Law of Sale of Goods and Negotiable Instruments
Sale of Goods Act, 1930
A sale transfers property immediately; an agreement to sell is future or conditional. Conditions (s.12) go to the root of the contract and allow rejection; warranties give damages only. Implied conditions run through ss.14–17: title, sale by description, sale by sample, fitness for purpose and merchantability. Caveat emptor governs, subject to these implied terms and fraud. Section 27 codifies nemo dat, with exceptions for mercantile agents, estoppel and sale by an unpaid seller. Where the buyer defaults, the unpaid seller has lien (s.47), stoppage in transit (s.50) and resale (s.54).
Negotiable Instruments Act, 1881
A promissory note (s.4) is an unconditional promise; a bill of exchange (s.5) an unconditional order; a cheque (s.6) is a bill drawn on a banker payable on demand. A holder in due course (s.9) takes free of prior defects in title. Crossing (ss.123–131A) directs collection through a bank.
Section 138 applies where a cheque issued for a legally enforceable debt is dishonoured for insufficiency of funds or because it exceeds the arrangement. Notice must issue within 30 days of the return memo; the drawer gets 15 days to pay; the complaint must be filed within one month thereafter, in a court where the payee's bank branch is situated.
Worked example. A cheque is returned on 1 March. Notice must be issued by 31 March. If the drawer pays within 15 days of receipt, no offence arises; if not, the payee must file the complaint within one month after that 15-day period. Section 143A allows interim compensation of up to 20% of the cheque amount.
Traps. Confusing condition with warranty; forgetting the 30/15/30 rhythm of s.138; assuming the cheque's three-month validity decides limitation.