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Debtors and creditors both have certain rights granted by the fair debt collection practices Act, fair debt Reporting Act, and the U.S. Bankruptcy Code. The law imposes certain obligations for the creditor and debtor.
Obligations of the creditors
- The law imposes obligations relating to title, description, quality and fitness purpose, and sample. The creditor should deliver goods at the agreed time or if no time is agreed, within a reasonable time.
- The restrictions on the use of exemption clauses are imposed by the unfair contract term Act.
- If the creditor breaks any express or implied condition of the contract the bailee can treat the contract as at an end and claim damages. He is entitled to re-payment of all the installments that he has paid, but he must allow the creditor to repossess the goods. If the credit breaks a warranty the bailer may claim damages.
- If a dealer arranges with a consumer for goods to be sold to a finance company the dealer is deemed to have conducted the negotiations as an agent for the creditor. Thus the creditor will be liable for any representations or contractions promises made by the dealers.
Obligations of the debtor
- To take delivery of the goods
- To take reasonable care of the goods. The debtor is not liable for fair wear and tear, but he will be liable for damage caused by his negligence, or if he deals with goods in a manner that is unauthorized by the creditor. If the goods are stolen the agreement will be discharged by frustration and both parties will therefore be free from further liability.
- To pay the installments, unless the debtor has exercised his option to terminate.
Characteristics of property rights
Property rights are the rules that are set to govern property in terms of ownership. Property rights consist of multiple characteristics.
According to North, “property rights are the rights individuals appropriate over their labor and the goods and services they possess. Appropriation is a function of legal rules, organizational forms, enforcement, and norms of behavior (North 1990) Pg 3.
Property rights whether formal or informal, whether they apply to tangible or intangible assets, property rights consist of multiple characteristics each of which represents a different aspect of property ownership. These ownership characteristics include the right to use an asset, the right to exclude others from using the asset, and the right to transfer the asset to others. In its most complete form, ownership of property grants the owner control of all the sticks as long as the use does not infringe on the rights of others. For instance, the owner of a car has a right to carry other passengers as long as he does not endanger their lives and those of other drivers.
In the real sense, the rights of the debtor/creditor, as well as property rights, are not balanced. This is evident to the fact once a debtor becomes bankrupt and he is declared to be so by the competent he/she is aggrieved for paying the debt back to the creditor. In this case, the creditor has no remedy to recover his debt. Similarly, the rights of property are always protected by the law. As much as a person has absolute ownership of the property he/she has the right to enjoy the private use of his/her property. Any trespass to such property by any person will bring rise to an action against the person. Therefore property rights and debtor rights seem more complex as compared to those of a creditor. Further in terms of breach of a condition in a contract the creditor is treated more harshly by the law. This is evident from the fact that if this occurs the bailee can treat the contract as at an end and claim damages.
In terms of business, there is a wide difference between a creditor and a debtor. The law seems friendlier towards a debtor than a creditor looking at the rights and obligations of a creditor; it is evident that a creditor is more victimized by the law than a debtor. The creditor has the task of ensuring that the goods are delivered to the debtor at the agreed time and if no time is agreed, at a reasonable time. Failure to which the debtor can sue and recover damages for the unnecessary delay so caused.
Secondly, the creditor has always suffered whenever a debtor is declared bankrupt. The law leaves no remedy to the creditor to recover his debt in case the debtor is adjudged bankrupt.
Finally, the law seems to be more flexible to debtors than creditors. For long creditors have suffered so many losses due to the bankruptcy of debtors. Therefore the business should be addressed in such a way that both the debtor and creditor have legal remedies whenever a party fails to honor the terms of the contract or whenever the debtor is declared bankrupt.
- K. Abbort, K. Wardman, Business law, Wardman, 2002
- Dr.P.N.Gautum, Business Law, Central Law Agency.2001 edition