Month: April 2020

A negotiable instrument has the following characteristics.

1. Property

The possessor of the negotiable instrument is presumed to be the owner of the property contained therein. A negotiable instrument does not merely give possession of the instrument but right to property also. The property in a negotiable instrument can be transferred without any formality. In the case of a bearer instrument, the property passed by mere delivery to the transferee. In the case of an order instrument, endorsement and delivery are required for the transfer of property.

2. Title

The transferee of a negotiable instrument is known as holder in due course.’ A bonafide transferee for value is not affected by any defect of title on the part of the transferor or of any of the previous holders of the instrument. This is the main distinction between a negotiable instrument and other subjects of ordinary transfer. The general rule of nemo dat quod non habet does not apply to negotiable instruments.

3. Rights

The transferee of the negotiable instrument can sue in his own name, in case of dishonor.

A negotiable instrument can be transferred any number of times till it is at maturity. The holder of the instrument need not give notice of transfer to the party liable on the instrument to pay.

4. Presumptions

Certain presumptions apply to all negotiable instruments e.g. a presumption that consideration has been paid under it.

5. Prompt Payment

A negotiable instrument enables the holder to expect prompt payment because a dishonor means the ruin of the credit of all persons who are parties to the instrument.

Examples of negotiable instruments

(a) Negotiable instruments recognized by statute

(i) Bills of exchange

(ii) Promissory notes.

(iii) Cheques

(b) Negotiable instruments recognized by usage or custom :

(i) Hundis

(ii) Share warrants.

(iii) Dividend warrants

(iv) Banker’s drafts.

(v) Circular notes.

(vi) Bearer debentures.

(vii) Debentures of Bombay port trust.

(viii) Railway receipts.

(ix) Delivery orders.

The list of negotiable instruments is not a closed chapter. With the growth of commerce, new kinds of securities may claim recognition as negotiable instruments.

Example of Non-negotiable instruments

(i) Money orders.

(ii) Deposit receipts.

(iii) Share certificates

(iv) Dock warrants.

(v) Postal orders.

Consumer is a person or a group who intends to order, orders, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, not directly related to entrepreneurial or business activities.

Consumer Goods Sector

The consumer goods sector is a category of stocks and companies that relate to items purchased by individuals and households rather than by manufacturers and industries. These companies make and sell products that are intended for direct use by the buyers for their own use and enjoyment. This sector includes companies involved with food production, packaged goods, clothing, beverages, automobiles, and electronics.

Consumer goods can be broadly categorized as durable or nondurable, and the overall consumer goods sector can be broken down across many different industries. While some product types, such as food, are necessary, others, such as automobiles, are considered luxury items. In general, when the economy is growing, consumer demand grows and the sector will see an increased demand for higher-end products. When consumer demand shrinks, there is an increased relative demand for value products.

Many companies in the consumer goods sector rely heavily on advertising and brand differentiation. Performance in the consumer goods sector depends heavily on consumer behavior. Developing new flavors, fashions, and styles and marketing them to consumers is a priority.

Modern Internet technology has had an enormous and ongoing impact on the consumer goods sector. The ways products are manufactured, distributed, marketed, and sold have all evolved dramatically over the past few decades.

Subsectors

The consumer goods sector includes a diverse array of varied industries. Everything that consumers buy and use can fall into this category, so understanding how their different characteristics can affect industry performance can be important. Broadly, this sector can be divided into durable and nondurable goods. Many nondurable goods can be considered fast moving consumer goods, which are packaged goods with high sales volume, rapid inventory turnover, and often short shelf lives, such as foods. Durable goods include many big-ticket consumer goods, such as cars, major appliances, and household electronics.

Marketing and Branding

Marketing, advertising, and brand differentiation are key considerations for companies in the consumer goods sector. Many consumer goods sector companies are faced with a range of close competitors, substitute goods, and potential rivals. Competition on price and quality is often fierce, so brand identification and differentiation are critical to consumer goods sector companies’ performance.

Technology

Technological advancement is at the heart of consumer goods sector industry trends. Technological advancement has revolutionized supply chains, marketing, and the products themselves in this sector. Continuous and interconnected supply chains are driving operational efficiencies. Using new technologies, many consumer goods sector companies are engaging with consumers in more direct and innovative ways. Consumers research, purchase, and engage with brands digitally, and companies in this sector have to take this into account in their strategies. Consumer participation in brands has moved beyond just buying and consuming the products, with continuous consumer feedback and on-demand access to consumer data in real time. Connectedness and interoperability of consumer products have become key selling points for companies in this sector.

Goods and services are often pronounced in the same breath. These are offered by the companies to the customers to provide utility and satisfy their wants. At present, the success of the business lies in the combination of best quality of goods and customer oriented services. ‘Goods’ are the physical objects while ‘Services’ is an activity of performing work for others.

Goods implies the tangible commodity or product, which can be delivered to the customer. It involves the transfer of ownership and possession from seller to the buyer. On the other hand, services alludes to the intangible activities which are separately identifiable and provides satisfaction of wants.

One of the main difference between goods and services is that the former is produced and the latter is performed.

Goods

Goods refer to the tangible consumable products, articles, commodities that are offered by the companies to the customers in exchange for money. They are the items that have physical characteristics, i.e. shape, appearance, size, weight, etc. It is capable of satisfying human wants by providing them utility. Some items are made for one-time use by the consumer while some can repeatedly be used.

Goods are the products which are traded on the market. There is a time gap in the production, distribution, and consumption of goods. When the buyer purchases goods and pays the price, the ownership is passed from seller to buyer.

Products are manufactured in batches, which produces identical units. In this way, a particular product offered by the company will have the same specifications and characteristics all over the market.

Example: Books, pen, bottles, bags, etc.

Services

Services are the intangible economic product that is provided by a person on the other person’s demand. It is an activity carried out for someone else.

They can only be delivered at a particular moment, and hence they are perishable in nature. They lack physical identity. Services cannot be distinguished from the service provider. The point of sale is the basis for consumption of services. Services cannot be owned but can only be utilized. You can understand this by an example: If you buy a ticket for watching a movie at the multiplex, it doesn’t mean that you purchased the multiplex, but you have paid the price of availing services.

Service receiver should fully participate when the service is provided. Evaluation of services is a relatively tough task because different service providers offer the same services but charges a different amount. It may be due to the method they provide services is different or the parameters they consider in valuing their services vary.

Example: Postal services, banking, insurance, transport, communication, etc.

Differences between Goods and Services

The basic differences between goods and services are mentioned below:

1. Goods are the material items that the customers are ready to purchase for a price. Services are the amenities, benefits or facilities provided by the other persons.
2. Goods are tangible items i.e. they can be seen or touched whereas services are intangible items.
3. When the buyer purchases the goods by paying the consideration, the ownership of goods moves from the seller to the buyer. Conversely, the ownership of services is non-transferable.
4. The evaluation of services is difficult because every service provider has a different approach of carrying out services, so it is hard to judge whose services are better than the other as compared to goods.
5. Goods can be returned to or exchanged with the seller, but it is not possible to return or exchange services, once they are provided.
6. Goods can be distinguished from the seller. On the other hand, services and service provider are inseparable.
7. A particular product will remain same regarding physical characteristics and specifications, but services can never remain same.
8. Goods can be stored for future use, but services are time bound, i.e. if not availed in the given time, then it cannot be stored.
9. First of all the goods are produced, then they are traded and finally consumed, whereas services are produced and consumed at the same time.

Generally, companies keep a stock of goods with itself to fulfill an urgent requirement of goods. It also keeps track of the quantity of goods at the beginning and the end. In contrast to services are delivered as per the request of the customer itself. In short, the production of services depends on the customer’s demand. Both are subject to tax like Value Added Tax (VAT) is levied on goods while service tax on services provided.

Sometimes products offered by the companies in such a way that it‘s hard to segregate goods and services like in the case of a restaurant, you pay for the food you eat as well as for the add-on services of the waiters, chef, watchman and so on.

Defect in Goods

Section 2(1)(f) of the Consumer Protection Act, 1986 defines defect in goods. The defect is defined as any imperfection, fault, a shortcoming in certain parameters of the good which are as follows:

• Quality
• Quantity
• Purity
• Potency
• Standard

The above has a level that needs to be maintained by or under any law in force at that time.

Hence, if any good is not up to the mark or is faulty, that is, does not meet the mark of the laws applicable in the particular period, it is defective.

illustrations of Defective Good

• A consumer purchases a washing machine. It has a wiring problem which results in the destruction of all the clothes put in the machine.
• A consumer purchases a cosmetic product that causes irritation to the skin.
• A consumer purchases a handbag. After purchase, he sees a slit at the bottom of the bag.
• A consumer purchases milk that has been adulterated by mixing with water.
• A consumer purchase socks made of a fabric that causes skin infection.

A defect of Good seen in numerous cases due to its wide ambit. Defects can be present in goods irrespective of their size, shape, colour, dimension, state of matter and so on. The defect in service often causes inconvenience, injury and in aggravated cases, death. Producers of goods must be immensely careful of the goods that are being manufactured by them.

Safety is a major concern which is sought after by all consumers across the globe. A small defect in good can cause a great impact on the consumer who can face a damage. This damage includes physical, mental and economic loss.

Cases of the defect in goods are too many to count and have rapidly increased with the introduction of online shopping. The Consumer Protection Act tries to limit these grievances of the consumers by penalizing the producers of such goods. It is the much-required means of providing justice to those consumers who have been at a loss or inconvenience.

Cases of Defect

Laxmi Engineering Works vs P.S.G. Industrial Institute, Abhay Kumar Panda v. Bajaj Auto Limited and various other cases that resulted in major debates were initially filed as cases for the defect in good. The former saw a defect in a machine while the latter saw a defect in a vehicle purchased. Other prominent cases include Kevin Enterprise vs Joint Cit, and cases at the Supreme Court, Union Of India (Uoi) vs Ratilal Jadavji and Union Of India vs Behari Lal And Co.

These cases show the repercussions of defective goods. While the first two cases resulted in a whole new deliberation upon the definition of the consumer, the later cases were all under the ambit of defective goods. However, all these case complaints find its root in the good received being defective, hence highlighting its meaning and importance.

Online Shopping and Defect in Goods

Online shopping is a recent development in the market. It has introduced a new and modern style of interaction between consumers and sellers by benefitting both consumers and sellers. The consumers find online shopping extremely convenient while the sellers now have a wider access for sale of their products. However, this development in the global sphere also has its repercussions. It has brought in a large number of complaint of defective goods.

In many cases, the good purchased online looks nothing like what was portrayed of the product. Goods have arrived broken, faulty in design, torn, adulterated, impure and so forth. This is a great hurdle in Consumer Protection and is a problem that remains unsolved today.

Online shopping has turned disastrous to the consumer in cases like Anil Kumar v. M/s Naaptol Online Shopping Pvt. Ltd. and M/s Gati Limited, Vinodkumar, Ernakulam Vs. Shoed Merchant, Mumbai & Ebay India and the Chitra Vittal case.

Sellers must take care while sending their goods for transit. The goods should be handled with care during the transportation process. The sellers should not attempt to cheat the consumers by intentionally handing over defective goods to them.

Deficiency of Service

Deficiency of Service sprawls across various fields like medicine, construction, transport and so on. Deficiency in service often causes inconvenience, injury and in aggravated cases, death. Services are to be provided by immensely equipped individuals with utmost proficiency. If services are not provided with care, severe damage can be caused to the receiver. This damage includes physical, mental and economic loss.

Cases of deficiency of service are rampant in India due to inefficiency and negligence. The Consumer Protection Act is a way to penalise curb this lax behaviour and curb negligent activities in future. It is the much-required means of providing justice to those consumers who have been at a loss or inconvenience.

The field of medicine has seen the most complaints, ranging from Ayesha Begum v. All India Institute of Medical Sciences to the famous Indian Medical Association v. V.P. Shantha. The former dealt with a wrong diagnosis leading to economic loss and physical weakness, while the latter argued upon the distinction of the contract of service and contract for service. Other cases in this field include Gulam Abdul Hussain v. Katta Pullaiah Choudhary and Consumer Unity and Trust Society Vs. State of Rajasthan.

The field of construction to has seen cases of deficiency of service, as noted in the case, Lucknow Development Authority v. M.K. Gupta. The field of tailoring involves A.C. Monday v. Cross Well Tailor And Anr.

These cases are the various instances where the Indian law rightly intervened and redressed the consumers. It poses as a strong deterrent to all those service providers who indulge in fraudulent or negligent means of operation.

Contract of Service of Contract for Service

As clearly mentioned in the definition of service, a contract of service is excluded from service. But what does this term actually mean? The concepts are as follows:

A Contract of Service involves an employer and an employee, similar to a master-servant relationship. All the actions of the employee are monitored, controlled and regulated by the employer. The employee acts on the directions of the employer, hence he is told what task to do and precisely how to do it.Hence, the employee is not personally liable for the acts done by him. The employee can be hired and fired at any time, on the discretion of the employer. The acts of an employee arising out of a contract of service is not a service and hence cannot be deficient.

Company law (also known as business law or enterprise law or sometimes corporate law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

While the minute nature of corporate governance as personified by share ownership, capital market, and business culture rules differ, similar legal characteristics – and legal problems – exist across many jurisdictions. Corporate law regulates how corporations, investors, shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community, and the environment interact with one another.[ Whilst the term company or business law is colloquially used interchangeably with corporate law, business law often refers to wider concepts of commercial law, that is, the law relating to commercial or business related activities. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), i.e. capital raising (through equity or debt), company formation, registration, etc.

Characteristics of Company

The following are the defining characteristics of a company:-

1. Separate Legal Entity

On incorporation under law, a company becomes a separate legal entity as compared to its members. The company is different and distinct from its members in law. It has its own name and its own seal, its assets and liabilities are separate and distinct from those of its members. It is capable of owning property, incurring debt, borrowing money, having a bank account, employing people, entering into contracts and suing and being sued separately.

2. Limited Liability

The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him when called upon to pay and nothing more, even if liabilities of the company far exceeds its assets. On the other hand, partners of a partnership firm have unlimited liability i.e. if the assets of the firm are not adequate to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in case of a company once the members have paid all their dues towards the shares held by them in the company.

3. Perpetual Succession

A company does not die or cease to exist unless it is specifically wound up or the task for which it was formed has been completed. Membership of a company may keep on changing from time to time but that does not affect life of the company. Death or insolvency of member does not affect the existence of the company.

4. Separate Property

A company is a distinct legal entity. The company’s property is its own. A member cannot claim to be owner of the company’s property during the existence of the company.

5. Transferability of Shares

Shares in a company are freely transferable, subject to certain conditions, such that no share-holder is permanently or necessarily wedded to a company. When a member transfers his shares to another person, the transferee steps into the shoes of the transferor and acquires all the rights of the transferor in respect of those shares.

6. Common Seal

A company is a artificial person and does not have a physical presence. Therefore, it acts through its Board of Directors for carrying out its activities and entering into various agreements. Such contracts must be under the seal of the company. The common seal is the official signature of the company. The name of the company must be engraved on the common seal. Any document not bearing the seal of the company may not be accepted as authentic and may not have any legal force.

7. Capacity to sue and being sued

A company can sue or be sued in its own name as distinct from its members.

8. Separate Management

A company is administered and managed by its managerial personnel i.e. the Board of Directors. The shareholders are simply the holders of the shares in the company and need not be necessarily the managers of the company.

9. One Share-One Vote

The principle of voting in a company is one share-one vote. I.e. if a person has 10 shares, he has 10 votes in the company. This is in direct contrast to the voting principle of a co-operative society where the “One Member – One Vote” principle applies i.e. irrespective of the number of shares held, one member has only one vote.

Distinction between Company and Partnership

A Partnership firm is sum total of persons who have come together to share the profits of the business carried on by them or any of them. It does not have a separate legal entity. A Company is association of persons who have come together for a specific purpose. The company has a separate legal entity as soon as it is incorporated under law. Liability of the partners is unlimited. However, the liability of shareholders of a limited company is limited to the extent of unpaid share or to the tune of the unpaid amount guaranteed by the shareholder. Property of the firm belongs to the partners and they are collectively entitled to it. In case of a company, the property belongs to the company and not to its members. A partner cannot transfer his shares in the partnership firm without the consent of all other partners. In case of a company, shares may be transferred without the permission of the other members, in absence of provision to contrary in articles of association of the company. In case of partnership, the number of members must not exceed 20 in case of banking business and 10 in other businesses. A Public company may have as many members as it desires subject to a minimum of 7 members. A Private company cannot have more than 50 members. There must be at least 2 members in order to form a partnership firm. The minimum number of members necessary for a public limited company is seven and two for a private limited company. In case of a partnership, 100 % consensus is required for any decision. In case of a company, decision of the majority prevails. On the death of any partner, the partnership is dissolved unless there is provision to the contrary. On the death of the shareholder the company’ existence does not get terminated.