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CSEET · Business Laws and Management · Elements of Law relating to Sale of Goods

Meera Textiles sold cloth to Ravi Traders for Rs 2,00,000 and received a cheque as conditional payment. The cheque was dishonoured on presentation. Which statement is correct?

Meera Textiles is an unpaid seller. When a negotiable instrument is received as conditional payment and the condition fails because the instrument is dishonoured, the seller is deemed unpaid. Receiving the cheque alone does not discharge the price, and buyer insolvency is not a requirement.

  1. AMeera Textiles is an unpaid seller because the condition on which the cheque was received was not fulfilledCorrect
  2. BMeera Textiles is not an unpaid seller because it has already received an instrument
  3. CMeera Textiles becomes an unpaid seller only if the cheque amount was below the price
  4. DMeera Textiles is an unpaid seller only if the buyer is declared insolvent

Explanation

Under Section 45(1)(b), a seller is deemed unpaid where a bill of exchange or other negotiable instrument was received as conditional payment and the condition was not fulfilled by reason of dishonour or otherwise. Merely receiving the cheque does not make the seller paid. Insolvency is not required for the seller to be unpaid.

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