CMDE) P. Mistake of law • Foreign • Indian 2.1/26/2014 MEANING Mistake may be defined as an erroneous belief concerning something Kinds of mistake 1. K. Mistake of fact • Bilateral • Unilateral Prof.

if permitted. Prof.IF Legality of object & consideration Consideration & objects are unlawful 1) It is forbidden by law 2) It is of such a nature that.(CMDE) P. 3) It is fraudulent 4) It involves or implies injury to the person or property of another 5) The court regards it as immoral 6) The court regards it as „opposed to public policy‟. Goel 1/26/2014 38 . it would defeat the provisions of any law. K.

Expressly declared void agreements Agreement
1) In restraint of marriage 2) In restraint of trade 3) In restraint of legal proceedings 4) The meaning of which is uncertain 5) By way of wager 6) Contingents on impossible events 7) To do impossible acts”
Prof.(CMDE) P. K. Goel



Contingent Contracts
“A contingent contract is a contract to do or not to do something, if some

event, collateral to such contract does
or does not happen”


Prof.(CMDE) P. K. Goel




Prof.(CMDE) P. K. Goel


K. Goel 42 . By the promisor himself 2.By whom contracts must be performed 1. By the legal representatives 4. By the agent 3. Performance by a third person 1/26/2014 Prof.(CMDE) P.

By performance – actual or attempted. K. By breach of contract 1/26/2014 Prof. Goel Discharge of a contract 43 . By operation of law 6. 2.Modes of discharge 1. 3. By subsequent or supervening impossibility or illegality. By lapse of time 5. By mutual consent or agreement. 4.(CMDE) P.

Reimbursement of person paying money due by another.Quasi – Contract Quasi Contractual obligations 1. in payment of which he is interested. 2.(CMDE) P. Claim for necessaries supplied to a person incapable of contracting or on his account. 1/26/2014 Prof. Goel 44 . K.

Liability of person to whom money is paid. or thing delivered by mistake or under co-ercion. Obligations of person enjoying benefit of non-gratuitous act. 4.Quasi Contractual obligations 3. 1/26/2014 Prof.(CMDE) P. Goel 45 . K. Responsibility of finder of goods. 5.

Suit upon quantum – Meruit 4. 1/26/2014 Prof. 2. Suit for damages 3. Goel 46 . K. Rescission of the contract. Suit for specific performance of the contract 5.(CMDE) P. Suit for an injunction.Remedies for breach of contract 1.

(CMDE) P. 1/26/2014 Prof. Goel 47 .Indemnity DEFINITION: “A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person. is called a contract of indemnity”. K.

1/26/2014 Prof. or discharge the liability of the third person in case of his default”. Goel 48 .(CMDE) P.Guarantee DEFINITION: “A contract of guarantee is a contract to perform the promise. K.

K. Primary Liability is of Principal Debtor  Surety gives guarantee at the request of the debtor  3 Parties – Creditor.(CMDE) P.Distinction between Indemnity & Guarantee Indemnity  Liability of the Indemnifier is Primary  Indemnifier acts independently  Two parties – Indemnifier and Indemnity holder 1/26/2014 Guarantee  Liability of the surety is secondary. Principal Debtor and Surety. Goel 49 . Prof.

liability of the  There is an existing indemnifier arises only on the legal debt/duty. guaranteed by the surety. Goel 1/26/2014 50 .  The Indemnifier cannot sue  Can proceed against the third party for loss in his the Principal Debtor in own name.(CMDE) P. the happening of the performance of which is contingency. K. the suit in the name of the indemnified unless there is an assignment in his favour. Can only bring his own right. Prof.Distinction between Indemnity & Guarantee Indemnity Guarantee  In most cases.

indemnifier arises only on There is usually an existing the happening of a debt or duty the contingency. Goel 51 . performance of which is guaranteed by the surety.Distinction between Indemnity & Guarantee Indemnity Guarantee  For the reimbursement of  Security of a debt or good loss. K.  Only one contract between  3 Contracts = A & B the indemnifier and the = B&C indemnified = A&C 1/26/2014 Prof.(CMDE) P. The liability of the conduct of an employee.

(CMDE) P.Kinds of Guarantee a)Specific b)Continuing Guarantee 1/26/2014 Prof. Goel 52 . K.

Notice of Revocation Death of Surety Variance in terms of contract Release or discharge of Principal Debtor. Goel 53 . Creditor‟s act or omission impairing surety‟s eventual remedy. 1/26/2014 Prof.Discharge of Surety from Liability 1. K. 8. 2. Invalidation of the contract of Guarantee. Loss of security. Arrangement by Creditor with Principal Debtor without surety‟s consent. 5. 3. 6.(CMDE) P. 4. 7.

Goel 54 . upon a contract that they shall. 1/26/2014 Prof. when the purpose is accomplished. K. be returned or otherwise disposed of according to the directions of the person delivering them”.DEFINITION: Bailment “A Bailment is the delivery of goods by one person to another for some purpose.(CMDE) P.

(CMDE) P. Delivery of movable goods 2. K.Essential features of Bailment 1. Goods are delivered for some purpose. 1/26/2014 Prof. Goel 55 . Condition of delivery – on accomplishment of purpose goods are to be returned. 3.

3. 2. Not to mix goods bailed with his own goods 4.(CMDE) P. Not to make unauthorized use of goods entrusted to him. To take reasonable care of goods delivered to him. To deliver any accretion to the goods. K. 1/26/2014 Prof.Duties of Bailee 1. 5. To Return the goods. Goel 56 .

To indemnify bailee. Goel Duties of Bailor 57 . Prof. To receive back the goods. 5.(CMDE) P. 4. 2. To repay necessary expenses in case of gratuitous bailment.1/26/2014 1. 3. K. To disclose faults in goods bailed. To repay any extraordinary expenses in case of non-gratuitous bailment.

To deliver goods to one of several joint bailors.(CMDE) P. Lien. To deliver goods in good faith. to bailor without title. 2. 3. Goel 58 .Rights of Bailee 1. K. Enforcement of bailor‟s duties. 4. 1/26/2014 Prof.

Rights of Bailor 1. To demand return of goods at any time incase of Gratuitous Bailment.(CMDE) P. To terminate bailment if the bailee uses the goods wrongfully. K. Goel 59 . 1/26/2014 Prof. 3. Enforcement of bailee‟s duties. 2.

is called the PRINCIPAL” Sec 2(a) 1/26/2014 Prof.(CMDE) P. The person for whom such act is done. K. Goel 60 .Agency DEFINITION: “An AGENT is a person employed to do any act for another or to represent another in dealing with third persons. or who is represented.

K. Goel 61 .Creation of Agency •Agency by Express Agreement •Agency by Implied Agreement •Agency by Ratification •Agency by Operation of Law 1/26/2014 Prof.(CMDE) P.

K.(CMDE) P.  Not to make any profit out of his agency except his remuneration.  To render accounts  To communicate with Principal in case of difficulty.Duties of Agent  To follow Principal‟s directions or customs.  Not to deal on his own account. 1/26/2014  Not to delegate authority.  To carry out the work with reasonable care. Goel 62 . skill and diligence. Prof.  On termination of agency by Principal‟s death or Insanity to protect and preserve the interest of the Principal.

Goel 63 . K.particular  To be indemnified against consequences of Lawful acts  To be indemnified against consequences of acts done in goods faith  To compensation  Stoppage of goods in transit.(CMDE) P. 1/26/2014 Prof.Rights of Agent  To receive remuneration  Retainer  Lien .

 To indemnify agents against consequences of acts done in good faith  To indemnify against the injury caused by Principal‟s neglect. 1/26/2014 Prof. Goel 64 . K.  To pay the agent for commission or other remuneration agreed.Duties of Principal  To indemnify agents against consequences of all lawful acts.(CMDE) P.

 To resist against agent‟s claim for indemnity against liability incurred. Goel 65 . 1/26/2014 Prof.Rights of Principal  To recover damages  To obtain an account of secret profits and recover them and resist a claim for remuneration. K.(CMDE) P.

Goel 66 . K.Termination of Agency By Act of Parties By Operation of Law Performance of the Contract Agreement Expiry of the time Death of either party Revocation by the Principal Revocation by the Agent 1/26/2014 Insanity of either party Destruction of the subject matter Principal becoming an alien enemy Dissolution of Co. Termination of agents authority Prof.(CMDE) P.

Contract of sale of Goods DEFINITION: “A Contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.(CMDE) P. Goel 67 .” Sec 4(1) of the Sale of Goods Act 1/26/2014 Prof. K.

No Formalities to be observed 1/26/2014 Prof.Essential Characteristics of a contract of Sale of Goods 1. Goel 68 . Goods 4. Includes both a „Sale‟ and „an Agreement to Sell‟ 6. Price 5. Transfer of Property 3. Two Parties 2. K.(CMDE) P.

Distinction between ‘Sale’ and ‘Agreement to Sell’ 1. 4. 2. 5. K. 1/26/2014 Prof. Transfer of property (ownership) Risk of loss Consequences of Breach Right of Resale Insolvency of buyer before he pays for goods 6. Insolvency of seller if the buyer has already paid the price. Goel 69 .(CMDE) P. 3.

the breach of which gives the aggrieved party a right to repudiate the contract itself. Goel 70 .” Sec 12(2) 1/26/2014 Prof.(CMDE) P.Condition DEFINITION: “A Condition is a stipulation essential to the main purpose of the contract. K.

K.(CMDE) P. the breach of which gives the aggrieved party a right to sue for damages only. and not to avoid the contract itself.” 1/26/2014 Prof. Goel 71 .Warranty DEFINITION: “A warranty is a stipulation collateral to the main purpose of the contract.

Goel 72 .Implied Conditions  As to title  In a sale by description  In a sale by sample  In a sale by sample as well as by description  As to fitness or quality  As to merchantability  As to wholesomeness 1/26/2014 Prof.(CMDE) P. K.

Implied Warranties  Of quiet possession  Of freedom from encumbrances  Of disclosing the dangerous nature of goods to the ignorant buyer. Goel 73 . K.(CMDE) P. 1/26/2014 Prof.

 In case of sale by sample. K. Prof.  Fitness for a particular purpose 1/26/2014  Merchantable quality.  In case of sale by description by sample.Exception to the Doctrine of Caveat emptor  In case of misrepresentation by seller  In case of concealment of latent defects by seller. Goel 74 .(CMDE) P.  In case of sale by description.

(CMDE) P. Goel 75 .Transfer of Property  Risk „Prima Face‟ passes property with  Action Against third parties  Suit for price  Insolvency of the seller or the buyer. K. 1/26/2014 Prof.

Rules regarding transfer of property 1. In Specific or Ascertained Goods  When goods are in a deliverable state  When goods have to be put in a deliverable state  When goods have to be measured etc. K. In Unascertained goods & future goods 1/26/2014 Prof. Goel 76 . to ascertain price  When goods are delivered on approval 2.(CMDE) P.

Meaning of unpaid seller DEFINITION: The seller of goods is deemed to be „UNPAID SELLER (a) When the whole of the price has not been paid or tendered. OR (b) Where a bill of exchange or other negotiable instrument has been received as a conditional payment. K.e.(CMDE) P. Goel 77 . subject to the realization thereof. I. and the same has been dishonored 1/26/2014 Prof.

K.(CMDE) P.Characteristics of an unpaid seller  He must sell goods on cash terms and not on credit  He must be unpaid either wholly or partly  He must not refuse to accept payment when tendered. 1/26/2014 Prof. Goel 78 .

60) 1/26/2014 79 . K. 61) Prof.Rights of an unpaid seller Against the Goods Where the property in the goods has passed [Sec. Goel Lien Stoppage Re-sale (Sec.54) With holding to 49 (Sec. 47 in transit (Sec. 56) (Sec.(CMDE) P. 50 delivery to 52 Suit for price Suit for Repudiation (Sec. 46(1)] Against the Buyer personally Where the property in the goods has Not passed [Sec. 46(2)] Stoppage in transit Suit for interest (Sec. 55) damages Of contract (Sec.

notwithstanding any defect of title in the person from whom he took it.” -Judge Wills 1/26/2014 Prof.DEFINITION: Negotiable Instrument “A Negotiable instrument means a promissory note. bill of exchange or cheque payable either to order or to bearer” -Sec.(CMDE) P. 13 “ A Negotiable instrument is one the property in which is acquired by every person who takes it BONAFIDE and for value. K. Goel 80 .

(CMDE) P.        1/26/2014 In writing Signed by the Maker/Drawer Promise or order to pay Promise/order must be unconditional Payment in Money For a certain sum Payable at a time certain to arrive Drawee must be named or described with reasonable certainty. K. Goel Essential Elements of a Negotiable Instrument 81 . Prof.

K. to pay a certain sum of money. or to the order of. 1/26/2014 Prof. a certain person.(CMDE) P.Promissory Note Meaning “A Promissory note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking. Goel 82 . signed by the maker. or to the bearer of the instrument.

directing a certain person to pay a certain sum of money only to.” 1/26/2014 Prof. Goel 83 .Bill of Exchange Meaning “A Bill of exchange is an instrument in writing containing an unconditional order signed by the maker. or to the order of. a certain person or to the bearer of the instrument. K.(CMDE) P.

K.Meaning Cheque “A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form” 1/26/2014 Prof. Goel 84 .(CMDE) P.

written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system. K.Meaning Cheque – Electronic Form „A cheque in the electronic form‟ means a cheque which contains the exact mirror image of a paper cheque. 1/26/2014 Prof. Goel 85 .(CMDE) P. and is generated.

Goel 86 . K. 1/26/2014 Prof. substituting the further physical movement of the cheque in writing. whether paying or receiving payment. either by the clearing house or by the bank. immediately on generation of an electronic image for transmission.(CMDE) P.Meaning Truncated Cheque „A truncated cheque‟ means a cheque which is truncated during the course of a clearing cycle.

K. Prof.(CMDE) P.Distinction between Bill & Promissory Note Note  Two parties – Maker (Dr) & Payee (Cr)  Cannot be made payable to the maker Bill  3 Parties –Drawer Drawee & Payee. Goel  Unconditional promise  by the maker to pay 1/26/2014 87 . Two can be OK  The drawer and payee or drawee and payee –same Unconditional order to the drawee to pay according to the drawer‟s directions.

K. Prof.(CMDE) P.  The liability of maker is  Liability of the drawer is primary & absolute secondary & conditional  Maker stands in  immediate relation with the payee Maker/drawer of an accepted bill in immediate relation with the acceptor & not the payee.Distinction between Bill & Promissory Note… Note Bill  Presented for payment  Payable after sight must be w/o any prior accepted by the drawee or acceptance by the some one else on his behalf maker before it can be presented. Goel 1/26/2014 88 .

K. Goel 89 .(CMDE) P.Distinction between Bill & Promissory Note… Note  No need of protest Bill  Foreign bills must be protested for dishonor where law requires it No notice is necessary  Notice of dishonor by the holder to the drawer & intermediate endorsers  1/26/2014 Prof.

Goel   Payable to bearer on demand-valid Does not require acceptance by the drawee   1/26/2014 90 . Such a B/E is void and illegal Such acceptance is necessary Prof.(CMDE) P.Distinction between A cheque & B/E Cheque Bill of Exchange   Drawn on a Banker Payable on demand   May be drawn on any person including a banker Payable on demand or the expiry of certain period after date of sight. K.

Distinction between A cheque & B/E……. Cheque Bill of Exchange      1/26/2014 Does not require any stamp No days of grace Can be crossed    Proper stamp is necessary Three days of grace on „time bills‟ Can not be crossed No Such a thing is required Prof. K. Goel Payment can be  countermanded by the drawer No system of noting/protest  91 .(CMDE) P.

” -Sec.Holder “The holder of a negotiable instrument means any person entitled to the possession of the instrument in his own name and to receive or recover the amount due thereon from the parties liable thereto.8 1/26/2014 Prof. K. Goel 92 .(CMDE) P.

He must have become holder in good faith. 3. 4. He must take the N/I complete and regular on the face of it. 1/26/2014 Prof. He must be a holder for valuable consideration. 2. 5. He must be a holder. He must have become the holder of the N/I before its maturity.Holder in due course 1. K. Goel 93 .(CMDE) P.

Privileges of Holder in due course
He gets a better title than that of the transferor. Privilege in case of inchoate stamped instruments. Liability of prior parties Privilege in case of fictitious bill. Privilege when an instrument delivered conditionally is negotiated.  Estoppel against denying original validity of instrument.  Estoppel against denying capacity of payee to indorse.     
Prof.(CMDE) P. K. Goel



“When a promissory note, bill of exchange
or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.”
Prof.(CMDE) P. K. Goel



Not Negotiable

“A person taking a cheque crossed
generally or specially, bearing in either

case the words „Not Negotiable‟, shall not
have, and shall not be capable of giving, a better title to the cheque than which the person from whom he took it had.”
Prof.(CMDE) P. K. Goel


 A written complaint to a M. within one month of the date when the cause of action arose.Bouncing of Cheques  Cheque should have been dishonored due to „insufficiency of funds.‟  Cheque presented within its validity. 1/26/2014 Prof. K.  For the discharge of legally enforceable debt or other liability.M. or 1st Class J.  Notice within 30 days of dishonor. Goel 97 .  Failed to make the payment within 15 days of the receipt of notice.(CMDE) P.M.