ww.

ow

Contract of Sale of Goods

1930-ORIGIN AND GROwTH
AN INTRODUCTION TO SALE OF GOODS ACT,
term 'Goods
to sale of goods in India. The
The Sale of Goods Act 1930 deals with the
law relating
movable property, other than Money and Actionable Claims)
means every kind of
Sale of Goods Act, 1893,. Before the
(The Sale of Goods Act, 1930 is mainly to sale of English
based on the
the Chapter VIl of
was covered under
Saleof Goods Act, 1930, the law rel atingwhich were goods
found to be inadequate.
the provision of
Indian Contract Act, 1872, a
need was independant
felt to have an Sale of Goods Act and cosequently
Therefore a strong
Act containing 66 sections
came

Sale of Goods Act, 1930 was passed. The preser.tly

new act called Kashmir.
which extends to whole of India except the state of Jammu and
from 1st July,1930
into force

LCONTRACT OF SALE
defines a contract of sale as under:
Section 4 of the Sale of Goods Act transfer the
the seller transfers or agrees to
is a contract whereby
'A contract of sale of goods
property goods
in to a buyer for a price."
the following:
Aeontract of sale consists of
Sale [or Absolute Sale],
Conditional Sale].
Agreement to sell [or

)Sale or Absolute Sale transferred from the seller to the

goods in the is immediately
(Where the property (ownership) of the seller, there is a sale or absolute sale. Counter sale in a
buyer, and nothing is left on the part
shop is a sale or an absolute sale.

Conditional Sale
t ) Agreement to sell or shall take place in future or on the
transfer of property (ownership) in the goods
Where the
be an agreemernt to sell or a conditional sale. The
property
fulfillment of certain conditions, it shall unless some
transferred from the seller to the buyer until and
(ownership) in goods shall not be
of the contract of sale
Condition is fulfilled for the completion

AGREEMENT TO SELL BECOMES A SALE ?

HOW
of sale is an agreement to sell. When seller and buyer agrees to
In the first stage every contract
sell and buy some goods at a price,
there is an agreement between the two for the sale of the goods.
I-1.2 Contract of Sale of
Now what remains, is the transfer of ownership of the goods from the seller to the b. Go
ownership is transferred by the seller immediately it becomes a sale and if he does not t yer.f th
OWnership until some condition is fulfilled it shall remain an agreement to sell till the co
fulfilled and the ownership is transferred. cOnditon g
ESSENTIALS OF A CONTRACT OF SALE
To constitute a valid contract of sale, the following essentials must be present,

D1) A valid Contract

A contract of sale is just like any other contract made
Essentials of a Contract of Sale
1. A Valid Contract
under Indian Contract Act, 1872. Therefore to constitute a
2. Two parties
valid contract of sale, it should satisfy all the essentials of a
3. Transfer the
valid contract namely, a valid offer, a valid acceptance, free property
4. Goods
consent of the parties, a valid and lawful
consideration, 5. Price
parties must be competent to contract and lawful object etc.)
Two parties
To constitute a contract of sale, there must be a transfer or agreement to transter the
goods by the seller to the buyer. It means that there must be two persons, one the property in
the buyer. The seller and the seller and the other
buyer must be two different persons, for a man cannot purchase his
goods. lhe parties must be competent to contract. Own

EXAMPLES (a) A partnership firm was dissolved and the

surplus
among the partners in specie. Tax officer wanted to tax this asassets including some goods were divided
a sale.
sale as the partners were themselves The Court held that it was not a
joint owners of the goods and they could not be both sellers and
buyers. Moreover no money consideration was passed. [State of
Guj 60). Gujarat v. Raman Lal & Co. AIR 1965
A club supplies food and drinks to
(6)
member of the club pays to the members
its members at fixed price. This was held to be not a sale as a
jointly (i.e. to the club) "Members of a club are
owners and not part owners"
[Graft v. Evans.(1882). 8. QBD 373]. undivided joint
There certain
are
exceptions to the rule that the same
person cannot be both a purchaser and a
seller. These are-
(a) Where a person's goods are sold in execution of a
(b) A part owner can sell his share to the other
decree, he may himself buy them.
the sole owner of the part owner so as to make the other part-ownte
goods.
c) Where a pawnee sells the
goods pledged with him on non-payment of bill
pawnor may himself buy such goods. money,
(d) A partner may also buy the
goods from the firm in which he is a partner and vice
(e)In case there is a sale by auction, the seller ver
and may thus may reserve right of making a bid at the au ction
purchase his own goods.
O3) Agreement for the transfer of ownership
To constitute a valid contract of sale, there should be nt to
transfer immediate transfer or an
the general property in
goods sold or agreed to be sold. It agTeeneral
property in the goods from the seller to the buyer with or without is essental to transferthethe 8
physical possession of go
4) Goods:
The subject-matter of the contract of sale
must be 'goods', the
to be
property in whidn
 of Sale of Goods I1-1.3
contract
Lerad from the seller to the buyer. Accorang to ectionn 2(7), "Goods means every kind of

able property other than actionable claimis d ad includesstock and shares; growing
OTasS. trees and things attached to or forming part or the land which are agreed to be severed it
crops, grass,

efore sale or under contract of sale.)

EXAMPLE: Where the trees were sold so that they were to be cut out and separated from land and taken
away by the buyer. The contract was for sale of trees as moveable goods. [Kurseer vs. Timber
Operators & Contractors Ltd. (1927)]

A debt is not goods because it can only be assigned as per Transter ot Property Act but cannot be

sold.

EXAMPLE: According to a contract between the hotel and resident customers the hotel made a
consolidated charge for residents, services and supply of food. No rebate was allowed if food was not
taken. On a question being raised whether the supply of food amounted to sale it was held that it was
simply a provision of service as the transaction was an indivisible contract of multiple services and did
not involve any sale of food. [Associated Hotels of India v. Excise and Taxation OfficerAIR 1966.
Punjab, 249].
Money, Actionable claims and Immovable property are excluded from the definition of "goods".
is legal tender, is essential aspect of every sale because the price of
Money, which a an
goods has to be expressed in terms of money and therefore, "money" itself cannot be the
subject of sale.)
Actionable claims means claims which canbe enforced by a legal action or a suit. e-g. a
book debt evidenced by an entry by the creditor in his account books. A book debt is not
goods because it can only be assigned as per the Transfer of Property Act, 1882 but cannot
be sold) Similarly, a bill of excahnge or a promissory note represents a debt, i.e., an
actionable claim. These can be transferred under Negotiable Instruments Act, 1881 by mere
delivery or endorsement and delivery, such instruments cannot be sold.
T h e sale of immovable property is not covered under the Sale of Goods Act, 1930. The sale
of immovable property is governed by a separate act i.e., Transfer of Property Act, 1882.

) Price
o constitute a valid contract of sale, consideration for transfer must be money paid or promised.
Wh there is no money consideration the transaction is not a contract of sale, as for instance goods
ere
en in exchange for goods or as remuneration for work or labour. However, an existing debt due
nthe seller to the buyer is sufficient) Further, there is nothing to prevent the consideration from
be eing
partly in money and partly in goods or some other articles of value.
APLE:A refrigerator company supplies a new refrigerator of R 9000 In exchange of old refrigerator and
6000 in cash. It is a sale under the Sale of Goods Act.
tmay be noted that no particular form is necessary to constitute a contract of sale. A contract of
salendy be made in writing or by words of mouth or may be implied from the conduct of the parties.

SALE AND AGREEMENT To SELL-DISTINCTION

Thehe distinction betweer
en sale and an agreement to sell is very necessary to determine the rights
And the liabilities of the to the contract.
parties
 II-1.4 Contract of Sale of
The main points of distinction are:
soods
Sale and agreement to sell distinct
1. Nature of contract ction
O Nature of contract 2. Transfer of property
An agreement to sell is an executory contract, is a 3. Risk of loss
contract pure and simple and no property passes; 4. Consequences of the breach

whereas a sale is an executed contract plus a conveyance

5. Insolvency of the buyer
6. Insolvency of the seller
7. General and paticular property
OH2) Transfer of Property (Ownership) 8. Right of re-sale
In sale the passes from seler to
property in goods
buyer immediately and buyer becomes the owner of the goods immediately
But in an agreement to sell the property in goods passess from seller to buyer at some future
or subject to the fulfiment of certain conditionsi.e., the seller continues to be the owner of the grdate
supplied until the agreement to sell becomes a gale. 80ods

) Risk of loss
in a sale, if the goods are destroyed, the risk of loss falls on the buyer even if the goods werei
the possession of the seller because the risk of loss in
passes with the ownership
But in an agreement to sell if goods are destroyed the risk of loss faís on the seiler even if the
goods were in the possession of buyer because ownership has not passed from the seller to the buver
and the risk
passess with the
ownership)
)Consequences of the breach
On breach of an agreement to sell by the seller, the buyer has only a personal
seller. But if after
a sale the seller breaks the
remedy against the
contract (eg., resells the
delivery of the goods or for damages. goods) the buyer may sue for
an agreement to sell, if the búyer fails to accept the goods the seller
and not for the price. On a sale, if the may sue for damages only
buyer does not the pay price, the seller may sue him for the
price.

O
5Insolvency of the buyer
In a sale, if the buyer is adjudged an insolvent, the seller in the absence of a lien
bound deliver the goods to the Official
to over the goods is
to a rateable dividend for the Receiver or
Assignee. The seller will, however, be entitled
price of the goods.
n an
agreement to sell,when the buyer becomes insolvent before he
may not part with the goods) pays for the goods, the seller
O
nsolvency of the seller
sale, if the seller becomes insolvent, the
In a

Offical Receiver or Assignee as the buyer is entitled to recover the goods from tne
property of the goods is with the buyer.
In agreement to sell, if the buyer has already paid
an
the price and the seller becomes insolveny
the buyer can calim only a rateable dividend and not the goods.
General and particular property
An agreement to sell creates a right in personam while a sale creates a right in In case or
rem. a
Contract of Sale of Goods I-1.5

to sell the
greement buyer and seller get remedy against each other in case of breach of an

The of
greement. agreement sale, creates a right with which only the contracting parties are

Concerned and not the whole world

Whereas in case of sale, the buyer gets an absolute right of ownership and this right ot the buyer
is recognised by the whole world.

D (8 Right of re-sale
the goods after sale. If he
In a sale, the seller cannot resell the goods even if he is in possession of
the good title and the first buyer can recover the goods.
does so the new buyer does not get
the seller sell the goods since ownership is with the seller. If he does
In an agreement to sell, may
title.
breach of agreement. But in this case the new buver gets good
So, he may become liable for
 Contract or dale of
ot Goods
Tho:
be s e v e r e d before sale.
I-1.8
attached
to or forming part
of the land
which are
definition

agreed to
of goods.
interest
things within the
of a partner in partnership
also comes
of sale may
be divided into thro
three types
contract
of a
Goods which form
the subject-matter
namely. 3. Contingent goods.
2. Future goods;
or
1. Existing goods; or
O)Existing goods
of the making of the contract of ssale
al
the seller at the time are
Goods owned and possessed by be in possession
but may not be the owner od
the
Sometimes the seller may
goods. existing
called goods.
For instance in the case of sale by a mercantile agent or a pledge the goods ar possessed sential
but
of a contraç} it is e s s o
the seller. Where the existing goods are the subject-matter of a
not owned by be made only subjecmatter har
that they must be in actual existence, for a present sale can
believing it to be in existo
naving
Thus, for example if A sells his horse to B, stence
actual or possible existence.
no contract will arise.
but in fact the horse is dead,
under:
existing goods can be further classified
as
The
i) Specific Goods (i) Ascertained Goods; (iii) Unascertained Goods;
GASpecific Goods:
'Specific Goods" are those goods which are identified and agreed upon at the time of contract of
sale is made. It is essential that the goods are identified and separated from the other goods at the
contract of sale is made and the goods merely in an identifiable position does not make the
goods specific)
EXAMPLE : In the case of sale of one horse out of 25 horses, goods shall be specific if the horse is selected
before the contract of sale is made. Here it is important to note that all the horses are horses but they
cannot be exactly similar to each other. Therefore it is essential to select the horse out of the lotas
specific goods.
Ascertained Goods
Sometimes the terms "Specific Goods" and "Ascertained Goods" are used interchangeably. But
actually they are not same and different in the sense that specific goods are identified at the time ot
contract of sale whereas the ascertained goods are identified after the contract of sale as per the termis
decided lt is important to note here that the goods are almost of
and the buyer is to select exactly the same type and quany
keeping in mind the defective
pieces only.
EXAMPLE: If there
is going to be a sale of 25
chairs for an office out of a lot of 100 such chairs of the
design and quality, the goods are unascertained till sain
defective 25 particular
chairs are selected
in any way and are
considered to be the best of the lot for the so that they are
they are allbest and equal in satisfaction of the buyer, tnou
selected out quality from the point of view of the seller. When the
ascertained goods for the contract ofrequired
of the lot, the 25 chairs a
goods are said to be
sale.
GTUnascertained Goods
When the goods are not separately
sale, are known as unascertained identified or ascertained at the time of making a
ract of
of goods, but are goods. When the buyer does not select the goods for him
co lot
defined or indicated only by frouAs
separated from description,
soon as particular g0ods are we call them
unascertained
quoted in ascertained goods, the lot of 100 the lot they become ascertained goods. In thegonle
Selected or identified for purchase they become chairs are
unascertained re
goods. When 25 naairs
ascertained goods.
 of Goods
contract of Sale I-1.9

o (2) Future goods

goods to be manufactured produced acquired by the seller after the making of the
It meanssale. or or

ontract of
cCon
As rule, any person may sell offer for sale at any price goods of which he is not the
or
which he hopes
Owner, but expects to A to sell oil not from seeds in
or
acquire. contract yet pressed
his possession is a contract tor the sale of future goods.)

It may, however be noted that where by a contract the seller purports to effect the present sale of

future goods, the caontract operates as an agreement to sell. [Section 6(3)] The reason for the same is
that the ownership of the goods cannot be transferred before the goods come into existence. Thus a
contract for the sale of future goods is always an agreement to sell

EXAMPLE: P agrees to sell to Q all the mangoes which will be produced in his garden next year. This is an
agreement for the sale of future goods.

Contingent goods
type of future goods, the acquisition of which by the seller depends upon a
(These are a
contract to sell goods conditionally on their
which o r may not happen. A seller may
contingency may
be expected to come into existence) as
acquisition, that is, goods which might
the eggs.
a) goods to arrive, (6) future crops, (C) 41H Oth goe OroAT But suchh
 THE PRICE
Price is an essential element of sale. rice means the money consideration for a sale of goods. No
cale can take place without a price. If no consideration is given, then it will be a gift. It may be
Vali

noted that old and rare coins are not included in the definition of the term
money The price
citutes the essence of a contract of sale as no sale can take place without a price. The pfice may be
oney actualy paid or promised to be paid depending on whether the agreement is for cash or credit
mone

sle. However, ofwhere goods areitsold for a fixed sum and the price is paid partly in terms of cash and
partly in ternms valued goods is a sale.

MODES OF FIXING THE PRICE

Section 9 provides the following modes of the determination of the price.
Expressly stated in the contract. The parties may fix such price for the goods as they may
please. Mere inadequacy of price does not affect a sale. But the sum should be definite.
Thus, a man may sell his goods at any price he likes and may even sell them at a loss.

Price to fixed in agreed manner. The contract may provide for the manner in which the
price is to be fixed. The agreement may be to pay as much for the goods as others pay, or a
fair market value. But, where (i) the price is agreed to whatever sum as such shall be offered
by any third party or (i) where the price is left to be fixed by only one of the contracting
parties the agreement would be uncertain as to price and hence void abinito.
Determined by the course of dealing between the parties. A practice to deduct discount in
determining the price may be implied from a course of dealing. Similarly a usage to pay the
price at the rate prevailing in the market on the date of delivery may be implied from the
course of dealings.
AReasonable Price. Where the price is not determined in accordance with the above three
modes, the buyer shall pay the seller a reasonable price. What is a reasonable price is a
question of fact dependent upon the circumstances of each particular case.

. Price is to be fixed by the valuation of a third party. VWhen such third party makes' the
valuation, there is a determination of the price and the agreement becomes a contract of
sale. In case the party which had to fix the price does not fix the same, the agreement is
thereby avoided. Where goods or part thereof have been delivered and appropriated by the
buyer he shall pay a reasonable price therefor. If one of the parties wrongfully prevents the
valuation from taking place, the party not in tault may claim damages from the other party.
XAMPLE A
l tone of heat to B at a price to be fixed by C In caco Ceficos to fiv tho
 Conditions and Warranties
When forming a contract, a party may make a statement with a view to inducing the other party
onter
toe into the contract. Such statements when made before entering into the contract are known as
nTesentations. Such a representation may be mere expression of an opinion or commendation by
repr
he seller of his goods-what is often known as a 'puff'. Such representations may or may not be a part
and this depends upon the intention of the parties. Where it is not a part of the
of the contract
of the contract
contract, it has no legal consequences. On the other hand, if it forms an integral part
and other party reliesupon such a representation,it will be 'stipulation' within the meaning of
section 12 of the Act and may be either treated as a condition or a warranty.

CONDITIONS AND WARRANTIES ISEC 12(1)1

A stipulation in a contract of sale with reference to goods which are subject matter there of, may be a

condition or a warranty.")

All the stipulations in a contract of sale are not of equal importance. Some of them are essential to
the main purpose of the contract which are called "cornditions" and some are collateral to the main

purpose of the contract which are called "warranties")

So therefore, these stipulations can be of two types:
(1) Conditions, and (2) Warranties.

Conditions. [Sec 12(2)]

the breach of which gives rise to
'A condition is a stipulation essential to the main purpose of the contract,
a right to treat the contract as repudiated."
In order to influence the buyer to purchase the goods, the seller makes certain statements
regarding the goods, which can be of two types
Statements in praise of the goods, which do not form a part of the contract: These
statements are given merely in praise of the goods having no legal consequences.

ZStatements which form an integral part of the contract : These statements are known as
"STIPULATIONS", A stipulation gives rise to legal consequences.

ESSENTIALS OF A CONDITION
I t is essential to the main purpose of the contract.
 u warranties
Wat
to the aggrieved parh
arrantiess
2The nonfulfillment of condition causes irreparable damage rty which
would defeat the very purpose for which the contract is
made.

The breach of a condition gives a right to the aggrieved party to rescind the contrans
3 tract and
recover the damages for breach of condition.

2Warranties. [Sec. 12(3)]

A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gines riseto
a clain for damages but not to a right to reject the goods and treat the contract as repudiateds

ESSENTIALS OF A WARRANTY
It is collateral to the main purpose of the contract.
The breach of warranty causes damage to the aggrieved party and does not defeat the main
ain
purpose of the contract.
The aggrieved party can only claim the damages forbreach of warranty but can repudiate
the contract.
The breach of a condition entitles the injured party to repudiate the contract, to refuse the goods
and if he has already paid for them, to recover the price. The remedy in case of breach of warrantv is
the
recoveryThus,
ofdamages only. It does not give right to reject the goods and treat the contract as
repudiated. a condition is more vital than warranty
The following illustrations make the nature of the terms clear.
 DIPFERENCE BETWEEN A CONDITION AND WARRANTY
Following are the main points of distinction between the conditions and the warranties

Importance in contract. Condition is a stipulation which is essential to the main purpose of

the contract, whereas warranty is a stipulation which is collateral to the main purpose of
the contract.
. Consequences of breach. The breach of condition gives a right to the aggrieved partyto
repudiate the contract and claim damages, whereas the breach of warranty gives the
aggrieved party a right to claim damages only ie. aggrieved party can not repudiate the
gontract.
3. Option of treatment. In the of condition, a breach of condition can be treated as aa
case
breach of warranty as an option on the part of the aggrieved party, whereas in breach of
warranty there is no such option available to the aggrieved party i.e. breach of warranty can
never be treated as breach of condition.

LWHEN cONDITION TO BE TREATEDAS WARRANTY

Section 13 deals with cases in which a condition may be waived or treated as a warranty. These
cases are as follows
(Voluntary waiver by buyer. contract of sale, although on a breach of condition by a
In a
seller, the buyer has a right to treat the contract as repudiated and he can reject the goods, but he is
not bound to do so. Instead he can elect to waive the condition ie. to treat the breach of condition as
breach of warranty and accept the goods and sue the seller for demages for breach of warranty
FYAMRLE I tonoll V 100'hea of narticular ai Jality of Besmati rice OF A500.nor bsa Put h
 Conditlons and anties
Il-2.4
to treat a breach of a conditio
A2 Treating the condition as warranty. The buyer may elect jtion as a
breach of a warranty.
on the will.
nature and depend solely of t
The two mentioned above are voluntary in
cases
the right to repudiate the cone
buyer. On discovery of the breach
of a condition a party having
is taken to have waived his right
to repudiate it) contract
must excercise it; and if he does not, he

metres at the rate of 7 30 per metre, but supplia

of fine cloth
EXAMPLE : X agreed to supply Y 5000 15 per metre. There is a breach of
condition and Y Can so
the medium quality, the price of which is ct
he claim damages at the rate of F 15 per metre
the goods. However, if Y accepts the goods
can

the contract of sale is not severable and the buver

J3) Acceptance of goods by buyer{ Where condition can only be treated as a breach o
has
thereof, the breach of any of
accepted the goods or part
maintain action for damages, as if the condition were only a warTant.
warranty, but can only an
nty.
and directs delivery to be mailed to him. t
where a buyer sells the goods to the sub-buyer he
Similarly
act amounts to an unconditional acceptance of the goods.
EXAMPLE: A contract was made for the sale of wheat on c.i.f. terms. The buyer took the documents and
resold and delivered part of the wheat to sub-buyers without making a proper examinaton there of. The
wheat having been found of inferior quality, they claimed to reject it. It was held that the resale and
delivery of part of the wheat was an act inconsistent with the ownership of the seller and the rightto
reject the goods had been lost. [Hardy v. Hillerns (1923)2. K.B. 490 (CA)].

Where the contract is divisible and even though the buyer has accepted a part of the goods, he
can still exercise his right to reject the goods. Thus, in a contract by instalments the buyer can reject
the quantiy under any instalment. But under an indivisible contract, the buyer loses his right to reject
the goods if he accepts a part of it.

EXAMPLE: A dealer ordered from a manfacturer horns of different descriptions and prices. The horns were

toground
bedelivered in several
that they were notinstalments. The buyer
of merchantable accepted
quality. It was some instalments
held that
rejected others the
but was
the dealer entitled to do so.
on

[Jackson v. Rotax Motor and Cycle Company (1910) 2. K.B. 927].

VEXPRESs cONDITIONS AND WARRANTIES

In a contract of sale conditions and warranties
may either be express or implied. The conditions
and warraties which are
agreed upon between the parties in express words, either spoken or written
are called
express conditions and warranties.

MPLIED cONDITIONS AND WARRANTIES

Where the conditions and warranties are applicable in a contract of
sale by operation of law, tnt
are said to be implied conditions and warranties. These the conditions and warranties which
are
not form a part of contract of sale at
the time of contract between the
u
come into existence by parties,but they automaticauy
operation of law. However the implied conditions arnd warranties are bject
to contract to the contrary. suoj
EXAMPLEA plEuyes
uyes s SOOer Win B tor a loan of
1000 and promises him to give its
EXAday. Soon after he
sells
his scooter to C, an
innocent possession tne
nter being pledged. may either ask A to clear the
C buyer who does not know about the fact or
a suit against A for the recovery of the money. loan or may himself pay the
money and then e

Implied warranty annexed by usage of trade

A warranty as to fitness for a
particular purpose may be annexed
of trade (Section
to a contract of sale by a custom
usage 16(3)]
or

EXCLUSION OF IMPLIED CONDITIONS AND WARRANTIES

lnnlied conditions and warranties in a contract of sale
Impl may be negatived or varied by
(a) express agreement between the parties; or
b) course of dealing between them; or
(c)the custom or usage of trade.

CAVEAT EMPTOR
FCaveat Emptor",i.e., Let the buyer beware means that ordinarily, a
buyer must buy goods only
atersatisfying himselt of their quality or fitness. If he makes a bad choice, he can't blame the seller
and claim damage. In other words it is part of the seller's duty in a contract of sale to give to the
not a

buver, an article suitable for a particular purpose unless such

purpose is made known to the seller.
The rule of 'caveat emptor' is laid down in section 16, which states that, "subject to the provisions
of this Act or of any other law for the time being in force, there is no
to the quality or fitness for any
implied warranty or condition as
particular purpose of goods supplied under a contract of sale" But
the rule has no application in any case, in which the seller has undertaken and
the buyer has left it to
the seller, to supply goods to be used for a
purpose known to both parties
at the time of the sale.
EXAMPLE: There was sale by sample
by a woollen manufacturer of cloth to a merchant who was also a
tailor. The buyer required the cloth for making special uniforms but this fact was not made known to the
seller. Owing to latent defect in the cloth which was also there in the
But there was nothing to show that it was unfit
sample, it was unfit for the purpose.
for other purposes. It was held that the buyer was without
remedy. [Jones v. Padgelt. (1890). 24 Q.B.D. 650]

IEXCEPTIONS TO THE RULE OF CAVEAT EMPTOR

(The modern tendency is to narrow the scope of the rule of caveat emptor. These days, trade has
become international in nature making it difficult for buyers to examine
n the case of 'mail goods before hand especially
order' purchases
Section 16 lays down the following exceptions to the rule of caveat emptor.
KWhere the buyer relies on'the skill and judgement of the seller
Ihe doctrine of caveat emptor will not apply and the seller will be held liable for breach of
mplied condition as to quality or fitness of the goods, if the
buyer has known to the seller the
particular purpose for which he requires the goods and the buyer has relied on the skill and
agement of the seller, who deals in such goods.)
There is, however, no such implied conditíon where a specific article is sold under its patent or
trade name.
t
I-2.12 Conditions and Warranties
EXAMPLE:B purchased timber from C and the fact was made known to the seller that thetimber was to be
used for railway sleepers. It was held that B could reject the timber as it was notfit for the purpose
[Bombay Burmah Trading Corporation v. Agha Mohammad. (1911) 34. Mad. 453 (PC)J.
Merchantable Quality of goods
Where the goods are bought by description fronm a seller who deals in goods of that description,
there is an implied condition that the goods shall be of merchantable quality. However this exception
to caveat emptor will not apply if the buyer has examined the goods as regards the defects which
could have been revealed by such examination of the goods at the hands of the buyer
Consent by fraud
(The doctrine of caveat emptor shall not apply to all those purchases which have been made by a
buver under a contract where his consent was obtained by the seller by fraud ie., where the buyer
relies on false representation of the seller and suffers damages. A seller, who is guilty of fraud, shall
have no protection of the doctrine of caveat emptor
4 . Usage of trade
(An implied condition as to quality or fitness for a particular purpose may be annexed by the
usage of trade)
OBJECTIVE TYPE QUESTIONS
FILL IN THE BLANKS
1. If there is a breach of a condition in a contract of sale, the buyer can
2. Ifthere is a breach of a warranty in a contract of sale; the buyer can
3. Whether a stipulation in a contract of sale is a condition or a warranty depends in
4. There is an implied condition that the goods are reasonably fit for the purpos
needs them provided
5. In the case of a contract for sale by sample, there is an implied condition
6. An implied warranty or condition as to quality or fitness for a particu