Legal Aspects of Business Assignment-2 1

Name: - Kaklotar Sahil Naresh Bhai

Roll No: - 240

Assignment Topic: - 1. Discuss the various parties of negotiable instruments Act

2. Explain Sale and Agreement to sale and distinguish

Year: - T.Y.B.B.A (finance )
Division: - 1
Submission Date: - 01/10/2022
Submitted To: - Vaishali madam

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Legal Aspects of Business Assignment-2 2

Q-1 Discuss the various parties of negotiable instruments Act

Maker/drawer: the person who makes or executes the note promising to pay the amount stated
therein.
Drawee: The person directed to pay the money by the drawer. The drawee is the paying bank
in case of cheque.
Payee: Payee is the person whose name is written on the promissory note or bill of exchange
or cheque. The payee is entitled to receive amount mentioned in the note or bill or cheque.
Holder: Holder is either the payee or some other person to whom he may have endorsed the
promissory note or bill of exchange or cheque. A person cannot be a holder unless he is the
payee or indorse (endorsee) thereof.
Holder in due course: Holder in due course means any person who for consideration became
the possessor of a promissory note, bill of exchange or cheque, if payable to bearer, or the
payee or indorse thereof, if payable to order, before the amount mentioned in it became payable,
and without having sufficient cause to believe that any defect existed in the title of the person
from whom he derived his title.”
Endorser: A signature of the owner (the holder of the instrument) would serve the legal rights
to transfer an instrument to another party. The holder of the instrument who transfers his right
to another party by endorsement is called endorser.
Endorsee: If the endorser adds a direction to pay the amount mentioned in the instrument to,
or to the order of, a specified person, the person so specified is called the “endorsee” of the
instrument.
Endorsement: If the endorser signs his name only, it is called endorsement in blank. If the
endorsement contains the instructions of endorser to pay the amount mentioned in the
instrument to, or to the order of, a specified person, the endorsement is called endorsement in
full.
Drawee in the case of need: In addition to drawee’s name, the name of a person is given in
the bill or endorsement, to have resorted in case of need. Such person is called drawee in case
of need.
Acceptor for honour: In the event of refusal of acceptance of bill by the original drawer or in
cases of providing better security when demanded by notary public, with the consent of the
holder some other person who is originally not liable for payment of bill, may accept it for
honour of any party liable on the bill. Such acceptor is called ‘Acceptor for honour”.

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The Liability of parties

1. Liability of Drawer (Section 30)
Drawer means a person who signs a cheque or a bill of exchange ordering his or her bank to
pay the amount to the payee
In case of dishonour of cheque or bill of exchange by the drawee or the acceptor, the drawer of
such cheque or bill of exchange needs to compensate the holder such amount. But, the drawer
needs to receive due notice of dishonour.
So, the nature of the drawer’s liability on drawing a bill is:
(i) On due presentation: - It should be accepted and paid accordingly.
(ii) In the case of dishonour: - Drawer needs to compensate the holder such amount, only when
he receives a notice of dishonour by the drawee.
2. Liability of the Drawee of Cheque (Section 31)
The person who draws a cheque i.e drawer having sufficient funds of the drawer in his hands
properly applicable to the payment of such cheque must pay the cheque when duly required to
do so and, or in default of such payment, he shall compensate the drawer for any loss or damage
caused by such default.
The drawee of a cheque will always be a banker. As a cheque is a bill of exchange, drawn on
a specified banker by the drawer, the banker is bound to pay the cheque of the drawer, i.e., the
customer. For the following conditions are need to be satisfied:
(i) Sufficient amount of funds to the credit of customer’s account should be there with the
banker.
(ii) Such funds are required to be properly applied against the payment of such cheque, e.g.,
the funds are not under any kind of lien etc.
(iii) The cheque is duly required to be paid, during banking hours and on or after the date on
which it is made payable.
If the banker unjustifiably refuses to honour the cheque of its customer, it shall be liable for
damages.
3. Liability of Acceptor of Bill and Maker of Note (Section 32)
As per section 32 of negotiable instrument act, in the absence of a contract to the contrary, the
maker of a promissory note and the acceptor before the maturity of a bill of exchange are under
the liability to pay the amount thereof at maturity.
They need to pay the amount according to the apparent tenor of the note or acceptance
respectively. The acceptor of a bill of exchange at or after maturity is liable to pay the amount
there of to the holder on demand
The liability of the acceptor of a bill or the maker of a note is absolute and unconditional but is
subject to a contract to the contrary and may be excluded or modified by a collateral agreement.
4. Liability of Endorser (Section 35)

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An endorser is the one who endorses and delivers a negotiable instrument before maturity.
Every endorser has a liability to the parties that are subsequent to him.
Also, he is bound thereby to every subsequent holder in case of dishonour of the instrument by
the drawee, acceptor or maker, to compensate such holder of any loss or damage caused to him
by such dishonour. However, he is to compensate only after the fulfilment of the following
conditions:
(i) There is no contract to the contrary
(ii) The Endorser has not expressly excluded, limited or made conditional his own liability
(iii)And, such endorser shall receive due notice of dishonour
5. Liability of Prior Parties (Section 36)
Until the instrument is duly satisfied, every prior party to a negotiable instrument has a liability
towards the holder in due course. The prior parties include the maker or drawer, the acceptor
and all the intervening endorsers. Also, there liability to a holder in due course is joint and
several. In the case of dishonour, the holder in due course may declare any or all prior parties
liable for the amount.
6. Liability Inter-se
Every liable party has a different footing or stand with respect to the nature of liability of each
one of them.
7. Liability of Acceptor when Endorsement is Forged (Section 41)
An acceptor of a bill of exchange who had already endorsed the bill is not relieved from
liability even if such endorsement is forged. This is so even if he knew or had reason to believe
that the endorsement was forged when he accepted the bill.
8. Acceptor’s Liability when Bill is drawn in a Fictitious Name
An acceptor of a bill of exchange who draws a bill in a fictitious name, payable to the drawer’s
order will be liable to pay any holder in due course. He or she will not be relieved from such
liability by reason that such name is fictitious.

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Legal Aspects of Business Assignment-2 5

Topic: - The consumer Protection Act 2019

1. Consumer Rights
“Consumer’s Right”, by definition, is the right of a consumer to have adequate information
regarding the quality, quantity, potency, purity, price, and standard of the commodity they are
using and that they are protected against any malpractices as a consumer. The following are
the fundamental consumer rights of an individual in India:
Right to Safety: The consumer has the right to ensure the quality of the product available in
the market in order to safeguard their long-term interests. The quality marks for products in
India are Indian Standards Institution (ISI) (for industrial, electrical products), AGMARK (or
Agriculture Mark for agricultural products), FPO mark (for processed fruit items), etc.
Right to be Informed: The consumer can insist on acquiring all the necessary details regarding
the products and protect themselves from malpractices.
Right to Choose: It is the right of a consumer to have accessibility to a variety of products
available in the market at fair prices.
Right to be Heard: The consumer’s interest will be given proper consideration and they will
be provided with the appropriate forum to do so.
Right to Seek Redressal: The consumer has the right to claim for redressal in case of
exploitation and demand for a fair settlement.
Right to Consumer Education: It is also the responsibility of the consumer to be aware of
their rights and hence the right to consumer education means the right to acquire relevant skills
and knowledge as required to be an informed consumer.
Legislations for protection of consumer rights
The Consumer Protection Act (CPA) was introduced in 1986 to protect the interests of
consumers in India. The purpose of CPA was to solve customer disputes and to help establish
Consumer Councils and other authorities for the settlement of these disputes.

Consumer Protection Act, 1986

Globally, there was significant progress and expansion in the consumer goods industry by the
1980s. This attracted a variety of consumer goods to the market but also affected consumer
sovereignty due to asymmetric information and control held by traders and manufacturers.
There was limited oversight over their advertisements over television, newspaper, or
magazines. However, the services provided by these manufacturers were not up to the mark.
Consumer items were manufactured by a variety of firms which was adding up to the tally of
adulterated and sub-standard articles in the Indian market.

In order to counter these issues, the Government has been introducing a series of provisions for
providing protection to consumers such as the Indian Contract Act 1872, Sale of Goods Act
1930, Standards of Weight and Measures Act 1976, etc. These measures provided some relief

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to the consumer but there was scope for further reform to address adulterated and sub-standard
goods. This is what the Consumer Protection Act of 1986 sought to resolve. While it was
successful in addressing critical issues, it still had some drawbacks as well:

• Lack of provisions related to online transactions or teleshopping

• Many varieties of deceptive or unfair practices were not added in this Act
• Lack of provision related to product liability
• Lack of provisions related to unfair contracts
• Lack of provisions for e-commerce websites
• No provision for an Alternative Dispute Redressal Mechanism
Consumer Protection Act, 2019
The Consumer Protection Act of 2019 was an improvement over the 1986 version of the same.
Some key improvements that were introduced were:
Streamlining all methods of exchanges related to merchandise purchase and enterprise
transactions
The 1986 version of the Consumer Rights Act only had six types of unfair/deceptive trade
practices. Three new practices were added in this section in the Consumer Protection Act of
2019.
The concept of product liability was also introduced
The provision of ‘Unfair Contract’ was also introduced—defined as a contract that can cause
a change in the rights of a consumer.
New provision for direct selling and e-commerce, which also elaborates basic consumer rights
Mandates that mediation cells should be attached to State, District and National level
commissions.
Creation of the Central Consumer Protection Authority to promote, protect and enforce the
rights of consumers
How is the Consumer Protection Act 2019 making a difference?
The new Consumer Protection Bill 2019, with its pillars of transparency and accountability,
has been regarded as a major step in the consumer empowerment landscape.

Apart from strengthening consumer protection efforts, it has enabled the consumers to make
logical and informed decisions before availing of any services or purchasing anything.
Strict regulations along with the provision of penalties and punishments would act as a shield
for the consumers against manipulative tactics. It has been introduced to provide major benefits
to the consumers and to streamline the entire consumer complaint mechanism.

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(2) Misleading Advertisement

What is misleading advertising?

Under the consumer law advertising is seen as misleading if it involves false, misleading or
deceptive information that is likely to cause the average consumer to act in a way they might
otherwise not. Advertising may also be considered misleading if important information that
the average consumer needs to make an informed decision is left out. Misleading advertising
covers claims made directly to consumers by manufacturers, distributors and retailers, as well
as in advertisements, catalogues, websites etc.

Examples of misleading advertising

• A false claim about the characteristics of the goods or service, e.g. – a product is a
different colour, size or weight to what is advertised.
• The price or way the price is calculated is misrepresented, e.g. – products are advertised
at sale prices, but turn out not to be.
• The way the goods or service are supplied is misrepresented, e.g. – free delivery is
advertised, but the delivery actually involves some sort of fee or charge.
• Any aspect about the advertiser is misrepresented, e.g. – the business is presented as
being a member of a trade association, when they are actually not.
• The advertisement creates a false impression about a product or service, even if the
information given is correct.
• Any important information is hidden or left out.

Forms of advertisement
• Remember that advertisements may take many different forms, such as:
• Press advertisements in newspapers or magazines
• Television or radio commercials
• Posters telling the public about an event or concert
• Digital advertisements on websites or mobile phones
• Websites
• Shop signs (giving information unique to a particular shop)
• Sales/direct mail letters
• Faxes of promotional material
• Catalogues
Prevalent forms of misleading advertisements: -
• One example is the case of milk advertisements to children. A number of milk
companies claim that their products enhance performance during sports.
• Additionally, certain advertisements use celebrities to endorse their products. By doing
this, the products will be creating the impression that it is those food products that can
cause one to live their dreams or live a celebrity-like life. Children usually take things
at face value and this misleads them into purchasing those items as they are.

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Another interesting feature about advertisements to children is that most of them are
usually done for products that are low in nutrients; these include breakfast cereals and
other junk foods. Such foods are high in sugar and low in other essential nutrients.
However, many companies do not include that information in their advertisements;
instead, most of them assert that children should actually purchase the products so as to
become healthy. This is very misleading and can cause children to become overweight
or even obese.
• In close relation to this example is the labelling of food as containing zero fat. This is
also another gimmick that could cause dire consequences to the consumer because it
does not necessarily mean that the item has no fat at all; it simply means that its fat
content is lower than in other similar products. This means that when consumers
continually purchase and use such food items, then they may still be subjected to the
same health problems that their counterparts eating the non-low-fat foods are.
• The advertisements regarding fairness creams, getting slimmer or taller by popping pills
or the claims by unscrupulous financial institutions regarding giving unrealistic higher
returns on investments trick gullible consumers in purchasing their goods or services.

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