Sale of Goods and Negotiable Instruments
Scope
This domain combines the Sale of Goods Act, 1930 and the Negotiable Instruments Act, 1881. Expect questions distinguishing sale from agreement to sell, conditions from warranties, unpaid seller rights and cheque dishonour.
Sale of goods
A sale (s 4) transfers property in goods immediately; an agreement to sell transfers property later or conditionally. Risk generally follows property, subject to agreement. A condition (s 12) is essential to the main purpose; its breach allows rejection and damages. A warranty is collateral; breach gives damages only. Implied conditions include title (s 14), sale by description (s 15), sale by sample (s 16) and, in described goods from a dealer, merchantable quality, plus fitness where the buyer relies on the seller's skill. Caveat emptor applies subject to these exceptions. An unpaid seller has a lien (s 47), stoppage in transit (s 50), resale (s 54) and damages. The nemo dat rule (s 27) protects the true owner, subject to exceptions.
Negotiable instruments
A promissory note, bill of exchange or cheque is negotiable by delivery or endorsement. A holder in due course (s 9) takes for consideration, in good faith, before maturity and without notice of defect. Crossing restricts payment through a bank; 'not negotiable' crossing does not stop transfer but denies the transferee a better title. On dishonour, notice is generally required (s 93). Section 138 applies only to a cheque dishonoured for insufficiency of funds; the payee must send a demand notice within 30 days, allow 15 days to pay, and file a complaint within one month thereafter.
Worked example
A buys a laptop 'as per model X' from a dealer. It works on delivery but the battery overheats within a week. Because the buyer relied on the dealer's description and the defect is latent, the implied condition of merchantable quality is breached. A may reject the goods or claim damages, not merely a repair cost, unless the contract validly excludes that condition.
Traps
Property and risk can separate. A condition may be treated as a warranty if the buyer accepts goods and continues the contract. Section 138 is not available for a bill of exchange or for a cheque dishonoured for reasons other than insufficiency.