Basic Business Law

Basic Business Law

Cheques

Completed during the last lecture:-

1. A/c Payee endorsement on face of cheque
2. Payee A/c endorsement on face of cheque
3. Crossing on face of cheque
4. Signatures
5. Dating of cheque

To do during this lecture: -

1. Not negotiable
2. Not transferable
3. Not over
4. Instructions
5. Special Instructions
6. Carbonise
7. Taping
8. Protectograph

Transferable Instruments. Any instrument or commodity which is transferable from one person to other is governed by a law which states that a transferor can transfer a title which is better than the one he owns. For example if a Thief ‘T’ steals a books from person ‘Z’ sells it to a buyer ‘B’ and is caught later on, the book will be recovered from ‘B’ and restored to Z. Because T had not title (Ownership) on the stolen book and therefore buyer ‘B’ also had no ownership on the book despite having paid money for it. Once a instrument is marked as Not Transferable, it can not be transferred and credited into any account other than on whose name it was issued

Negotiable Instruments. A negotiable instrument is a transferable document which satisfies certain conditions. A instrument is considered as negotiable when it can be transferred to another person by endorsement or even without endorsement and the person to whom it is transferred (Transferee) gets full rights over it even if it was fraudulently acquired by the person who transferred it (Transferer). In the above example of selling of a stolen book, if it was a negotiable instrument, buyer Mr ‘B’ would have been considered rightful owner of the book subject to fulfilment of following additional conditions: -

(a) The instrument should have been paid for.

(b) The person acquiring it had no previous knowledge of any fraud relating to the instruments transaction. Eg. A cheque stolen and sold off to another person can not be taken back from the person if he had no prior knowledge that it was a stolen cheque. After he has purchased the cheque for a price, he is the rightful owner of the cheque.

A cheque is by default a negotiable instrument by law unless endorsed otherwise on the face. Therefore, a cheque which is lost or stolen and sold there after by the thief or finder, can not be recovered even upon discovery. But once a cheque is endorsed “NOT NEGOTIABLE” on the face, it remains only a simple transferable document (if not marked “NOT TRANSFERABLE”) and if the fraud or theft is detected, the person who had purchased it, loses all the right over it and will have to return it back to its owner without any reimbursement of consideration paid by him for acquiring the cheque.

Instructions The instructions that can be given basically fall under the following catergories

1. Single
2. Joint
3. Either
4. Survivor
5. Power of Attorney Holder
6. ?

Special Instructions

There are Special Instructions which can be given for realisation of a cheque like: -

1. Not valid unless signed twice.

2. Draw money from mother account in case of shortage of funds.

Such instructions are safeguard against frauds and also for convenience.

Carbonising By using a reverse carbon on the other side for writing a cheque, it is safeguarded against forgery.

Tape over the Figure insures against any changes after it is made because when the tape is removed it will also take away part of the printed material from the cheque.

Protectograph is a machine for writing cheques which also perforates while writing the cheque. It is not useful for computer printed cheques.

UNFAIR AND RESTRICTIVER TRADE PRACTICES

All unfair trade practices are restrictive but all restrictive trade prtices are not unfair.

Caveat Emptor = ‘Buyer Beware’

Unfair trade practice is illegal but restrictive trade practise could be extra legal which means that it could have sanction under extra ordinary/special provisions of the law. Like Ambulances, Fire Engines, police vehicles have right to enter no entry area or one way streets from wrong end under special provisions of the law.

Eg of Restrictive Trade Practices

1. Coca Cola stopping its vendors from keeping the soft drinks of its rival brands.

2. M/s TELCO ordering a vehicle maintenance firm near Lonavla Ghats to refuse service of vehicles other than TATA. TELCO won the case on the ground that the technicians had only been trained for maintenance of TATA vehicles.

Agreements in restriction of the trade are void.

A bond indicating payment of penalty in case of employee quitting the job where in there is no training involved, is void. However, if there is training imported to the employee, then the bond is fully valid.

If a bond states a time frame against joining a rival company within specified period of leaving the job by the employee, it is valid only if the next location is within 5 KM radius by crow flight. If a person joins another rival company which is more than 5 Km from his previous job location, the bond does not apply on him.

There are 3 types of notices

1. Simple Notice – Could be verbal or written
2. Constructive Notice – Like No thorough fare, Tress passers will be prosecuted”
3. Legal Notice – Has to be replied within 21 days mandatorily else it is deemed that the facts stated in the notice have been accepted by the person.