CA Foundation Solutions For Business Laws – Conditions And Warranties

Conditions And Warranties Self-Study Questions And Answers

Question 1. Describe the stipulation as to time in the contract of sales.

Answer:

The stipulation as to time in the contract of sales

• Before concluding a contract of sale, certain statements are made by the contracting parties.
• The statement may be a stipulation – one by the seller on the reliance of which the buyer makes the contract.
• The statement may not be a stipulation if it is a mere recommendation by the seller thus, does not give rise to any action.
• “A stipulation or a representation is a contract of sale regarding goods which are subject thereof, maybe a condition or a warranty.”

Question 2. Define the Terms – Conditions and Warranties.

Answer:

Conditions and Warranties

• “A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated and claim damages.”
• “A warranty is a stipulation collateral to the main purpose of the contract, i.e. a subsidiary promise the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.”
• As per section 11: Stipulation as to the time of payment is not the condition unless such an intention appears in the contract.

Question 3. When a condition a Contract of Sale may be Treated as a warranty.

Answer:

• Where the buyer waives the performance of the condition altogether, the party may for his benefit waive a stipulation.
• Where the buyer himself opts to treat the breach of condition as a warranty.
• Where the contract is indivisible and the buyer has accepted either the whole goods or any part thereof.
• Where the fulfillment of any condition or. warranty in excused by law because of impossibility or otherwise.

Question 4 How many types of Conditions are there?

Answer:

Types of Conditions are there

Question 5. Define the “Express Conditions” in a Contract of Sale.

Answer:

“Express Conditions” in a Contract of Sale

• Condition is expressed when the terms of the contract expressly state them.
• They are agreed upon between the parties at the time of the contract and are expressly provided in the contract.
• It does not negative an implied condition.

Question 6. What are the Implied conditions in a Contract of Sale?

Answer:

The Implied conditions in a Contract of Sale

• Conditions are implied when the terms are not expressly provided for.
• They are presumed by law to be present in the contract.
• They may be neglected or waived by an express agreement.
• It includes :
  1. Condition as to title,
  2. Condition as to sale by description.
  3. Condition as to sale by sample as well as description.
  4. Condition as to quality and fitness.
  5. Condition as to merchantability.
  6. Condition as to sale by sample.
  7. Condition as to wholesomeness.

Question 7. What are the Conditions as to title in a Contract Sale?

Answer:

The Conditions as to title in a Contract Sale

• It presumes that the seller has a valid title to the goods.
• The seller has the right to sell the goods in case of sale.
• In case of an agreement to sell, he will have the right to sell the goods at the time when the property is to pass unless there is a contract to the contrary.
• If the seller’s title turns out to be defective, the buyer may return the goods to the true owner and recover the price from the seller.

Question 8 What are the Conditions of Sale by Sample as well as Description in a Contract of Sale?

Answer:

The Conditions of Sale by Sample as well as Description in a Contract of Sale

Here, the implied condition is that the bulk of goods supplied must correspond both with the samples as well as with the description.

Question 9. What are the Conditions for Quality and Fitness in a Contract of Sale?

Answer:

The Conditions for Quality and Fitness in a Contract of Sale

1. Here the implied condition operates on the fulfilment of the following conditions:
   • The buyer requires the goods for a particular purpose which he has made known to the seller,
   • The buyer relies on the skill and judgment of the seller.
   • The seller sells such types of goods.
2. If the goods are bought under a patent or trade name, there is no such condition.

Question 10. What are the Conditions for Merchantability?

Answer:

The Conditions for Merchantability

• It means that when the goods are bought by description from a seller who deals in such goods, it is implied that the goods will be of merchantable quality.
• It is immaterial whether the seller is a manufacturer or producer or not.
• It does not operate where the buyer examines the goods before the sale and examination ought to have revealed the defects.

Question 11. What are the Conditions for Wholesomeness?

Answer:

The Conditions for Wholesomeness

In the Case of eatables and other provisions, there is an implied condition of wholesomeness i.e. fit for consumption, other than merchantability.

Question 12. What are the Conditions in Cash of Sale by sample?

Answer:

The Conditions in Cash of Sale by sample

There is an implied condition that:

• The bulk shall correspond with the sample in quality.
• The buyer shall have a reasonable opportunity to compare the bulk with the sample.
• The goods shall be free from any defect rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample.

Question 13. What are the Types of Warranty?

Answer:

Types of Warranty

Question 14. What is the Express Warranty in a Contract of Sale?

Answer:

Express Warranty in a Contract of Sale

It is a warranty that has been expressly agreed on by the parties at the time of the contract of sale.

Question 15. What are the kinds of Implied Warranty, under the Provision of Sale of Goods Act, of 1930? Describe all types of Warranty.

Answer:

• It is a warranty which the law presumes that the parties have incorporated it into their contract.
• It may be excluded by the course of dealing between the parties.
• It includes:
  1. Warranty as to undisturbed possession.
  2. Warranty as to the non-existence of encumbrances.
  3. Warranty as to the dangerous nature of goods.
  4. Warranty as to the quality of fitness by the usage of trade.

Warranty as to undisturbed possession [Section 14 (b)]

• An implied warranty in that the buyer shall have and enjoy the quiet possession of the goods.
• If the buyer is later on disturbed in his possession, he is entitled to sue the seller.

Warranty as to Non-Existence of Encumbrances [Section 14(c))

• An implied warranty is that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time of entering into a contract.
• If defects are known to the buyer at the time of entering into to contract, he is not entitled to ask for any compensation from the seller for discharging the encumbrance.

Warranty Implied by the custom or usage of trade [Section 16(3)]

An implied warranty or condition as to the quality of fitness for a particular purpose may be annexed by the usage of trade.

Warranty as to the dangerous nature of goods:

If goods are dangerous, and the buyer is not aware of such danger, it is implied warranty that the seller should warn the buyer about it else he will be liable for damages caused to the buyer.

Conditions And Warranties Objective Questions And Answers

Question 1. State with reason whether the following statement is Correct or Incorrect: If a seller does not disclose the dangerous nature of the goods to be sold to the buyer he breaches the contract.

Answer:

Incorrect: If a seller does not disclose the dangerous nature of the goods to be sold to the buyer and the buyer is ignorant of the danger, it is a breach of implied warranty.

In case of an implied warranty, the seller must warn to the buyer of the probable danger of the dangerous nature of the goods. It is not a breach of condition but it is merely a breach of implied warranty and the seller will be liable for damages.

Question 2. State with reason whether the following statement is Correct or Incorrect: Where the buyer elects to treat the breach of condition as one of warranty, he may repudiate the contract.

Answer:

Incorrect: Section 13 of the Sale of Goods Act, 1930 lays down that where the buyer elects to treat the breach of condition as one of a warranty, he may only claim damages instead of repudiating the contract.

Conditions And Warranties Short Notes

Question 1. Write short notes on the following: Implied warranties in a contract of sale.

Answer:

Implied Warranties in a contract of sale:

1. Warranty of quiet possession [Section 14(b)] Sale of Goods Act: In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods.
   • If the buyer is in any way disturbed in the enjoyment of the goods as a consequence of the seller’s defective title to sell, he can claim damages from the seller.
2. Warranty of freedom from encumbrances [Section 14(c)]: The buyer is entitled to a warranty that the goods are not subject to any change or right in favor of any change or right in any way disturbed because of the existence of any charge or encumbrances on the goods in favor of any third party, he shall have a right to claim damages for breach of this warranty.
3. Warranty as to quality or fitness by usage of trade [Section 16(4)]: An implied warranty as to quality or fitness for a particular purpose may be annexed by the usage of trade.
4. Warranty to disclose the dangerous nature of goods: Where a person sells goods, knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, otherwise he will be liable for damages.

Question 2. Distinguish between the following: Condition and Warranty.

Answer:

Condition and Warranty:

Conditions And Warranties Descriptive Questions And Answers

Question 1. Comment on the following: Breach of a condition in a sale of goods can be treated as a breach of warranty, but not otherwise.”

Answer:

‘Breach’ of a condition in a sale of goods can be treated as a breach of warranty, but not otherwise:

• This statement is quite correct. Sections 1 2 and 1 3 of the Sale of Goods Act, throw light on this statement. The definitions given of these two terms under the Act are quite meaningful to support this statement.
• “The condition in a contract of sale regarding goods, is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.” [Section 12(2)].
• “A warranty is a stipulation collateral to the main purpose of the contract.

The breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.” [Section 12(3)].

• These definitions distinguish the nature of the two stipulations as well as the effect of the breach of the stipulations. Condition is an important stipulation than warranty.
• The law gives a right to the aggrieved party to cancel the contract in case of a breach of this stipulation, which right is not available in the case of a breach of a warranty. On this basis, the above statement is supported.

Question 2. What is meant by the doctrine of ‘Caveat Emptor’? State the circumstances under which the doctrine is not applicable.

Answer:

Caveat Emptor: In the case of the sale of goods, the doctrine applicable is “Caveat Emptor” which means “Let the buyer beware”.

• When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods.
• If the goods turn out to be defective he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer, The seller is not bound to disclose the defects in the goods which is soiling.
• The buyer must satisfy himself before buying the goods that the goods will serve the purpose for which they are being bought.

If the goods turn out to be defective or do not serve his purpose or if he depends on his skill or judgment, the buyer cannot hold the seller responsible.

• The rule of Caveat Emptor is laid down in the opening lines of Section 16, which states that “subject to the provisions of this Act or any other law for the time being in force.
• There is no implied warranty or condition as to the quality of fitness for any particular purpose of goods supplied under a contract of sale”.

Exceptions: The doctrine of Caveat Emptor is, however, subject to the following exceptions;

1. Where the buyer makes known to the seller the particular purpose for which the goods are required, to show that he relies on the seller’s skill or judgment and the goods are of a description which is in the course of the seller’s business to supply, the seller must supply such goods as are reasonably fit for that purpose [Section 16(1)].
2. In the case where the goods are purchased under its patent name or brand name, there is no implied condition that the goods shall be fit for any particular purpose [Section 16(1)].
3. Where the goods are sold by description there is an implied condition that the goods shall correspond with the description.
4. Where the goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality.
5. The rule of Caveat Emptor is not applicable. But where the buyer has examined the goods this rule shall apply if the defects were such which ought to have been revealed by ordinary examination [Section 16(2)].
6. Where the goods are bought by sample, this rule of Caveat Emptor does not apply if the bulk does not correspond with the sample [Section 17].
7. Where the goods are bought by sample as well as description, the rule of Caveat Emptor is not applicable in case the goods do not correspond with both the sample and description [Section 15].
8. An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat Emptor is not applicable.
9. Whore the seller sells the goods by making some misrepresentation or fraud and the buyer relies on it own or when the seller actively conceals some defect in the goods so that the same could not be discovered by the buyer on a reasonable examination, then the rule of Caveat Emptor will not apply. In such a case, the buyer has a right to avoid the contract and claim damages.
10. If trade usage attached implied warrants or a condition as regards the quality of goods. [Section 1 6(3)].

Question 3. Explain the following: When a condition in a contract of sale may be treated as a warranty?

Answer:

When a condition may be treated as a warranty (Section 1 3, Sale of Goods Act, 1930).

In the following case, a contract is not avoided even on account of a breach of a condition. These are:

1. Where the buyer altogether waives the performance of the condition, a party may for his benefit, waive a stipulation or
2. Where the buyer elects to treat the breach of the condition as one of a warranty i.e. he may only claim damages instead of repudiating the contract.
3. Where the contract is non-severable and the buyer has accepted either the whole goods or any part thereof, unless there is an express or implied term in the contract to the effect that it amounts to a rejection of goods and repudiation of the contract.
4. Where the fulfillment of any condition or warranty is excused by law because of impossibility or otherwise.

Question 4. Explain the following: Give the exceptions to the ‘doctrine of caveat emptor in the Sale of Goods Act.

Answer:

The doctrine of Caveat Emptor (“Let the buyer beware”): It is no part of the seller’s duty in a contract of sale of goods to give to the buyer an article suitable for a particular purpose or of a particular quality unless such quality or fitness is made an express term of the contract. If the buyer makes a bad choice, he is to suffer for his judgment.

Exceptions: The doctrine has no application:

1. If the seller has made a false representation relating to the goods and the buyer relies upon it to his detriment.
2. When the seller has deliberately concealed a defect that is not apparent on the reasonable examination of goods.
3. When the seller is a manufacturer or a dealer of the type of goods sold, and the buyer has communicated to him the purpose for which the goods are required, he relies on the skill or judgment of the seller. [Section 16(1), Sale of Goods Act, 1930]. The exception does not apply if the goods are bought under the patent or trade name.
4. The goods shall be of “merchantable quality”, in case of goods sold by description.
5. In the case of goods sold by sample, if the bulk does not correspond with the sample the buyer is not provided a reasonable opportunity of inspecting the goods. [Section 17(2)].
6. If the trade usage attaches an implied warranty or a condition as regards the quality of goods. [Section 16(3)].
7. In the case of sale by sample as well as description, if the bulk does not correspond with the description as well as sample. [Section 15].

Question 5. Briefly answer the following: A contract of sale is not avoided even on account of a breach of a condition.

Answer:

A contract of sale is not avoided even on account of a breach of a condition

The Sale of Goods Act, of 1930 defines a condition as a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as having been repudiated.

• Thus it is clear from the definition that the buyer gets the right to avoid the contract in case of a breach of a condition on a contract for the sale of goods.
• However, the law does not force the buyer to avoid the contract in case of breach of a condition.
• The buyer can treat the breach of a condition, as a breach of a warranty. He also gets a right to waive the condition.

Further, where the contract is non-severable and the buyer has accepted either the whole goods or any part thereof, then he cannot avoid the contract.

• Further, where the law excuses the fulfillment of a condition or warranty, then the breach of a condition shall not allow the buyer to repudiate the contract.
• Thus, a contract of sale can be avoided by the buyer in case of breach of a condition, and therefore; the statement as given in the question is not true.

Question 6. Briefly answer the following: What are the implied conditions in a Contract of Sale?

Answer:

The implied conditions in a Contract of Sale

It is open to the parties to include in their contract any number of conditions and warranties. But in addition to what the contract may provide, the law implies every sale of goods has some conditions.

They are read with every contract of sale. They are known as implied conditions. They are stated as under:

1. Condition as to title (Section 14): It is an implied condition in every. sale that the seller has the right to sell. That means the title of the seller is perfect.
2. Sale by description: Section 15 lays down the condition that where the sale is by description the goods must correspond with a description. If the goods do not correspond with the description the sale may be set aside.
3. Sale by description as well as be sample (Section 15): Section 15 further provides that “if the sale is by sample as well as by description, the delivery of goods should correspond to description as well as sample.
4. Goods supplied must be fit for buyer purposes: If the buyer has disclosed the purpose it should be fit for his purpose otherwise the contract may be set aside (Section 16(1)).
5. Goods supplied should be of mercantile quality: It is an implied condition of sale that goods must be of mercantile quality [Section 16(2)].

It is open to the parties to include any express conditions in their contract. But an express condition does not negate a condition implied by the Sale of Goods Act, of 1930.

Question 7. Define the terms ‘Condition’ and ‘Warranty’ as used in the Sale of Goods Act, Can a breach of warranty be treated as a breach of condition and vice-versa?

Answer:

“Condition” and “Warranty”: Section 12(2) of the Sale of Goods Act, 1930, defines a condition as a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to a right to treat the contract as having repudiated.

• Section 12(3) of the Act defines a warranty as a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to repudiate the contract.
• X buys a car from V for touring purposes. The car is unfit for touring purposes. Here X can repudiate the contract since “touring purpose” is a condition for buying the car.
• On the other hand, the home of the car is defective. X can not repudiate the contract, since the defective horn is only a warranty and the home can be repaired or replaced.
• Whether a stipulation is a condition or warranty depends in each case, on the construction of the contract. ‘Conditions and Warrantees’ may be either express or implied.

A warranty cannot be treated as a condition because it is of lesser importance to the concerned parties. But a condition may be treated as a warranty under the following circumstances:

1. The buyer altogether waives the performance of the condition.
2. The buyer elects to treat the breach of the condition as a breach of warranty and claims damages only.
3. Where the contract is non-severable and the buyer has accepted either the whole goods or any part thereof.
4. Where the fulfillment of a condition or warranty is excused by law because of impossibility of performance or otherwise.

Question 8. Briefly answer the following: What are the implied conditions in a Sale by Sample?

Answer:

Implied conditions in a sale by sample:

A sale is by sample where there is a term in the contract (express or implied) to that effect. The effect is that where goods are sold by sample, there should not be any latent defect that renders the goods unmerchantable.

1. The bulk must correspond with the sample in quality.
2. The buyer shall have a reasonable opportunity to compare the bulk with the sample; and
3. The goods shall be free from any defects rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample. (Section 17, Sale of Goods Act, 1930).

Question 9. Briefly answer the following: When shall a condition be treated as a warranty?

Answer:

A condition shall be treated as a warranty in the following cases.

1. Voluntary wavier of condition: Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may
   • Waive the condition, or
   • Elect to treat the breach of the condition as a breach of warranty [Section 13(1)]. If the buyer once decides to waive the condition, he cannot afterward insist on its fulfillment.
2. Acceptance of goods by the buyer: If the contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, unless there is a term of the contract, express or implied, to the contrary. [Section 13(2)].

The provisions of Section 1 3 of the Sale of Goods Act, 1 930 do not affect the cases where the fulfillment of any condition or warranty is excused by law by reasons of impossibility or otherwise. [Section 13(3)].

Question 10. What is meant by the doctrine of ‘Caveat emptor’? State the circumstances under which the doctrine is not applicable.

Answer:

Caveat Emptor: This means “Let the buyer beware”, i.e. in a contract of sale of goods the seller is under no. duty to reveal unflattering truths about the goods sold.

• Therefore, when a person buys some goods, he must examine them thoroughly. If the goods turn out to be defective or do not suit his purpose or if he depends upon his skill or judgment and makes a bad selection, he cannot blame anybody except himself.
• The rule of caveat emptor is enunciated in the opening words of Section 1 6 which runs thus: “Subject to the provisions of this Act and of any other law for the time being in force.

There is no implied warranty or condition as to the quality or fitness, for any particular purpose of goods supplied, under a contract of sale”.

Exceptions: The doctrine of caveat emptor has certain importance. The exceptions are given below:

1. Fitness for buyer’s purpose: Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which he requires the goods and relies on the seller’s skill or judgment and the goods are of a description which it is in the course of the seller’s business to supply, the seller must supply the goods which shall be fit for the buyer’s purpose [Sec. 16(1)].
2. Sale under a patent or trade name: In the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition that the goods shall be reasonably fit for any particular purpose [Proviso to Sec. 16(1)].
3. Merchantable quality: Where goods are bought by description ‘from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality. But if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed [Sec. 16(2)].
4. Usage of trade: An implied warranty or condition as to quality or fitness for a particular purpose “may be annexed by the usage of trade [Sec. 10(3)].
5. Consent by fraud: Where the consent of the buyer, in a contract of sale, is obtained by the seller by fraud or where the seller knowingly conceals a defect that could not be discovered on a reasonable examination (i.e. where there is a latent defect in the goods), the doctrine of caveat emptor does not apply.
6. Sale by sample (Section 17): when goods are bought by sample’ the bulk must correspond with the sample and the buyer must have a reasonable opportunity to inspect the goods.

Question 11. What is the Doctrine of “Caveat Emptor”? What are the exceptions to the Doctrine of “Caveat Emptor”?

Answer:

Doctrine of “Caveat Emptor”

In the case of the sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods.

If the goods turn out to be defective he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer. The seller is not bound to disclose the defects in the goods which he is selling.

The exceptions to the Doctrine of Caveat Emptor are:

1. Fitness as to quality or use: Where the buyer makes known to the seller the particular purpose for which the goods are required, to show that he relies on the seller’s skill or judgment and the goods are of a description which is in the course of seller’s business to supply, it is the duty of the seller to supply such goods as are reasonably fit for that purpose [Section 16(1)].
2. Goods purchased under patent or brand name: In the case where the goods are purchased under the patent name or brand name, there is no implied condition that the goods shall be fit for any particular purpose [Section 16(1)].
3. Goods sold by description: Where the goods are sold by description there is an implied condition that the goods shall correspond with the description [Section 15]. If it is not so then the seller is responsible.
4. Goods of merchantable quality: Where the goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality. The rule of Caveat emptor is not applicable.
5. Sale by Sample: Where the goods are bought by sample, this rule of Caveat emptor does not apply if the bulk does not correspond with the sample [Section 17].
6. Goods by sample as well as description: Where the goods are bought by sample as well as description, the rule of Caveat Emptor is not applicable.
7. Trade Usage: An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat emptor is not applicable [Section 16(3)].
8. Seller actively conceals a defect or is guilty of fraud: Where the seller sells the goods by making some misrepresentation or fraud and the buyer relies on it or when the seller actively conceals some defect in the goods so that the same could not be discovered by the buyer on a reasonable examination, then the rule of Caveat Emptor will not apply.

Question 12. Discuss the various types of implied warranties as per the Sales of Goods Act 1930.

Answer:

Implied Warranties:

It is a warranty that the law implies in the contract of sale. It is a stipulation that has not been included in express words, but the law presumes that the parties have incorporated it into their contract.

The following types of implied warranties are provided by the Sale of Goods Act, of 1930:

1. Warranty as to undisturbed possession: An implied warranty that the buyer shall have and enjoy quiet possession of the goods. If the buyer is later disturbed, he is entitled to sue the seller for the breach of the warranty.
2. Warranty as to the non-existence of encumbrances: An implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer at the time of making the contract.
3. Warranty as to quality or fitness by the usage of trade: An implied warranty as to quality or fitness for a particular purpose may be annexed or attached by the usage of trade.
4. Disclosure of the dangerous nature of goods: Where the goods are dangerous and the buyer is ignorant of the danger, the seller must warn the buyer of the probable danger.

Question 13. Write any four exceptions to the doctrine of Caveat Emptor as per The Sale of Goods Act, 1930.

Answer:

According to Section (16) of the Indian Contract Act, of 1872:

“Subject to the provisions of this act or any other law for the time being in force there is no implied warranty or condition as to quality or fitness for any particular purpose of goods supplied under a contract of sale. But, there are certain exceptions to this rule of CAVEAT EMPTOR.

1. Fitness as to Quality or use: When the buyer makes known to the seller the particular purpose for which the goods are required, to show that he relies on the seller’s skill or judgment and the goods are of a description which is in the course of seller’s business to supply the seller must supply goods as all reasonably fit for that purpose section 16(1).
2. Goods sold by description: When the goods are sold by description there is an implied condition that the goods shall correspond with the description. If it is not then the seller is responsible.
3. Sale by sample: When the goods are bought by sample, the rule of ‘CAVEAT EMPTOR’ does not apply if the bulk does not correspond with the sample.
4. Goods of merchantable quality: When the goods are brought by description from the seller who deals in goods of that description there is an implied condition that the goods should be of a merchantable quality. The rule of ‘CAVEAT EMPTOR’ is not applicable.

Question 14. What are the differences between a ‘Condition’ and ‘Warranty’ in a contract of sale? Also explain, when a ‘breach of condition’ be treated as a ‘breach of warranty’ under provisions of the Sale of Goods Act, 1930.

Answer:

The differences between a ‘Condition’ and ‘Warranty’ in a contract of sale

Section 13 of the Sales of Goods Act, 1930 specifies cases where a breach of condition be treated as a breach of warranty. As a result of which the buyer loses his right to rescind the contract and can claim damages only.

In the following cases, a contract is not avoided even, on account of a breach of a condition:

1. Where the buyer altogether waives the performance of the condition. A party may for his benefit, waive a stipulation. It should be a voluntary waiver by the buyer.
2. Where the buyer elects to treat the breach of the conditions, as one of a warranty. That is to say, he may claim only damages instead of repudiating the contract. Here, the buyer has not waived the condition but decided to treat it as a warranty.
   • Example: A agrees to supply B 10 bags of first-quality sugar @ ₹ 625 per bag but supplies only second-quality sugar, the price of Which is ₹ 600 per bag. There is a breach of condition and the buyer can reject the goods. But if the buyer so elects, he may treat it as a breach of warranty, accept the second quality sugar, and claim damages @ ₹ 25 per bag.
3. Where the contract is non-severable and the buyer has accepted either the whole goods or any part thereof. Acceptance means acceptance as envisaged in Section 72 of the Indian Contract Act, of 1872.
4. Where the fulfillment of any condition or warranty is excused by law because of impossibility or otherwise.

Question 15. What are the implied conditions in a contract of ‘Sale by sample under the Sale of Goods Act, of 1930? Also, state the implied warranties operative under the Act.

Answer:

Implied Condition in a contract of sale by sample

1. In a contract of sale of goods by sample, there is an implied condition that:
   • The bulk shall correspond with the sample in quality.
   • The buyer shall have a reasonable opportunity to compare the bulk with the sample.
   • The goods shall be free from any defects rendering them un-merchantable, which cannot be found even on a reasonable examination of the sample (ie. latent defects).
2. If any of the above conditions are not satisfied, then the buyer is entitled to reject the goods.
   1. Implied Warranties under Sale of Goods Act, 1930 warranty as to undisturbed possession An implied warranty, that the buyer shall have and enjoy quiet possession of the goods. In other words, if the buyer has got possession of the goods, later, disturbed in his possession, he is entitled to sue the seller for the breach of the warranty.
   2. Warranty as to Non-Existence of Encumbrances An implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time the contract is entered into.
   3. Warranty as to Quality or Fitness by Usage of Trade An implied warranty as to the quality or fitness of goods for a particular purpose may be annexed or attached by the usage of trade.
   4. Warranty as to disclosing the dangerous nature of goods Where goods are dangerous and the buyer is ignorant of the danger, the seller must warn the buyer of the probable danger. If there is a breach of warranty, the seller may be liable for damages.

Question 16. M/S Woodworth and Associates, a firm dealing with the wholesale and retail buying and selling of various kinds of wooden logs, customized as per the requirement of the customers. They dealt with Rose wood; Mango wood; Teak wood; Burma wood etc.
Mr. Das a customer came to the shop and asked for wooden logs measuring 4 inches broad and 8 feet long as required by the carpenter. Mr. Das specifically mentioned that he required the wood that would be best suited for making wooden doors and window frames. The Shop owner agreed and arranged the wooden pieces cut into as per the buyer’s requirements.
The carpenter visited Mr. Das’s house the next day, and he found that the seller had supplied Mango Tree wood which would be most unsuitable for the purpose. The carpenter asked Mr. Das to return the wooden logs as they would not meet his requirements.
The Shop owner refused to return the wooden logs on the plea that logs were cut to specific requirements of Mr. Das and hence could not be resold.

1. Explain the duty of the buyer as well as the seller according to the doctrine of “Caveat Emptor’.
2. Whether Mr. Das be able to get the money back or the right kind of wood as required to serve his purpose?

Answer:

Caveat emptor means “let the buyer beware”, i.e. in the sale of goods, the seller is under no duty to reveal unflattering truths about the goods sold. Therefore, when a person buys some goods, he must examine them thoroughly.

• If the goods turn out to be defective or do not suit his purpose, or if he depends upon his skill and judgment and makes a bad selection, he cannot blame anybody except himself.
• The rule is enunciated in the opening words of section 16 of the Sale of Goods Act, 1930, which runs thus, “subject to the provisions of this Act and of any other law for the time being in force.
• There is no implied warranty or condition as to the quality fitness for any particular purpose of goods supplied under a contract of sale.

The rule of caveat emptor does not apply in the following case: Fitness for buyer’s purpose:

Where the buyer, expressly orby implication, makes known to the seller the particular purpose for which he requires the goods and relies on the seller’s skill or judgment.

• The goods are of a description which it is in the course of the seller’s business to supply, the seller must supply the goods which shall be reasonably fit for the buyer’s purpose.
• In the given case Mr. Das had intimated the seller of his specific purpose and the goods supplied by the seller were unfit for that purpose.
• The seller is bound to supply the goods that are reasonably fit for the purpose.

Held, the contract is avoidable by Mr. Das and he holds full right to either get his money back or to get the right kind of wood as required for his purpose.

Question 17. Mrs. Geeta went to the local rice and wheat wholesale shop and asked for 100 kgs of Basmati rice. The Shopkeeper quoted the price of the same as ₹ 125 per kg. to which she agreed. Mrs. Geeta insisted that she would like to see the sample of what would be provided to her by the shopkeeper before she agreed upon such a purchase.
The shopkeeper showed her a bowl of rice as a sample. The sample exactly corresponded to the entire lot.
The buyer examined the sample casually without noticing the fact that even though the sample was that of Basmati Rice it contained a mix of long and short grains.
The cook on opening the bags complained that the dish if prepared with the rice would not taste the same as the quality of the rice was not as per the requirement of the dish.
Now Mrs. Geeta v/ants to file a suit of fraud against the seller alleging him of selling a mix of good and cheap quality rice. Will she be successful?
Explain the basic law on sale by sample under the Sale of Goods Act, of 1930. Decide the fate of the case and options open to the buyer for grievance redressal as per the provisions of the Sale of Goods Act, of 1930. What would be your answer in case Mrs. Geeta specified her exact requirement as to the length of rice?

Answer:

In a contract of sale by sample, there is an implied condition that

1. The bulk shall correspond with the sample in quality.
2. The buyer shall have a reasonable opportunity to compare the bulk with the sample.
3. The goods shall be free of any defect rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample.

This condition applies only to defects, which could not be discovered by an ordinary examination of the goods. But if the defects are latent, then the buyer can avoid the contract.

In the given case;

• Mrs. Geeta casually examined the sample and did not notice that the sample contained a mix of long and short grains. Hence, Mrs. Geeta cannot avoid the contract and will not be successful in the suit.
• However, if the buyer had specified her exact requirements, then the seller must supply such goods which are reasonably fit for the given purpose.

Question 18. Mr. Das, a general store owner went to purchase 200 kg of Basmati Rice of a specific length from a whole seller. He saw the samples of rice and agreed to buy the one for which the price was quoted as ₹ 150 per kg. While examining the sample Mr. Das failed to notice that the rice contained a mix of long and short grains of rice.
The whole seller supplied the required quantity the same as shown in the sample. However, when Mr. Das sold the rice to one of his. regular customers, she complained that the rice contained two different qualities of rice and returned the rice.
Regarding the provisions of The Sales of Goods Act, 1930, discuss the options open to Mr. Das for grievance redressal. What would be your answer in case Mr. Das specified his exact requirement as to the length of rice?

Answer:

According to the provisions of the Sale of Goods Act, of 1930,

1. In a contract of Sale of Goods by sample; there is an implied condition that:
   • The seller must provide a reasonable opportunity for the buyer to inspect the bulk,
   • The bulk must correspond to the sample in terms of quality.
   • The goods must be from latent or hidden defects which renders them un-merchantable.
   • If any of the above conditions are not satisfied, then the buyers are entitled to reject the goods.
2. If goods are bought under the description, then the goods must correspond with the description. Otherwise, the buyer can reject the goods.

Conclusion:

• In this case, as per Mr.provisions does the Act have any option for grievance?
• In this case, Mr. Das specified her exact requirement as to the length of the rice. Therefore, she can reject the rice as they do not follow the description made by her.

Question 19. TK ordered timber of 1-inch thickness for being made into drums. The seller agreed to supply the required timber of 1 inch. However, the timber supplied by the seller varies in thickness from 1 inch to 1.4 inches. The timber is commercially fit for the purpose for which it was ordered. TK rejects the timber. Explain with relevant provisions of the Sale of Goods Act, 1930 whether TK can reject the timber.

Answer:

As per the provisions of the Sale of Goods Act, 1 930. The doctrine of Caveat emptor is subject to the exception of fitness as to quality or use. Which states that where the buyer makes known to the seller the particular purpose for
which the goods are required.

• To show that he relies on the seller’s skill or judgment and the goods are of a description which is in the course of the seller’s business to supply, the seller has to supply such goods as are reasonably fit for that purpose [section 16(1)].
• In the present case, timber was purchased to make the drums. However, the timber supplied by the seller varies in thickness from 1 inch to 1.4 inches.
• Now it is mentioned that timber is commercially fit for the purpose for which it was ordered hence that contract could not be avoided. [Bombay Burma Trading Corporation Ltd. vs Aga Mohammad.]

Question 20. Mr. K visited M/S Makrana Marbles for the purchase of marble and tiles for his newly built house. He asked the owner of the above ‘ shop Mr. J to visit his house before supply so that he could ascertain the correct mix and measurements of marble and tiles.
Mr. J agreed and visited the house the next day. He inspected the rooms on the first floor and the car parking space. Mr. K insisted he visit the second floor as well because the construction pattern was different. Mr. J ignored the’ above suggestion.
Mr. J supplied 146 blocks of marble as per the size of the rooms and 16 boxes of tiles with a word of caution that the tiles could bear only a reasonable weight.
Marble and Tiles were successfully laid except on the second floor due to the different sizes of the marble. The tiles fitted in the parking space also got damaged due to the weight of the vehicle that came for unloading cement bags.
Mr. K asked Mr. J for the replacement of marble and tiles to which Mr. J refused taking the plea that the marble was as per the measurement and it was unsafe to fit tiles in the parking area as it cannot take heavy load. Discuss in the light of provisions of the Sales of Goods Act 1930:

1. Can Mr. J refuse to replace the marble regarding the doctrine of Caveat Emptor? Enlist the duties of both Mr. K and Mr. J.
2. Whether the replacement of damaged tiles be imposed on M/S Makrana Marbles? Explain.

Answer:

1. Duty of the buyer according to the doctrine of “Caveat Emptor”: In the case of the sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware.

• When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods.
• If the goods turn out to be defective he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer.

The seller is riot bound to disclose the defects in the goods which he is dealing or selling Duty of the seller according to the doctrine of “Caveat Emptor”.

The following exceptions to the Caveat Emptor are the duties of the seller:

1. Fitness as to the quality or use
2. Goods purchased under patent or brand name
3. Goods sold by description
4. Goods of merchantable quality
5. Sale by sample
6. Goods by sample as well as description
7. Trade usage
8. Seller actively conceals a defect or is guilty of fraud

Hence, in the given case Mr. J cannot refuse to replace the marble as it was mentioned that caveat emptor deals with the principle of fitness to the quality or use. Mr. J needs to replace the marbles.

2. As Mr. J has specifically mentioned the tiles can bear only a reasonable weight and not more than that. Hence, Mr. K cannot force him to replace the damaged tiles imposed on M/S Makhrana Marbles.

Question 21. Certain goods were sold by sample by J to K, who in turn sold the same goods by sample to L, and L by sample sold the same goods to M. M found that the goods were not according to the sample and rejected the goods and gave a notice to L. L sued K and K sued J. Can M reject the goods? Also advise K and L as per the provisions of the Sale of Goods Act, of 1930.

Answer:

As per Section 17 of the Sale of Goods Act, 1930, where the goods are sold by sample, there is an implied condition that the goods must correspond to the sample.

• If the goods do not correspond to the sample it amounts to a breach of condition as to the sample and the buyer has the right to reject the goods, cancel the contract, and claim damages.
• But if the buyer sub-sells the goods to another buyer, then the buyer loses the right to reject the goods but can claim only damages. In the above case, J sold goods by sample to K who in turn sold the same goods by sample to L.
• L by sample sold the same goods to M. M found that the goods did not correspond to the sample. Here, in light of the above-mentioned provisions, M can reject the goods to L.

L cannot reject the goods to K but can claim damages. K cannot reject goods to J but can claim damages.