Sale of Goods - Chapter 4 - Conditions and Warranties

This Chapter deals with conditions and warranties in relation to contract of sale. In this Chapter we will discuss stipulation of time, warranty, implied undertaking, sale by description and sample etc. from sections 11 to 17.

1. Stipulations as to Time

Q. Time stipulation for the payment is not essence of the contract" substantiate with relevant example.

Section 11 deals with the time stipulation in a contract of sale. It says-

"Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract."

This section has two rules: first time of payment and second other stipulations as to time.

"Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of a sale-it means time of payment is not a condition of the contract unless the parties make it a condition in their contract. In the case; Martindale v. Smith, (1841) 1 QB 389: 55 RR 285, some stacks of oats were sold by the defendant to plaintiff. The stacks were remained to be on the defendant's (seller's) ground for 12 weeks and the payment was to be made within 12 weeks. But, buyer failed to pay within stipulated time and asked for more time; but the seller did not accede to his request. The buyer later on tendered the price but the seller refused to accept it and resold the stacks. The seller was held liable to the buyer in trover.

1.1 Stipulations as to Time of Payment

Punctual payment does not cover the whole consideration of a sale. It was held in the case Martindale v. Smith, that the failure of payment by the buyer doesn't entitle the seller to treat the contract as repudiated. The seller may stop the delivery of goods until the payment is made to him. He (seller) can resale the goods if the buyer does not pay the price within a reasonable time. But, if before such resale the buyer wishes to make the payment although stipulated time has elapsed, the seller cannot treat the contract as finished unless in the contract, contrary to the stipulated time something is mentioned.

1.2 Stipulation as to Time of Performance of other Terms

Q. In which cases time is considered as essence of the contract? Explain.

The Act does not deal only with commercial contracts but other kinds of contract also. Mc Cardie, J. in the case; Hartley v. Hymans, (1920) 3 KB 475 (484), observed that in ordinary commercial contracts for the sale of goods the rule clearly is that time is prima facie the essence with respect to delivery. In another case; Orissa Textile Mills v. Ganesh Das, MANU/BH/0027/1961 : AIR 1961 Pat 107 (109), the court said that a mercantile contract is not always an isolated transaction, but a link in a chain transactions, so that punctual performance may go to the whole consideration for the sale.

Time is considered to be as essential as soul in the following types of cases:-

(i)When the parties of a contract agreed upon to treat time as the essence of the contract;

(ii)where delay in fulfilment of conditions of contract operates as an injury; and

(iii)if, nature and necessity of the contract require time to be construed in it.

In view of the above, few examples are given as follows:

(a)In the case; Browes v. Shand, (1877) 2 App Cas 455, there was a contract between seller and buyer to supply Madras rice during the month of March and April by the former to latter. A large quantity of rice was shipped in the month of February and about one-eighth was dispatched during March. It was the observation of the House of Lords that the buyers were entitled to reject the goods. Although, there was no difference in the quality of the goods and the buyer did not suffer any loss due to supply of goods earlier than stipulated time.

(b)In the case; Hartley v. Hymans, (1920) 3 KB 475, the plaintiff and defendant underwent a contract wherein the plaintiff had to sell the defendant 1000 lbs of cotton yarn per week from September. It was mentioned in the contract that failure of supply of goods within a stipulated time would render the contract liable to termination. There was no supply of goods till October, after that average supply was 500 lbs per week. The buyer throughout this period reminded to supply the goods as per the conditions laid down in the agreement but of no avail. In March, the order was cancelled.

It was held that in this contract the time factor was paramount but during all this period, the buyer's request to supplier for better deliveries and his conduct waived his right to cancel the contract.

2. Condition and Warranty

Q. Discuss conditions or warranties of a contract of sale as given in section 12 of the Sale of Goods Act, 1930.

Section 12 of the Sale of Goods Act, 1930 deals with the conditions and warranties. It speaks as-

"(1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

(2) 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.

(3) 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.

(4) Whether a stipulation in a contract of sale is a condition or a warranty depends in each on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract."

There are number of terms and conditions which may be attached to an agreement of contract viz., nature and quality of goods and their fitness. Although, it may be the possibility that all the terms may not hold the equal importance in carrying on the contract but some may be, in case of non-fulfilment jeopardize the contract.

� such terms are known as conditions of the contract and in case of their breach enables the other party to repudiate the contract.

Section 12(2)

� if the terms given in the contract are not of that vital importance then it is known as warranty.

Section 12(3)

� the breach of warranty 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)

But, the court doesn't go only by the provisions as laid down the section regarding conditions and warranty but it assess the relative importance of the stipulation in dispute in the light of all the prevailing circumstances from time of entering the contract till its non-fulfilment. Some cases are mentioned below for its elaboration-

2.1 Baldry v. Marshall, (1925) 1 KB 260: (1924) All ER Rep 515

Here, the plaintiff consulted a car dealer, defendant' for a car which should be suitable for touring purposes. The plaintiff purchased the car 'Bugatti' on defendant's suggestion that it would be fit for touring. The car, after its use, it was found that it was not good as told by the defendant. The plaintiff asked for its rejection. But, it was defendant's plea that in the contract, guarantee was there to protect/repair the car against the mechanical defects and excluded every other guarantee or warranty.

But the court did not accept the plea and found that the car which was purchased by the plaintiff for touring purpose could not stand up for the same as ensured by the defendant hence, plaintiff is entitled to reject and get the price refunded.

2.2 We can find the illustration of Warranty in the case; Harrison v. Knowles and Foster, (1917) 2 KB 606: (1918-19) All ER Rep 306

The plaintiff purchased two small ships from the defendants. Plaintiffs relied upon the particulars furnished by the defendants in which all the information pertaining to ships were made available. It was said that the dead weight capacity of each ship was 460 tons but in reality it was only 360 tons.

The plaintiff wanted to reject the ships. It was observed that the representation of capacity was not a condition but a warranty, for which the plaintiff could have sued for damages had liability for warranties not been excluded.

3. Condition to be Treated as Warranty

Section 13 of the Act speaks about the conditions which are to be treated as warranty. It says as-

"(1) 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 and not as a ground for treating the contract as repudiated.

(2) Where a 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 and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

(3) Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility or otherwise."

In some circumstances, condition turns to be a warranty and in this condition buyer loses his right to reject the goods. He can ask only for damages for the breach of condition.

3.1 Waiver by Buyer

First part of the section says that conditions, express or implied, are for the benefit of the buyer. So, he has got the option to waive the breach of a condition. Here, he is liable for the price, but he can also recover damages for the breach. In the case; City and Industrial Development Corpn. of Maharashtra Ltd. v. Nagpur Steel and Alloys Ltd., MANU/MH/0014/1992 : AIR 1992 Bom 55-the goods supplied were oversized, it was known to the buyer even then instead of rejecting them, consumed the same without giving any opportunity to the seller to replace them and also paid the price of 58 consignments out of 60, all this amounted to waiver disentitling the buyer from the right to insist on the condition and making him liable to pay the balance price.

3.2 Acceptance of Goods by Buyer

Section 13(2) says that once the buyer has accepted the goods or part thereof then the breach of any condition of the term limited the remedy to damages only and loses the right to reject the goods. We will study the condition of acceptance of goods under section 42 of this Act under the Chapter 'Performance of the Contract'.

4. Implied undertaking as to title etc.

Q. Can a buyer claim the price of goods if it was found on possession that it was stolen and seller sold it knowingly?

Section 14 of the Act says-

In a contract of sale, unless the circumstances of the contract are such as to show a different intention there is-

(a)an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass;

(b)an implied warranty that the buyer shall have and enjoy quiet possession of the goods;

(c)an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

In sale, the ownership of goods is transferred from seller to buyer. The law confers the right on seller to sell the goods, and it is an implied condition in every sale that the seller has the right to sell. Buyer may reject the goods if the title of the seller turns out to be defective.

In a case; Rowland v. Divall, (1923) 2 KB 500 CA, the buyer had purchased a second hand car from a dealer and used it but within few months, the car was seized by the police as it was stolen. Here, the buyer may recover the full price from the seller (dealer) although he had used it for few months. Lord Atkin said-

"There can be no sale at all of goods which the seller has no right to sell. The whole object of a sale is to transfer property from one person to another.....In fact the buyer has not received any part of that which he contracted to receive-namely, the property and right to possession-and that being so, there has been a total failure of consideration."

Even, when a seller has full ownership of the goods, yet he may commit a breach of this condition.

In Niblett v. Confectioners' Materials Co., (1921) 3 KB 387: (1921) All ER Rep 459 CA, 3000 tins of condensed milk was sold by the defendants. The consignment reached from New York to London and the plaintiff found that 1000 tins were labelled as "Nissly brand". Another manufacturer of condensed milk under the name of 'Nestle brand' claimed that this was an infringement of their trade mark. Then the plaintiff removed the labels and sold it on reduced price. Then the plaintiff sued the sellers for the breach of the condition as to title.

In the case, it was held that the plaintiff had the right to reject the goods or was entitled to recover what he lost due to sale of milk or reduced prices.

Lord Atkin has explained the meaning of the words "right to sell" as follows-

"The seller had not the right to sell these goods .......having admitted that there being an infringement of the Nestle Company's trade mark they were liable to an injunction restraining the sale. Therefore, they had no right to sell these goods at the time when the property was to pass".

It was the view of their Lordship that the defendants could have passed the property in the goods but for the intervention of the third party, they had nevertheless no right to sell the goods owing to the existence of a title superior to that of the vendor, so that the possession of the vendee may be disturbed. In the words of Scrutton LJ:-

"The defendants impliedly warranted that they had then the right to sell it. In fact they could have been restrained by injunction from selling them, because they were i\nfringing the rights of a third person. If a vendor can be stopped by process of law from selling he has not the right to sell".

5. Sale by Description

Q. Under the provision of section 15 of the Sale of Goods Act discuss the sale by description. Cite relevant cases also.

Section 15 lays down the condition which speaks about the sale which is based on description. It is as-

"Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with the description."

To invoke the protection under this section, two essentials are to be fulfilled, first-the sale should be through 'description' and secondly-the goods should not correspond with the description.

There are many situations where sale is completed that is based on description

(a)In the case; Grant v. Australian Knitting Mills, (1936) AC 100, Lord Wright has said about 'sale by description' as-

"It may also be pointed out that there is a sale by description even though the buyer is buying something displayed before him on the counter merely as the specific thing, but as a thing corresponding to a description, e.g. woollen undergarments, a hot-water bottle,a second-hand reaping machine, to select a few obvious illustrations."

(b)In the case; Varley v. Whipp, (1900) 1 QB 513 (516), there was a sale of a reaping machine. The seller gave its description as a machine which was only one year old and was used to cut only 50 to 60 acres. The buyer purchased it but found that the machine was too old and did not correspond with the specification as given by the seller in the description, hence he returned it. The seller brought the action against the buyer on its return but failed.

(c)In the case; Moore & Co. v. Landauer & Co., (1921) 2 KB 519 CA, packing of goods was considered as description of goods. There was a contract for the purchase of 3000 tins of canned fruits from Australia. The packing was to be done in a pack of 30 tins in one case. But, the sellers tendered only 24 tins in one case. The method of packing the tins was a part of description and therefore, the buyers were entitled to reject the consignment as a whole.

(d)Reliance on description to be in contemplation of parties-

A sale of goods by description takes place only when the buyer is satisfied with the description.

In the case; Harlington & Leinster Enterprises Ltd. v. Christopher Hill Fine Art Ltd., (1990) 1 All ER 737 CA, defendants were a company dealing in art paintings. It was in business for a long time and was carrying it out from a London gallery. There were two paintings which Harlington wanted to sell in 1984. In the 1980 catalogue, it was mentioned that these two paintings were done by Gabriele Munter who belonged to German expressionist school. But Harlington was not specialized to make out whether these paintings were in reality belonged to Gabriele Munter. When the defendant contracted Christie's-a renowned auctioneer who dealt in art, the latter shown interest in one of the paintings and wanted to buy it at a price of � 6000 without asking any question about the provenance of the paintings or making any further inquiries about them. The invoice showed that the painting described it as being by Munter. But, the plaintiff found later on that the painting was not a genuine one and sought repayment of price what he had paid for purchasing the painting since the sale was based on description.

It was also observed that a description was applied to goods either in the course of negotiations or in the contract itself did not necessarily make the contract fit for the sale of goods by description. The description had to be influential in the sale to make the description an essential form of the contract. In this case, the plaintiff did not rely on Harlington description what they have given about painting as being by Munter but had purchased the painting as it was, and the sale was not a sale by description.

It was further observed that the sold item was a painting and nothing else, it was still merchantable but might have fetched lower price since it was not the same as it was not painted by the same artist, what the plaintiff had thought of.

(e)In the case; Gill & Duffus S.A. v. Berger & Co. Inc., (1984) 1 All ER 438 (445-446): 1984 AC 382 (394), Lord Diplock has defined 'description' as-

While 'description' itself is an ordinary English word, the Act contains no definition of what it means when it speaks in that section of a contract for the sale of goods being a sale 'by description'. One must look to the contract as a whole to identify the kind of goods that the seller was agreeing to sell and the buyer to buy......where, as in instant case, the sale is "by sample as well as by description", characteristics of the goods which would be apparent on reasonable examination of the sample are unlikely to have been intended by the parties to form part of the 'description' by which the goods were sold, even though such characteristics are mentioned in references in the contract to the goods that are its subject-matter'.

It would not be out of place to mention here that once it has been proved that the sale is by description then the law implies the condition that the goods must correspond with the description and the description should be accurate.

6. Sale by Sample

Q. Discuss the provision of section 15 of the Sale of Goods Act, which deals with `Sale by Sample'.

The second part of section 15 speaks about sale by sample as-"if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample, if the goods do not also correspond with the description". It convey a clear meaning that where a sale has been agreed upon between the two parties then the goods shall not merely agree with the sample, but must also correspond with the description.

In the case; Azemar v. Casella, (1867) 2 CP 431, buyer was to get 'long staple salem cotton' from the seller as per the description and sample and it was mentioned that if the goods proved to be inferior in quality, a reasonable allowance would be made to the buyer, but the buyer was held not bound to accept the goods which were turned out to be not long staple cotton, but only Western Madras Cotton. Regarding Allowance clause Montague Smith J. said-

"Suppose a contract were made for the sale of 'one hundred casks of spirits' guaranteed to be equal to a sample produced, and with a stipulation for an allowance should the quality prove inferior to the guarantee, and the sample being brandy, the bulk tendered were to consist of rum, could the allowance clause be applied to such a case?

7. Conditions implied by way of Exceptions to Rule of Caveat Emptor

Q. What is the significance of the exceptions of the rule `caveat emptor' in contract?

Section 16 of the Act speaks about the principle of caveat emptor i.e. buyer beware.

The implied conditions and exceptions as given in the above section, the seller is not bound to supply goods which should be fit for any particular purpose or which should possess any particular quality. R.A. Eastwood in 'The Contract of Sale of Goods'¹ said that it was for the buyer to make himself acquainted with qualities and defects of the goods which he contemplated while purchasing:

"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, except as follows:-

(1)Where the buyer, expressly or by implication, make known to the seller the particular purpose for which the goods are required, so as to show that the buyer 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 (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:

Provided that, 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 as to its fitness for any particular purpose.

__________________

1. 2nd Edn., 1946, p. 42.

(2)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:

Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.

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

(4)An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith."

In the case; Ward v. Hobbs, (1878) 4 App Cas 13, the seller sold some pigs by auction and no warranty was given in respect of any fault or error or description. The buyer accordingly paid the price for healthy pigs. But, all the pigs except one died of typhoid fever. They also infected few other pigs of buyer. It was the observation of the House of Lords that sending infected pigs to the market was an offence, but there was no implied condition or warranty that they were sound. Lord O' Hogan said, in this regard as-

"Although a vendor is bound to employ no artifice or disguise for the purpose of concealing defects in the article sold, since that would amount to a positive fraud on the vendee; yet another the general doctrine of caveat emptor, he is not ordinarily bound to disclose every defect of which he may be cognizant, although his silence may operate virtually to deceive the vendee."

In the case; Jones v. Padgett, (1902) 2 IR 585, a wool merchant and a tailor purchased indigo cloth for the purpose of making liveries, the purpose being not known to the seller, he was held not liable when, on account of a latent defect the cloth was unfit for that purpose, but it was fit for other usual purposes.

In another case; Wallis v. Russell, (1902) 2 IR 585, the scope of caveat emptor has been explained by Fitzgibbon LJ of the Irish Court of Appeal as-

'Caveat emptor does not mean in law or Latin that the buyer must 'take chance', it means he must 'take care'. It applies to the purchase of specific things, e.g. a horse or a picture, upon which the buyer can, and usually does, exercise his own judgment; it applies also whenever the buyer voluntarily chooses what he buys; it applies also where by usage or otherwise it is a term of the contract, that the buyer shall not rely on the skill or judgment of the seller:

Exceptions

In recent times it has been seen that exceptions to the rule caveat emptor has gained more significance than the rule itself. The rule originated when the buyer and seller used to meet in the open market. The seller showed the goods and buyer, if he liked, purchased the same. But, in modern times, traders and buyers undergo agreement to sale or purchase from distant places and do all the business through correspondence. Seller on his part does assure the contents and quality of the goods. Thus, the rule of caveat emptor needed to be restricted by few exceptions upon its scope.

Best C.J. in the case; Jones v. Bright, (1829) 5 Bing 533, has stated the essence of the exceptions as-

"It is the duty of the court in administering the law to lay down rules calculated to prevent fraud, to protect persons who are necessarily ignorant of the qualities of a commodity they purchase and to make it the interest of manufacturers and those who sell, to furnish the best article that can be supplied. I wish to put the case on a broad principle. If a man sells an article he hereby warrants that it is merchantable-that is, fit for some purpose. If he sells it for a particular purpose he thereby warrants it fit for that purpose".

Steve Hedley, in the book 'Quality of Goods, Information and the Death of Contract, (2001) observed the exception of caveat emptor as-

'Caveat emptor is dying, or so it is often supposed. And this death is thought to be no isolated event, but to exemplify the death of freedom of contract generally. Contracting parties are no longer free to set what terms they wish, except in particular, tightly defined markets; sellers can no longer abuse their freedom by selling sub-standard goods and relying on exclusion clauses. The benevolent hand of the law has replaced the harsh rule of the market'.

8. Division of section 16

We can divide section 16 in following parts to study the minutest details of this section

8.1 Fitness for Buyer's Purpose [Section 16(1)]

8.1(i)Sale under Trade Name

8.1(ii)Sale to Consumer Statutory Changes

8.1(iii)Sale by Agent

8.2 Merchantable Quality [Section 16(2)]

8.2(i)Purchase by Description

8.2(ii)Marketability

8.2(iii)Sale of Pictures: A general observation

8.2(iv)Goods should not violate Applicable Statutes

8.2(v)Pack

8.2(vi)Test of Merchantable Quality

8.2(vii)Statutory Definition of Merchantability

8.3 Conditions Implied by Trade Usage [Section 16(3)]

8.4 Express Warranty

8.1 Fitness for Buyer's Purpose

Q. What do you mean by fitness for buyer's purpose under section 16(1).

If, we see the sub-section (1) of Section 16, there is an implied condition that the goods shall be reasonably fit for such purpose. But, for this condition to arise, it is necessary to prove following points:

(a)The buyer should express the seller's particular purpose for which the goods are required.

(b)The buyer should rely on the seller's skill or judgment, and

(c)The goods must be of a description which it is the course of the seller's business to supply.

The above essentials are required in a sale of goods and the same are also fulfilled in routine sale of article or goods. In a case; Grant v. Australian Knitting Mills, (1936) AC 85: 105 LJ PC 6: 154 LT 18: 52 TLR 38: MANU/PR/0089/1935 : AIR 1936 PC 34, the plaintiff (a doctor) purchased two woollen underpants from the defendants. The plaintiff wore a pant and got ill the following day. The illness was diagnosed as dermatitis which was caused by a chemical irritant used by the defendants who had negligently omitted to remove during the process of manufacture.

It was held that the sale was within the exception and the implied condition of fitness for the buyer's purpose was broken. Lord Wright observed as-

"It is no doubt essential that the buyer must rely upon the seller's skill or judgment. But the reliance will seldom be expressed it will usually arise by implication from the circumstances. Where the seller deals in certain goods, the buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment'.

Lord Wright further added-

'There is no need to specify in terms the particular purpose for which the buyer requires the goods, which is nonetheless the particular purpose within the meaning of the section, because it is the only purpose for which any one would ordinarily want the goods'.

In another case; Manchester Liners Ltd. v. Rea Ltd., (1922) 2 AC 74, the plaintiffs ordered coal specifically for their ship, Manchester. The furnaces of Manchester, required special variety of coal. The coal which was supplied for Manchester was fit for other steamers but not for Manchester:

In rejecting the coal, plaintiff was justified. In the words of Lord Buckmaster-

'The order was expressed for the use of a particular steamship and it must, therefore, be assumed that the respondents knew the nature of the furnaces and the character of the coal she used, for it was this coal they contracted to supply'.

8.1(i) Sale under Trade Name

We usually rely more on the trade name of a commodity when we go to buy the goods than the skill and judgment of the seller. Proviso of section 16 says-

'Provided that, 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 as to its fitness for any particular purpose'-

It clearly suggests that mere mentioning of the product's name does not exclude the condition, for even then the buyer may rely on the seller's skill and judgment.

In the case; Baldry v. Marshall, (1925) 1 KB 260, the buyer told the seller that he needed a car for touring purpose and the seller recommended 'Bugatti' car (a trade name). This did not exclude the implied condition of fitness.

Bankes LJ. said as-

"The mere fact that an article sold is described in the contract by its trade name does not necessarily make the sale, a sale under a trade name may illustrate my meaning by reference to three different cases. First, where a buyer asks a seller for an article which will fulfil some particular purpose and in answer to that request the seller sells him an article by a well-known trade name; there I think it is clear that the proviso does not apply. Secondly, where the buyer says to the seller 'I have been recommended such and such article'......mentioning it by its trade name......'will it suit my particular purpose', naming the purpose and thereupon the seller sells it without giving more information; there again, I think the proviso has no application. But there is a third case where the buyer says to a seller. I have been recommended so and so, 'giving its trade name........' as suitable for the particular purpose for which I want it. Please sell it to me. In that case I think it is equally clear that the proviso would apply and that the implied condition of the things fit for the purpose named would not arise. In my opinion, the test of an article having been sold under its trade name within the meaning of the proviso is: Did the buyer specify it under its trade name in such a way as to indicate that he is satisfied, rightly or wrongly, that it will answer his purpose, and that he is not relying on the skill or judgment of seller, however great the skill or judgment may be?"

8.1(ii) Sale to consumer statutory changes

The Supply of Goods (Implied Terms) Act, 1973 (English Act) provides that the implied condition of fitness may also extend to every seller who sells the goods in the course of business.

In the case; Buchanan Jardine v. Hamlist, (1981) SLT 60, owners of a farm containing livestock sold their farm. After sometime, one of the cow was found to be a positive tuberculosis reactor. That was slaughtered and the movement of the cattle to the farm was prohibited. Subsequently one more cow had to be slaughtered and the buyer could not move his stock. It was the seller's plea that it was not a sale in the course of business.

The Court observed that if a person who sells any part of his business equipment, sells that part in the course of his business and that it made no difference whether the sale was of one item or the whole of the goods used by him for the purpose of his business.

If a person purchases a thing repeatedly, it does not take him out of the category of a consumer so as to constitute it as a trade sale.

8.1(iii) Sale by Agent

If a person sells the goods on behalf of his principal and does not disclose that he is not the true seller but working as an agent even then the fitness remains applicable. The owner of the goods on whose behalf the sale was effected can be sued though he was an undisclosed principal.

In the case; Boyter v. Thomson, (1995) 3 All ER 135 HL, the buyer purchased a boat from the seller assuming that he is the owner but in fact, he was an agent. The boat turned out to be unseaworthy. It was also held that the right of rejection was exercisable against the undisclosed principal who was the real owner.

8.2 Merchantable Quality [Section 16(2)]

Q. What is merchantable quality of goods.

Merchantable quality means satisfactory quality of good which can be sold or purchased by the two consenting parties. Section 16(2) says that-

"Where the 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".

8.2(i) Purchase by Description

Q. Write note on "Purchase by Description".

To fulfil this condition, goods must be purchased by description from a seller who sells goods with that description. After fulfilment of this condition it becomes the responsibility of the seller to supply the goods of 'merchantable quality'.

It has been said that some 'description inevitably occurs as and when an article is demanded. In the case - Godley v. Perry, (1960) 1 All ER 36, some plastic toy catapults were being displayed by a toy dealer in his shop window. A child bought one of the toys but when he was playing with it, the toy broke down and injured boy's left eye which had to be removed.

It was the plea of seller that there was no condition of merchantable quality as the toy was not purchased from him by description. But, the court rejected this plea and held-

"That a sale over the counter can be a sale 'by description' is clear.....and where, as here, a child asks for a catapult and one is sold to him over the counter, that is no less a 'sale by description' than one where an order is placed on the strength of a catalogue"

8.2(ii) Marketability

In the case; Grant v. Australian Knitting Mills, (1936) AC 85 (105), it was held that 'Merchantability does not mean that the thing is saleable in the market because it looks all right, it is not merchantable in that event if it has defects unfitting it for its only proper use but not apparent on ordinary examination'. In one another case; Harlington & Leinster Enterprises Ltd. v. Christopher Hill Fine Art. Ltd., (1990) 1 All ER 737 CA (This case has already been discussed in this Chapter as case No. 13), it was held that 'where the thing is not defective in itself as such and no fraud was practiced on the buyer it may still be regarded as merchantable even if it is not able to fetch a full value in the resale market.'

8.2(iii) Sale of Pictures: A General Observation

In the world of Art, we have often heard about the fake, forged or imitated artworks of renowned painters which are being sold as the original work of that renowned artist who has really created/painted the original one. Many cases have come to the court and Harlington case is one of them. Nourse LJ. has passed the observation as follows regarding the state of the picture trade:

'Although that is enough to dispose off this appeal in favour of the defendants, I desire to add some general observations about sale of pictures by one dealer to another where the seller makes an attribution to a recoginsed artist. The huge additional value of an authentic attribution has, from the earliest periods of European art, seduced a corresponding volume of skill and energy into the production of fakes, even in the lifetime of the artist. An early example was Durer (1471-1528), who had to enlist the support of Emperor Maximilian I in order to prevent the imitation of his woodcuts and engravings. With the great expansion in royal and noble collections which took place in the eighteenth century, faking became an art of its own. It has even been known for a faker, Han Van Meegeren, who between 1935 and 1945 produced forgeries of the works of Vermeer, to become almost as famous as the artist himself. Advance in technology, while in some respects increasing the possibilities of detection, have in others assisted the faker to apply his skill with ever-increasing ingenuity. Even if fakes are put on one side, many old master paintings cannot be safely attributed to a particular member of a group of artists, some of whom may still remain obscure'.

8.2(iv) Packing

Packing of goods plays an important role in sale of goods. Packing itself speaks the quality of goods about its manufacturer and other details. Packing of goods is an equally important consideration in judging their 'merchantability'. In the case; Morelli v. Fitch and Gibbons, (1928) 2 KB 636, a bottle of Stone's Ginger Wine was purchased by the plaintiff and when he attempted to draw its cork with a corkscrew and with due care, the neck of the bottle broke off and fell to the ground injuring plaintiff's hand. The seller had to answer in damages. Chorley and Tucker¹ in his book has mentioned that there was an implied condition that the bottles, as well as the contents, should be reasonably fit for the purpose for which they were required.

8.2(v) Goods should not violate Applicable Statutes

It is necessary that the goods which are being sold does not violate any applicable statute. The law in this connection means the law of the country where the goods are made. In this case; Summer Permain & Co. v. Webb & Co., (1928) 2 KB 636, a seller is not bound to satisfy the requirements of a

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1. Cases on Mercantile Law, 4th Edn., 1962, p. 186.

foreign law, unless that is a part of his contract or he has been trusted to supply goods fit for a particular purpose. The fact of this case was regarding sale of quantity of 'Webb's Indian Tonic Water'. It was for resale in Argentina. This tonic water contained 'salicylic acid' which was prohibited in Argentina. The buyer then sought to reject the goods as being unmerchantable. But, he was not allowed to do so, because merchantable quality has reference to the substance and quality of the goods and not restrictions which has been imposed by a foreign law.

8.2(vi) Test of Merchantable Quality

Q. Define and discuss the test of Merchantable Quality".

Merchantability is generally concerned with the quality of goods and goods are merchantable if they are fit for any one of the several purposes for which they may ordinarily be used. In a case, the plaintiff purchased the feed for his young poultry but the poultry died after giving them the feed. The House of Lords held that the feed was not fit for the purpose of buyer and the seller was responsible, but that the feed was merchantable as it was fit for older birds and other animals.

Changing the term from 'merchantable quality' to 'satisfactory quality' the Sale and Supply of Goods Act, 1994 (English), section 14(2B) says that the goods must be fit for all the purposes for which goods of the kind in question are commonly supplied. So, the goods should be of all round fitness for all their purported purposes and not only just fit for one of their common purposes.

In the case; Aswan Engineering Establishment Co. v. Lupine Ltd., (1987) 1 WLR 1: (1987) 1 All ER 135, buckets were supplied and were found to be suitable for most types of export use, even when stacked in ships five or six feet high. These buckets were filled with a compound and remained for several days in direct sunlight on the quaside at Kuwait in very high temperatures. But, in the extreme heat, temperature reached very high and heavy-duty buckets collapsed resulting in loss.

The Court of Appeal held that the goods were to be regarded as merchantable quality if they were suitable for one or more of the purposes for which the goods of that description were normally bought. These buckets were suitable for most of the purposes for which buckets of that description (heavy duty) were commonly purchased or used. But the definition of satisfactory quality does not require that the goods should be fit for extreme or outlandish purposes but just for such uses or such goods are commonly, i.e., normally, used. Leaving the bucket stacked in such extreme temperatures could held to be an extreme, abnormal use.

8.2(vii) Statutory Definition of Merchantability

As per section 7(2) of the Supply of Goods (Implied Terms) Act, 1973 the merchantable quality means that the goods shall be fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all other relevant circumstances.

8.3 Conditions Implied by Trade Usage [Section 16(3)]

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

It gives a statutory force to conditions implied by the usage of a particular trade. It has been observed in commercial transactions, extrinsic evidence of custom and usage is admissible to annex incidents to written contracts in matters with respect to which they are silent.

In the case; Peter Darlington Partners Ltd. v. Gesho Co. Ltd., (1964) 1 Lloyd's Rep 149, it was observed that the contracts have to be construed in the light of trade usages. Here, a contract for the sale of canary seed was held subject to the custom of the trade that for impurities in the seed, the buyer would get a rebate on the price, but would not reject the goods.

8.4 Express Warranty [Section 16(4)]

'An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith'.

It is upto agreement between parties to include any express conditions and/or warranties in their contract at the same time. The express warranty doesn't negative a warranty or condition implied by the Act unless the express terms are inconsistent with the implied conditions.

9. Sale by Sample

Q. Discuss `Sale by Sample' with the help of relevant cases.

Section 17 of the Act speaks about the sale which is performed on the basis of sample of goods-

"(1) A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect.

(2) In the case of a contract for sale by sample there is an implied condition-

(a)that the bulk shall correspond with the sample in quality;

(b)that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;

(c)that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample."

So, this section puts three conditions into every contract of sale by sample:

(i)that the bulk shall correspond with the sample in quality.

(ii)that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

(iii)that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample.

If a buyer purchase the goods on the basis of sample and finds that the goods are defective which was not apparent on reasonable examination of the sample, the buyer has got the right to reject the goods on discovering the defect later. Further, even on partial defects of some of the goods, the buyer can reject the entire quantity of goods.

In the case; Prabhu Dayal v. Bhagwan Sahai, AIR 1955 NUC 4067 (Raj), the goods were found defective which was purchased on the basis of sample and it was unmerchantable too. Here, the buyer was justified in not accepting the goods on delivery. Here, the buyer has not committed any breach of contract and the seller is not entitled to any damages which he may have suffered on release of the goods.

Section 41 gives the buyer an opportunity to examine the goods which have been delivered and if it was not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.

If the buyer rejects the goods after inspection due to its non-conformity with the sample and if he has already paid for the goods then he can recover the price as money had and received for his use.

When the dispute arises from indifferent supply of goods (regarding quality), it would be the duty of the seller to prove that the goods were of the quality contracted for [Beharilal Baldeo Prasad, (in re:), MANU/TN/0137/1955 : AIR 1955 Mad 271].

9.1 Bulk to Correspond with Sample

It is the first essential that the bulk of the goods actually delivered must match the sample shown in quality.

In the case; E. & S. Ruben Ltd. v. Faire Bros., (1949) 1 KB 254, it was a contract for the sale of rubber materials of which samples were shown. The material was to be in rolls of specific length and width. The rubber material delivery was of measurements out of accord with the sample.

It was held that the goods did not correspond with the sample in quality, their measurement being a part of their quality and the buyer, having not rejected the goods, was entitled to damages for breach of the condition. And this would be so even if a very simple process was required to make them accord with the sample.

9.2 Opportunity to compare Bulk with Sample

Second implied condition is that the buyer shall have a reasonable opportunity of comparing the bulk of the goods with the sample.

9.3 Goods free from any defect, rendering them unmerchantable

Q. Discuss under section 17 the requirement of goods to be merchantable.

The third condition needs that the goods to be sold should be free from any such defect which renders them unmerchantable and which is not apparent on reasonable examination. It can also be said that there is no implied condition where the defect is a patent one. This condition arises only when the defect is a latent one, i.e. not discoverable by reasonable examination. In the case; Drummond & Sons v. Van Ingen, (1887) 12 App Cas 284, illustration of defect has been given as:

A cloth merchant ordered for worsted coating cloths from cloth manufacturers which were to be matched with quality of supplied sample. These clothes were to be supplied to clothiers and tailors. The coatings supplied corresponded with the samples, but arising certain defects of clothes, it was unmerchantable. Although, the same defect existed in the supplied sample but was not discoverable by due diligence upon such inspection as it was ordinary and usual upon sale of cloth.

It was the observation of House of Lords that the defect was a latent one hence, the goods were unmerchantable.

In the words of Lord Macnaghten the meaning and effect of a sample as follows:

"Correspondence of the goods with the sample does not relieve the seller from his obligation to supply goods fit for the purpose for which they were intended. After all the office of a sample is to present to the eye the real meaning and intention of the parties with regard to the subject-matter of the contract, which owing to the imperfection of language may be difficult or impossible to express in words. The sample speaks for itself. But it cannot be considered as saying more than such a sample would tell a merchant of the class to which the buyer belongs, using due care and diligence and appealing to it in the ordinary way and with the knowledge possessed by merchants of that class at the time. No doubt the sample might be made to say a great deal more pulled to pieces and examined by unusual tests which curiosity or suspicion might suggest, it would doubtless reveal every secret of its construction. But that is not the way in which business is done in this country".

In another case; Champanhac & Co. Ltd. v. Waller & Co. Ltd., (1948) 2 All ER 724, the fact of the case was that the plaintiff's representative inspected surplus balloons which was possessed by the defendants. Plaintiff saw the sample of balloons, examined it and after finding it strong and merchantable, purchased 200 balloons subject to all faults and imperfections. After delivery, it was found that the material was perished and it was unmerchantable too.

It was observed that with the words like "with all faults and imperfections" meant that provided the bulk corresponded in type and quality with the sample it would be accepted with whatever faults and imperfections it had. But, here the fabric of the balloons did not correspond with the sample and, therefore, the implied condition was breached.

9.4 Buyer's State of Knowledge about Goods

Q. Upto what extent a buyer is responsible regarding his knowledge about the goods? Explain it with the help of relevant cases.

The most vital part of the administration of conditions and warranties is the buyer's state of knowledge about the goods and this in turn depends on the information which is imparted by sellers to buyers. In the book 'Quality of Goods. Information and Death of Contract,¹ Steve Hedley has given his statement as follows:-

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1. 2001 JBL 114 (123).

"Strictly speaking goods are only defective in the eye of beholder. There is no such thing as a 'defective product': only a product which this buyer, properly informed as to its nature, would not have bought at this price. Few articles, indeed, are entirely useless or defective in everyone's eyes: one person's old and barely functioning car is another person's valuable antique, and yet another's promising piece of scrap metal. And some business exis rmation, by introducing an onus on the seller to explain to the buyer of the goods if they are not as the buyer would want them - and to do so in language which the buyer can be expected to understand.