239

Chapter - 16
THE SALE OF GOODS ACT, 1930
The Sale of Goods Act, 1930 (hereinafter referred as the "Act") deals with
sale of goods regarding which provisions were earlier contained in sections
76-123 of the Indian Contract Act, 1872. The provisions of the Act covered
under the head: Condition and Warranties, comprising sections 11 to 17, are
very significant from the point of view of consumers. The Act is mainly
based on the provisions of the erstwhile English Sale of Goods Act, 1893.
In England, this Act had been modified by the Supply of Goods (Implied
Terms) Act, 1973 and Unfair Contract Terms Act, 1977. Then the Sale of
G o o d s Act was reframed in 1979. 1 The [Indian] Sale of Goods Act
continues to apply as earlier without any modifications. The Law
Commission of India in its 103 rd Report (1984) on "Unfair Terms in
Contracts" has recommended that the Indian Contract Act, 1872 should be
amended to protect consumers against unfair terms in contracts imposed by
business houses. So far the recommendation has not been translated into
practice.
The conditions and warranties in a contract of sale of goods as
incorporated in the Sale of Goods Act, are primarily aimed at protecting the
interests of consumers in the matters of:
(a) the time for payment and delivery of goods;
(b) right to reject the goods or claim damages in certain situations;
(c) protection of title and possession of goods purchased;
(d) merchantability and fitness of goods, for the purpose of their
sale; and
(e) correspondence of the goods sold with the description or sample
as offered by the seller.
In contrast to the English Act on Unfair Trade Terms, 1977, the Indian
Act gives precedence to the terms of the contract which may exclude

1. T h e modified section 55 of the English Act, 1979 provides that any terms in the
contract exempting the seller from liability for the breach of implied conditions and
w a r r a n t i e s , in case of a consumer sale, would be void. Section 6 of the Unfair
C o n t r a c t T e r m s Act, 1977 restricts exclusion of liability for breach of implied
conditions and warranties relating to title, conforming of goods with description or
sample or quality or fitness for a particular purpose. Section 5(1) of the Act gives
protection to consumers by prohibiting exclusion or restriction of liability of any
manufacturer or d i s t r i b u t o r arising out of supply of defective goods or due to
negligence.
240 A TREATISE ON CONSUMER PROTECTION LAWS

implied terms and conditions regarding title, possession, peaceful enjoyment

of goods etc. Section 12 of the Act 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 repudiated.2 A "warranty" is defined 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 reject the goods
and treat the contract as repudiated. 3
The conditions and warranties in sale of goods may be either express or
implied. Express conditions and warranties are those which are agreed upon
by the parties to the contract either orally or in writing and are to be
performed in accordance with the terms of the contract. The conditions and
warranties which are not express are termed as implied. Certain implied
conditions and warranties are laid down by the Act itself.
Whether a stipulation is a condition or warranty also depends upon its
nature as reflected by the construction of the contract rather than it is
literally called so in a contract. 4 At the discretion of the buyer a condition
may be treated as a warranty. The Act guarantees protection for the breach
of these conditions and warranties under separate provisions.

I. Time of Payment and Delivery of Goods

Section 11 of the Act lays down that ordinarily time is not of essence to the
contract of sale, but it depends upon the terms of a contract whether any
stipulation is of essence to the contract of sale or not. Accordingly, in a
transaction, if the buyer fails to pay in time, the seller would not be entitled
to repudiate the contract unless he unequivocally states so in the contract.
In Sundara Bayamma v. Venkateswara & Co.,s the court has held that if the
parties treat the payment of advance as a vital element to the contract and
the actual payment of the advance takes place only after the offer has been
revoked, no enforceable contract would be there. If the seller acquiesces the
delay in payment the time of payment cannot remain of essence to the
contract. Same is the case if the buyer accepts the delayed supply of goods
without protest. In Burn & Co. Ltd. v. Morvi State,6 there was a contract
about supply of wagons and the payment of the price was to be made in
three stages. The buyer made a default at the second stage, but the supplier
still supplied the part of the wagons. After such a conduct of the supplier,
the delay in payment was not accepted as a ground for rescission of the
contract. In Hind Techno Machines (P) Ltd. v. Jaipur Wire Industries (P) Ltd.,7

1. The Sale of Goods Act, 1930, sec. 12(2).

3. Id., sec. 12(3).
4. Id., sec. 12(4).
5. AIR 1955 N O C (Andh.) 5825.
6. (1926) 30 Cal WN 145.
7. (1988) 2 Raj LR 56.
THE SALE OF GOODS ACT, 1930 241

there was delay in deliveries of the goods but the buyer continued to accept
t h e m w i t h o u t p r o t e s t at the a p p r o p r i a t e time. T h e b u y e r was, therefor,
deemed t o have waived his right to sue for delay and thereby repudiate the
contract.
In Orissa Textile Mills v. Ganesh Das,s it has been observed that whether
t i m e of d e l i v e r y of g o o d s is of essence t o a c o n t r a c t d e p e n d s u p o n the
circumstances of each case. T h e reason for this is that a "mercantile contract
is n o t always an isolated t r a n s a c t i o n " but a part of chain of events and
t h e r e b y any lapse in delivery m a y result in h a r m t o the b u y e r . In such a
situation, delay in delivery of goods operates as an injury to the b u y e r and
the time w o u l d be of essence to the contract. In the instant case, there was
a contract of sale about five bales of dhotis. The seller supplied only one bale
and that also w i t h a delay of one m o n t h and offered the remaining o n new
excise terms. T h e buyer was held entitled to reject the supply because where
the prices are liable t o fluctuate and result in harm to the buyer, the time of
delivery is of essence t o the contract. It is, therefore, obvious that the time
of d e l i v e r y is of essence t o a c o n t r a c t if the n a t u r e and necessity of the
contract requires it to be so or the parties have expressly agreed to treat it
so.
W h e r e t h e t i m e for t h e p e r f o r m a n c e of contract has been m u t u a l l y
extended, the extended time also becomes an essence to the contract. 9

II. Treating Breach of Condition as Breach of Warranty

A c c o r d i n g t o section 13 of the Act, if a contract of sale is subject t o any
condition t o be fulfilled by the seller, the buyer may, at its discretion, waive
the c o n d i t i o n or elect t o treat the breach of the c o n d i t i o n as a breach of
w a r r a n t y a n d n o t as a g r o u n d for treating the c o n t r a c t as repudiated. 1 C
Similarly, if a contract of sale is not severable and the buyer has accepted the
goods o r part thereof, the breach of any c o n d i t i o n to be fulfilled by the
seller can only be treated as a breach of warranty and not as a g r o u n d for
rejecting the goods and treating the contract as repudiated. 1 ' H o w e v e r , this
m u s t n o t be in any w a y c o n t r a r y t o the express or implied t e r m s of the
contract. 1 2
Regarding enforcement of conditions and warranties, it has been made
clear u n d e r the Act that w h e r e fulfilment of any condition or w a r r a n t y is
excused by law by reason of impossibility or otherwise, the seller can vahdlv

8. AIR 1961 Pat 107.

9. British Paints (India) Ltd. v. Union of India, AIR 1971 Cal. 393.
10. Supra note 2, sec. 13(1).
11. Id., sec. 13(2).
12. Ibid.
242 A TREATISE ON CONSUMER PROTECTION LAWS

rely upon the ground of impossibility of performance in any action by the

buyer.13
If the buyer after receiving the goods resells them, that would put an
end to his right to reject the good, because by resale he cannot put the
goods at the disposal of the seller immediately on rejection. This was
explained by the Calcutta High Court in Jitendera Banerjee v. Murlidhar,14 a
case of purchase of black Italian cloth by sample, observing that if the buyer
after taking delivery exercises ownership rights (like resale) over the goods,
he cannot claim a refund of the purchase money on the ground that the
goods were damaged and not saleable. He may, however, be entitled to
damages.
If the goods, after receipt, are dealt with by the buyer like an owner,
and are taken to some other place and exposed to possible risks, the buyer
would lose his right to reject them as in a case of resale. In Nagardas
Mathurdas v. N.V. Velmahomed,15 the defendants purchased from the
plaintiffs konda (rice bran) and received the supply in certain bags. The bags
were unloaded and the buyer's marks were put on them. They were then
taken for shipping to another place. At this stage the buyer found that the
bags contained ground paddy husks and not rice bran. On finding this the
buyer rejected the goods while the seller sued for the price. The court held
that the proper place of inspection and rejection of the goods was the place
of delivery. Since, at that time, the goods were marked in the name of the
buyer and carried to the dock, he could not take the plea of breach of
condition.
In another case, Shah Thilokchand Possaji v. Crystal & Co.,16 relating to
sale of pens of a particular description, the supplied goods were not
answering the given description. The court held that where supplied goods
are not answering to the description contracted for, the buyer has a right to
either of the following alternative remedies:
(a) reject the goods and obtain a refund of the price if paid in
advance and sue for damages for non-delivery; or
(b) waive the condition and accept the goods and sue for damages
for a breach of warranty.
In the former case, the damages would be equivalent to the difference
between the contract price and the market price of the goods on the date of
the breach if the latter were higher. While, in the later situation, he has to
pay the contract price less by any claim for set off for the breach of
warranty.

13. Id., sec. 13(3).

14. AIR 1926 Cal 749.
15. (1930) 32 Bom LR 454.
16. AIR 1955 Mad. 481.
THE SALE OF GOODS ACT, 1930 243

Section 59 of t h e A c t enables the b u y e r t o seek remedy for breach of

any warranty. In case of breach of a warranty by the seller, the buyer is not,
as stated above, b y reason of such breach entitled t o reject the goods. Same
is t h e position w i t h respect to the buyer w h o opts or is constrained to treat
any breach of a condition o n the part of the seller as a breach of w a r r a n t y . ' 7
T h e b u y e r m a y , however, in either case set-up against the seller the breach
of w a r r a n t y in d i m i n u t i o n o r extinction of the price, o r sue the seller for
d a m a g e s for b r e a c h of w a r r a n t y . 1 8 A b u y e r w h o has set-up a b r e a c h of
w a r r a n t y in d i m i n u t i o n o r e x t i n c t i o n of price can also sue for t h e same
breach of w a r r a n t y if he has suffered further damage. 1 9 Section 59 does n o t
state the principle on w h i c h the damages claimed should be c o m p u t e d .
It can be inferred that once a buyer elects t o reject the goods, he divests
his title o n the goods and the property thereupon reverts to the seller. If the
divesting of t h e p r o p e r t y from a b u y e r and the vesting of it in t h e seller
takes place as a result of the conjoint action of the buyer and the seller, the
buyer cannot subsequently, by any unilateral act of his own, divest the seller
of h i s t i t l e t o t h e p r o p e r t y a n d p u r p o r t t o a c c e p t t h e g o o d s as in
performance of t h e original contract.
It has been judicially established that section 59 comes i n t o play only
after the buyer elects t o treat any condition in a contract as warranty. In City
and Industrial Development Corpn. of Maharashtra Ltd. v. Nagpur Steel and Alloys
(P) Ltd.,20 u n d e r a c o n t r a c t for s u p p l y of bars, t h e s u p p l i e d bars w e r e
oversized. T h e buyer, however, used t h e m as such on their delivery. T h o u g h
t h e s u p p l y of oversized bars w o u l d have been a breach of c o n d i t i o n , t h e
goods, after t h e y were c o n s u m e d by t h e buyer, could not be rejected. This
a m o u n t e d t o waiver because of which the buyer got disentitled t o insist o n
the condition. Since remedies u n d e r section 59 are not absolute and cannot
be resorted to at any strategical point suitable to the buyer, he is duty b o u n d
to give notice of his intention at p r o p e r time. T h e appropriateness of time,
f o r m a n d m a n n e r w o u l d , of c o u r s e , d e p e n d u p o n t h e facts a n d
circumstances of each case. T o hold otherwise, would amount to placing the
seller in an a w k w a r d and uncertain position w h i c h m a y not be w a r r a n t e d
either b y law or by equity.
E x p l a i n i n g t h e p o s i t i o n t a k e n b y t h e parties in t h e instant case, t h e
court observed that t h e b u y e r accepted the major instalments of the goods
supplied w h i c h did n o t strictly c o n f o r m t o the specifications given in t h e
purchase order a n d the contract. T h e goods were consumed and p a y m e n t s
of all the bills h a d been made but of the last t w o bills which were withheld
o n the ground that there was a breach of warranty, the goods supplied being

17. Supra note 2, sec. 59(1).

18. Ibid.
19. Id., sec. 59(2).
20. AIR 1992 Bom 55.
244 A TREATISE ON CONSUMER PROTECTION LAWS

not as per specifications. N o notice of b u y e r ' s i n t e n t i o n to claim

compensation for a breach of warranty or to set-up the breach in diminution
or extinction of price has been given and there was no evidence to that
effect adduced by the buyer. The court held that in these circumstances, the
buyer being fully aware of the so called oversize of the goods, did not reject
them though specifically provided for in the contract. He must be deemed
to have voluntarily waived the condition as to the size of the goods supplied.
The goods were consumed without giving any opportunity to the seller to
replace the same and even the price was paid for major quantity of the
goods supplied.
The buyer had also not adduced any proof of actual damages or its
likelihood in future. Thus, the buyer was not held entitled to withhold the
payment of full price by invoking section 59 which, according to the court,
comes into play only when the buyer does not waive the condition, but
elects to treat the breach of condition as a breach of warranty.

III. Implied Conditions as to Title and Possession

Section 14 of the Act relates to the implied condition as to title of goods.
This is to the effect that in every contract of sale, unless the circumstances
of the contract show a different intention, there is an implied condition on
the part of the seller that he has a right to sell the goods and in case of an
agreement to sell, he will have a right to sell the goods on the fulfilment of
the stipulation. 21 Section 14 lays down an implied warranty that the buyer
would have and enjoy peaceful possession of the goods, which will be free
from any charge or incumbrance in favour of any third party not declared or
known to the buyer before or at the time when the contract is made."

IV. Goods should be True to their Description

Section 15 of the Act provides that in a contract for the sale of goods by
description, there is an implied condition that the goods should correspond
with the description. 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. This implies that there is
an implied term that the goods should correspond with their description and
the seller should comply with express terms. In view of the consumer
interest, section 15 requires that if the description of the goods does not,
according to ordinary principles, amount to a term of the contract but is
merely a representation, such description should be treated as a term of the
contract. It, therefore, converts the 'description' into a 'term of the contract'
and obliterates the distinction between terms of the contract and
representations in contracts of sale of goods.

21. Supra note 2, sec. 14(a).

11. Id., sec 14(b) and (c).
THE SALE OF GOODS ACT, 1930 245

Whether puffs can be treated as terms of a contract would depend on

the circumstances of each case. A mere puff is a vague and extravagant
statement so preposterous in its nature that nobody could believe that
anyone was misled by it. While categorising a statement as a mere puff, the
court would have to examine its degree of untruth, the circumstances in
which it was made and the knowledge and experiences of the persons to
w h o m it was made. 2 3 Section 15 provides for the advancement of the
principles of fundamental obligation of the contract and the seller in every
case is supposed to deliver the specific commodity only. There cannot be
any unilateral change in the specifications. For example, if a seller has
delivered very comfortable chairs in place of sofas, he cannot defend a suit
for having committed a breach of his fundamental duty under the express
terms of the contract and section 15.
Seen in the context of practical realities, the expression "sale by
description" must apply to all cases where the purchaser has not seen the
goods but is relying on the description alone. Likewise, if the sale is about
future or unascertained goods, it must undoubtedly be a sale by description.
Even in many cases where the buyer has seen the goods, the sale can be
treated as sale by description. In Grant v. Australian Knitting Mills Ltd?4, Lord
Wright has made it clear that "there is a sale by description even though the
buyer is buying something displayed before him on the counter - a thing is
sold by description, though it is specific, so long as it is sold not merely as
the specific thing, but as a thing corresponding to a description ,..."25
The expression "sale by description" covers even those sales in which
during transaction no verbal communication takes place as in a self service
store with descriptive labels on goods spread over on the floor. In Varley v.
Whipp,lb to the advantage of the consumer, this principle has been applied
even though the goods were not sold by a person dealing in goods of that
description. 27
The requirements of section 15 have in certain cases been treated as
very rigorous and followed in a strict sense. Dealing with the matter, Lord

23. Pollock and Mulla, Sale of Goods Act, Ub-127 (2002).

24. (1936) AC 85.
25. Id, at 100.
26. (1900) 1 QB 513.
27. Ibid.; in this case, the defendant agreed to buy from the plaintiff a second hand
reaping machine, which was stated to be one year old and was hardly used. On
delivery, the buyer found that the claim of the seller was a gross misdescription, and
the defendant declined to accept it or pay for it. Though the buyer could not rely on
section 14 (section 16 under the Indian Act) because the plaintiff was not a dealer in
reaping machines, but as the goods did not correspond with the description it was
held that there was a breach of section 13 (section 15, of the corresponding Indian
Act).
246 A TREATISE ON CONSUMER PROTECTION LAWS

Atkin followed this trend in Across Ltd. v. E.A. Ronaasen & Sons,28 in which
the buyers agreed to buy staves for making cement barrels. Under the
contract, the staves were to be of a specified thickness, but on delivery only
about 5 per cent of the materials conformed to this requirement. The rest of
the supply included the staves of lesser thickness, though they were found
to be commercially merchantable and reasonably fit for the purpose for
which they were needed. In spite of these findings, Lord Atkin took the
view that the buyers were entitled to reject the goods for the breach. He did
not agree with the view that in all commercial contracts, the question was
whether there was a "substantial" compliance with the contract leaving
scope for some margin, and it was for the tribunal to determine whether the
margin was exceeded or not. He opined that if the written contract specifies
conditions of weight, measurement and the like, those conditions of weight,
measurement and the like should be followed as they have been agreed. He
observed that "a ton" does not mean "about a ton" or "a yard" just "about
a yard." 29 In view of the practical situations, it was noted that undoubtedly
"there may be microscopic deviations which business men and, therefore,
lawyers will ignore... But apart from this consideration the right view is that
the conditions of the contract must be strictly performed. If a condition is
not performed the buyer has a right to reject".30
P.S. Atiyah has remarked that unlike other kinds of dealings, a sale by
description is a special kind of contract in which the buyer stands for strict
adherence of the description of the goods. Also in case of sale by
description every statement, which forms part of the description, is a
condition, and breach of that makes the buyer entitled to reject the goods,
even if the statement might be of a trivial nature only. 31 On the contrary,
when a person buys specific goods not by description, any statements made
by the seller respecting the quality of the goods may constitute a term of the
contract, but he will be entitled to reject the goods on the breach of the
terms only if that is a condition. If such a statement is made by the seller
with respect to any minor matter, on its breach the buyer can claim only
damages and cannot reject the goods.
In cases of sale by description, there are probabilities of confusing
'description' with 'quality'. For example, in Steels and Busks, Ltd. v. Bleecker
Bik & Co. Ltd., 32 a part of goods were supplied to the buyer as per the
description. The goods supplied later contained some new chemicals, not
present in the original deliveries, which rendered the goods unfit for the
buyers purposes. In spite of the presence of such a chemical, the goods were

28. (1933) AC 470.

29. Id. at 479-80.
30. Ibid
31. See P.S. Atiyah, Sale of Goods Act, 59 (1967).
32. (1956) 1 Lyoyds' Rep. 228.
THE SALE OF GOODS ACT, 1930 247

held to be in accordance with the description. This was a case of confusing

quality with description. The fact is that even if the goods in this case might
have been of perfectly good quality but it was difficult to say that how they
could be held to comply with their description.
It needs to be emphasised that the description of the goods may go
beyond the mere physical state of goods and include the way they are
packed and labelled. The Court of Appeal explained the issue in Re Moore &
Co., Ltd. v. Landaver & Co.,i3 in which the buyer agreed to buy from the
seller 3000 tins of Australian canned fruit packed in cases each containing 30
tins. O n actual delivery, it was found that half of the goods were delivered
in cases each containing only 24 tins. The buyer was held to be entitled to
reject the goods though the total number of tins was the same and there was
no difference in value between the tins as they were packed and as they
should have been packed. The court held this change in packing as a breach
of description.
The case establishes the rule that if there has been a breach of
condition, the buyer is entitled to reject the goods even though he suffers no
damage therefrom. Generally, a breach of condition occurs causing some
damage, but there can be situations when the breach of description may not
cause damage and yet the buyer is entitled to reject the goods invariably.
Under the new commercial regime goods are generally identified by
trade names. If some goods have acquired a trade name they may
correspond to their description even if they are different from what their
trade name literally means. This was explained by Justice Darling in Lemy v.
Watson ,34 observing that "if anybody ordered Bombay ducks and
somebody supplied him ducks from Bombay the contract to supply Bombay
ducks would not be fulfilled."35 In Grenfell v. E.B.Meyrowitz, Ltd.,ib the
defendants were held not to be in breach of description when they supplied
goggles of "safety-glass" to the plaintiff which subsequently splintered in an
accident, as it was proved that "safety-glass" had acquired a technical trade
meaning and the goggles in fact conformed to the normal design. In
another case, Peter Darlington Partners, Ltd. v. Gosho Co., Ltd?7, there was a
contract for the sale of seeds on a "pure basis". Buyers refused to accept
goods as they were not 100 per cent pure. They were held to be at fault for
not accepting the goods as it was found that the highest standards of purity
in case of seeds was 98 per cent and in trade there was no such thing as 100
per cent pure.

33. (1921) 2 KB 519.

34. (1915) 3 KB 731.
35. W., at 732.
36. (1936) 2 All ER 1313.
37. [1964] 1 Lloyds' Rep. 149.
248 A TREATISE ON CONSUMER PROTECTION LAWS

It is notable that any term in a sale of goods by description, having the

effect of, excluding seller's liability for defects in the goods, cannot prima
facie be read to exclude the requirements of description though it may
exclude the requirement "of merchantability. In Robert A. Munro & Co., Ltd.
v. Meyer,is the defendant agreed to buy goods " with all faults", but this
clause was held by Justice Wright not to exclude the requirement of the
goods to conform to their description. The clause only protected the sellers
from the obligation to supply merchantable goods because the seller could
not have contracted himself out of the requirements of the description of
goods. It thus becomes clear that the seller in a contract of sale of goods
by description is duty bound to supply the goods which correspond to the
description, and any clause which purports to exempt the seller from this
obligation goes against the main spirit of the legislation and hence void. The
instant case serves a good example of adopting a pro-consumer approach by
a judge in cases of sale by description.

V. Caveat Emptor and Caveat Venditor

The common law rule caveat emptor means "buyer beware". It implies that the
buyer should himself be careful while purchasing goods; he should himself
ascertain that the goods suit his purpose, and if found unsuitable, he cannot
blame the seller. The implied terms as to quality and fitness laid down in
section 16 of the Act provide a protective measure against this common law
rule of caveat emptor. This section makes the seller liable for all the defects in
the goods supplied to the buyer, whether he is a manufacturer or producer
of goods or not. The buyer should make known to the seller the purpose for
which the goods are required, relying upon his skill or judgment and they
should of a description in the course of his business to supply/ 9 If the
buyer purchases goods under a patent or trademark, the question of implied
condition does not arise.40 Section 16 further lays down that if the goods
are purchased by description and seller deals in the goods of that
description, the goods should be of merchantable quality. 4 1 In such a
situation, if the buyer examines the goods, there exists no implied condition
as regards the defects which could have been p o i n t e d out by such
examination. 4 2 However, latent defects are not covered under this
provision. To widen the scope of implied condition or warranties, section 16
expressly provides that an implied condition or warranty as to quality or
fitness for a particular purpose can also be established by the usage of any
trade. 43 The section applies whether the purpose for which the goods are

38. (1930) 2 KB 312.

39. Supra note 2, sec. 16(1).
40. Id., proviso to sec. 16(1).
41. Id., sec. 16(2).
42. Id., proviso to sec. 16(2).
43. Id., sec. 16(3).
THE SALE OF GOODS ACT, 1930 249

required is made known to the seller either expressly or by implication.

The provisions of section 16 are obviously consumer-centric. The
conditions laid down in the Act are basically a series of duties obligating the
seller to the buyer regarding the goods which may be the subject of
transaction. This has converted the principle of caveat emptor into caveat
venditor, that is, seller beware. The buyer, however, cannot afford to remain
totally passive. To take the benefit of these obligations, the buyer has to be
himself careful. For example, the implied condition that the goods must
correspond with their description cannot afford a great deal of protection to
the buyer if the description of the goods is not detailed. In a contract for
supply of goods in which the details about the subject matter of sale have
not been reflected sufficiently, the supplied goods may be of the same kind
but with defects. For example, a photocopier supplied to a buyer under a
contract without sufficient description may be a photocopier, but the
supplied article, of course, may be with serious defects since no description
has been given, which may put the buyer in a state of loss.
Consumer interest requires that besides corresponding with their
description, the goods should be merchantable as well as suited to the
purpose for which the buyer bought them. Therefore, the implied condition
that the goods must be fit for the purpose for which they are bought is
being formally treated as the first exception to the rule of caveat emptor, and the
implied condition of merchantable quality is being considered as the second
exception to this rule. To look into the complexities involved in the matters of
suitability and merchantability of goods, they are examined below separately.

VI. Suitability of Goods to the Purpose for Which They are

Purchased
Sub-section (1) of section 16 of the Act provides that where the buyer
makes known to the seller the particular purpose for which the goods are
required, showing that he relies on the seller's skill or judgement, there is an
implied condition that the goods should be reasonably fit for such purpose.
The sub-section would, however, not apply if the goods are of a description
which are not in the course of the seller's business to supply, whether he be
their manufacturer or not. The condition also does not apply in the case of
sale of a specified article under its patent or other trade name. The particular
purpose for which the goods are required may be made known to the seller
either expressly or by implication. Taking a note of the realities in Grant v.
Australian Knitting Mills, Ltd.,** it has been observed in this respect that "the
reliance on the seller is seldom express. It is usually by implication from the
circumstances. It, however, needs to be noted that such inferences cannot
be drawn in the case of raw material or material manufactured in bulk and

44. Supra note 24 at 99.

250 A TREATISE ON CONSUMER PROTECTION LAWS

capable of being used for a large variety of purposes". 45

If the buyer relies only partially on the skill or judgment of the seller,
then it must be ascertained that whether the complaint is in respect of
matters which have been left to the seller. To be more explicit, the reliance
must be such as to constitute a substantial and effective inducement which
leads the buyer to agree to purchase the goods. This principle is reflected in
Cammel Laird & Co. Ltd. v. Manganese Bronze & Brass Co., Ltd.4b where two
propellers were to be constructed for two ships regarding which certain
specifications were given by the plaintiffs, but certain other matters had
been left to the defendants. One of the propellers was found defective in
some matter other than the specifications. The House of Lords held that
"there was a substantial area outside the specifications which ...was,
therefore, necessarily left to the skill and judgment of the seller". 4/ Thus,
where the buyer has relied partially on the skill or judgment of the seller, he
can claim benefit under implied conditions only if his reliance was such as to
constitute a substantial and effective inducement leading the buyer to agree
to purchase the commodity.
The plea can, however, not be stretched too far. A buyer knowing that
the seller supplies only a particular brand of goods cannot be said to have
relied on the seller's skill or judgment in each case. Thus, in Wren v. Holt,4S
the plaintiff had bought the beer in a public house 'which he knew to be
tied', the Court of Appeal held the buyer not having relied on the seller's
skill or judgement. However, in case of a mere suspicion that a seller could
supply only a particular kind of goods, the buyer may claim benefit under
the implied condition that the goods should be suited to the purpose. In
Manchester Liners, Ltd. v. Rear,49 a case related to coal supply, it was held that
even if the consumer could suspect that due to railways strike, the seller
could not supply the coal of a type other than the supplied, the seller could
not claim exclusion of liability from implied conditions.
In practice, it so happens sometimes that a third party is invited by the
buyer to inspect the goods on his behalf who reports favourably to him
relying on seller's skill and judgment. In such a situation, the buyer can be
treated to have himself relied on the seller's skill and judgment. Same will
be the position with respect to a buyer who may purchase goods on the
basis of the information received through his employee. Section 16(1) can,
therefore, apply in such situations. Since section 16(1) requires that the
goods should be fit for the purpose for which they are purchased, and they

45. See also Steel Busks, Ltd. v. Bleecker Bik & Co. Ltd., [1956] ILloyd's Rep. 236.
46. (1934) AC 402.
47. Id. at 414.
48. (1903) 1 KB 610.
49. (1922) 2 AC 74.
THE SALE OF GOODS ACT, 1930 251

should be so in case of goods having only one particular use even in the
absence of any specification of purpose having been made. In Priest v.
Last,50 the plaintiff wanted to purchase a hot water bottle from a chemist.
The plaintiff sold him an American rubber bottle, saying that it would stand
hot but not boiling water. The plaintiff purchased the bottle for his wife and
while she was using it burst and scolded. The seller was held liable to
compensate for breach of implied condition because the hot-water bottle
was not fit for the particular purpose for which it had been purchased.
Where the goods have only one particular use, there is no need to specify
that because it is the only purpose for which anyone would ordinarily want
the goods. 51
If the goods can be utilized for a variety of purposes known to the
supplier, then unless he is informed about the particular purpose for which
these goods are wanted, there is no condition of fitness that they shall be fit
for the particular purpose. In Re Andrew, Yule & Co.,52 which dealt with a
dispute relating to 3,00,000 yards of hessian, contained in 150 bales. The
goods were sold F.A.S. They were sold by the buyers to sub-buyers who
purported to reject 100 bales because while going through a batching
process they had acquired smell rendering them unfit for packing of food
stuffs, the main purpose for which they could be used. The buyer could not
reject the supply, because he had not disclosed the particular purpose to the
seller. The court observed, "If the buyers expressly communicate to the
sellers the p u r p o s e for which the goods are wanted (and the o t h e r
conditions are present) then there is an implied condition of fitness. Apart
from express communication, that knowledge may be imputed to the sellers
by reason of the circumstances of the case.
In Bombay Burmab Trading Corporation v. AGA Mahomed Khaleel Shirazee,53
the agents of the suppliers had committed a breach of contract with the
buyers regarding the delivery of teakwood sleepers to a railway company of
a particular measurement and quality, reasonably fit for its purposes. In
defence to an action for damages, the suppliers relied on a provision
contained in the contract that "the passing by the suppliers at the port of
shipment was as usual final as regards both measurement and quality". They
pleaded that the sleepers in question had been declared fit for the given
purpose in the impartial and honest exercise of their judgment by two
experts employed by them for that matter. The court, however, held that
there had been no decision by the experts that the sleepers were in
conformity with the contract but merely that they were fit to be sent out as
their employers' manufacture. So the buyer company was allowed to reject

50. (1903) 2 KB 148.

51. Supra note 24 at 99.
52. AIR 1932 Cal 879.
53. (1911) 38 IA 169.
252 A TREATISE ON CONSUMER PROTECTION LAWS

the supply as being not of the quality ordered.

In Joseph Mayer v. Phani Bhusan Ghose5*, the plaintiff (buyer) was carrying
on a business of ink and sealing wax and wished to start the manufacture of
carbon paper. He consulted the defendant (seller), who advised him to use
a steam boiler. Plaintiff placed the order for the same with the defendant
and having made known the purpose for which it was required relied upon
the skill and judgment of the defendant to supply him with a boiler which
was reasonably fit for the purpose. The boiler was accordingly delivered to
the plaintiff who installed it in his workshop. It was later discovered by the
boiler inspecting authorities that the boiler did not satisfy the statutory
requirements and was, therefore, discarded. The court held that the
defendant was guilty of breach of contract as the boiler was not reasonably
fit for the purpose for which it was ordered and supplied. The plaintiff was,
therefore, entitled to claim damages from the defendants under the heads
(1) expense incurred in removing the boiler in question and in installing
another suitable one in its place; (2) the difference between the price of the
replaced boiler suitable for the purpose and the discarded one; and (3) a sum
of money estimated to be the overhead charges in respect of the carbon-
paper plant only, during the time necessarily taken up in removing the
unusable boiler and installing a suitable one.
The provision dealing with suitability of good to the purpose for which
they are purchased applies to both manufactured and non-manufactured
goods. Thus, it covers even food stuffs.
The goods sold under a "patent or trade name" are not covered by
section 16(1) because of a clear proviso to that effect. In Bristol Tramways
Co. Ltd. v. Fiat Motor Ltd.,55 the plaintiffs ordered from the defendants a
vehicle mentioning its trade name and chassis thereof without any mention
in the written contract about the requirement of the vehicles for heavy
passenger traffic. The Court of Appeal did not provide relief to the buyer
on the ground that the sellers knew the buyers requirement. 56 In Baldry v.
Marshall,57 the buyer ordered a specific model car on the recommendation
of the defendants as being a comfortable car for touring, but the car did not
suit the buyers purpose at all. The proviso was held as not applicable, the
reason being that it applied only where the buyer ordered the goods under
their trade name in such a way as to show that he did not rely on the seller's
skill or judgment.
To illustrate it further it may be pointed out that where the buyer asks a
seller for an article which can fulfil some particular purpose, and in answer

54. AIR 1939 Cal 210.

55. (1910) 2 KB 831.
56. Ibid.; the proviso has been omitted in the English Act by the Supply of Goods
(Implied Terms) Act, 1973.
THE SALE OF GOODS ACT, 1930 253

to that request the seller sells him an article by a well-known trade name,
there the proviso to section 16(1) does not apply. If the buyer buys an
article after saying to the seller, "I have been recommended such and such
an article [mentioning it by its trade name] will it suit my particular
purpose?" naming the purpose, there the proviso has no application. But
where the buyer says to 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 the proviso would apply. 58 The test of an
article having been sold under its trade name within the meaning of the
proviso is whether the buyer specified its trade name in such a way as to
indicate that he was satisfied (rightly or wrongly) that it would suit his
purpose, and that he was not relying on the skill or judgment of the seller.59
As regards the latent defects in goods not discoverable by any amount
of diligence or care, the seller must be liable under section 16(1). Quite
logically in Frost v. Aylesbury Dairy Co. Ltd.,60 the argument was made that
the buyer "could not be said to rely on the skill or judgment of the sellers in
a case in which no skill or judgment would enable them to find out the
defect" in the goods supplied. The subject of sale in this case was the milk
infected with typhoid and it was not at the time of purchase practicable to
test it. The sellers were held liable, though a reason for this appears to have
been that they warranted the milk 'free from germs and disease'.
It the goods are fit for the purposes normally required but are not suited
to the buyer's purpose owing to some special circumstances on his part of
which the seller is unaware, the buyers claim would fail. In Griffiths v. Peter
Conway Ltd.61, the plaintiff, with an unusually sensitive skin, contracted
dermatitis from a cloth bought from the defendants. She failed to hold the
seller liable on the plea that the cloth was not fit for the purpose for which
it was required, that is, her personal use. The Court of Appeal, observed
that, if a person suffering from such an abnormality requires an article of
clothing for his or her use and desires to obtain the benefit of the implied
condition, he or she should make known to the seller the particular purpose
not only saying that he or she needs the article of clothing for personal use
but also by informing the seller about the abnormality or idiosyncrasy from
which the buyer suffers. Without such knowledge, the seller would not be
able to exercise his skill or judgment. 62
An important matter that needs mention is that a person having no
contractual relationship with the seller of unmerchantable and possibly

57. (1925) 1 KB 260.

58. Id., at 266.
59. Ibid.
60. (1905) 1KB 608.
61. (1939) 1 All ER 685.
62. Ibid.
254 A TREATISE ON CONSUMER PROTECTION LAWS

dangerous goods has remedy available not under the Act, but in tort. For
remedy in the tort, the plaintiff must prove negligence, because in such torts
there is no strict liability. There must be either negligence or contractual
relation with the seller, otherwise the claim will fail.63

VII. Goods Must be Merchantable

It has been pointed out above that 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 should be of merchantable quality. In case the buyer has examined
the goods, there would be no implied condition as regards defects which
could be detected on such examination.64 The implied condition, however,
continues to exist as regards the defects which are not apparent on their
reasonable examination rendering the goods unmerchantable. 6 3 The
proviso to section 16(2), excludes the implied condition that the goods must
be merchantable in a sale by description if the buyer has actually examined
the goods.
The language of the proviso is very important. It reads that "if the
buyer has examined the goods, there shall be no implied condition as
regards defects which such examination ought to have revealed." 66 As
regards the "examination of goods", the examination should actually have
been made, not that it might or ought to have been made. If the buyer,
however, tells to the seller or makes him believe that he has examined the
goods, he may not be later allowed to take a plea that he had not examined
them. In Tbornett & Fehr v. Beers and Son,67 the proviso was applied though
the buyer, being pressed for time, examined some barrels of glue only from
the outside, although the seller offered him every facility for a more
complete examination. The court took the view that the examination need
not be full and complete in order to exclude the implied condition, because
the very fact that the section refers to the possibility of defects which ought
to have been revealed by the examination shows that it contemplates a case
where the examination has not been sufficiently thorough. The court, thus,
decided the case in favour of the seller.
On this point Atiyah 68 has differed from Chalmers. 69 Chalmers holds
the position that the examination was in effect waived, but Atiyah holds the

63. Supra note 31 at 73-74.

64. Supra note 2, sec. 16 (2).
65. Id., sec. 17(2), this condition applies even in case of second hand goods: Barttett v.
Sydney Marcus, Ltd, [1965]1 WLR 1013.
66. With respect to sale by sample, similar provisions are found in section 17(2)(c).
67. (1919) 1KB 486.
68. Supra note 31 at 62.
69. Chalmers, The Sale of Goods, 57 (14th ed.)
THE SALE OF GOODS ACT, 1930 255

view that "the words of the section and the language of the judgment are
both clearly inconsistent with the possibility that the proviso may apply
unless there is in fact some sort of examination, however, incomplete and
unsatisfactory". 70 Atiyah's view is sound because this section modified the
common law rule which was that the implied condition was excluded by the
mere opportunity for examination, even if in fact the opportunity was not
taken. Chalmers reading fails to take a note of the legislative modification of
the common law position.
It is quite probable that at times the defects may not be discoverable by
a reasonable examination. O n this ground, in Wren v. Holt/1 damages had
been granted to the plaintiff for breach of the condition of merchantability
of beer c o n t a m i n a t e d by arsenic. Since such a defect could not be
discovered by reasonable examination, the seller could not take benefit of
the exempting proviso from liability. Similarly, in Godley v. Perry,72 in which
a child's catapult broke in ordinary use, the defect was held as not
discoverable on reasonable examination.
The seller's obligation in such cases depends broadly upon what is
meant by "merchantable quality" of goods which includes their state or
condition. 73 The state or condition of goods covers both the condition of
the labels as well as packing. 74 According to Farwell, LJ, "merchantable"
means that the subject of purchase is of such quality and in such condition
that a man of ordinary prudence acting reasonably would after a full
examination accept it whether he buys it for his own use or to sell again.75
The goods are not merchantable only because they looks all right. So an
article is unmerchantable, if it is defective and not fit for its only proper use
though the defects may not be apparent on ordinary examination. 76
In the celebrated Australian case, Grant v. Australian Knitting Mills Ltd.,77
the buyer brought an action against the seller and the manufacturer of
garments claiming damages on the ground that he had contracted dermatitis
by reason of the improper condition of an underwear purchased by him
from the seller. He alleged that the disease was caused by the presence of
certain irritating chemical, in the cuffs or ankle ends of the under-pants,
which was due to negligence in manufacturing. The facts in the case
revealed that the disease was external and the buyer's skin was normal. Free
sulphite was present in the garment in major quantities making the garments
defective.
70. Supra note 31 at 62.
71. Supra note 47.
72. (1960) 1 WLR 9.
73. Supra note 2, sec. 2£12).
74. Niblett v. Confectioners'Materials Co., Ltd. [1921] 3 KB 307.
75. Bristol Tramways Co., Ltd. v. Fiat Motors, Ltd. [1910] 2 KB 841.
76. Supra note 24 at 100.
77. Ibid..
256 A TREATISE ON CONSUMER PROTECTION LAWS

The privy council, on the basis of these facts, held that the sellers were
liable on the ground that the under-pants were not merchantable in the
statutory sense because their defect rendered them unfit to be worn next to
the skin. The court further held that the manufacturers were liable under
tort as the presence of the deleterious chemical in the pants was due to the
negligence in manufacture. It was immaterial that the buyer had a claim in
contract against the seller because that was quite an independent cause of
action based on different considerations, even though the damages may be
the same.
In Raghava Menon s/o Kasturi Amma v. Kuttappan Nair,7S a layman
purchased a watch of a particular make from the defendant company which
was the exclusive dealer for watches of that make. Along with the watch a
guarantee certificate was given for a period of one year "unless the watch
was unfairly used or damaged by accident". The watch being found to be
defective, was returned to the seller for repairs twice or thrice but it was
given back without any improvement in it. The plaintiff filed a suit for the
refund of the price or its replacement. Defendant denied liability contending
that the guarantee covered only free servicing. The court examined the
guarantee certificate which provided: "This is to certify that the under
mentioned Kenson Watch which has been sold this day is guaranteed for a
period of one year, unless unfairly used or damaged by accident, water or
perspiration". The court held on the construction of the guarantee clause
that it included repair as well as the replacement and the defendant was
liable to replace the watch or refund its price. The watch was obviously not
merchantable.
In V.P. Peer Mohamad Rowther v. Dalooram Jayanarayan,79 the subject of
sale was the bales of yarn which were damaged by white ants rendering them
unmerchantable. The goods had been inspected by the buyer before
purchase. The Madras High Court held in this case that where goods are
sold by description, there is an implied w a r r a n t y that t h e y are of
merchantable quality, though they might have been inspected before
purchase. If, however, the buyer has examined the goods, there is no
implied condition as regards defects which such examination ought to have
revealed.
Existence of defects makes the goods unmerchantable and it cannot be
assumed that certain goods may be defective and yet merchantable. In
Bartlett v. Sydney Marcus, Ltd.,80 the buyer was made aware of the defects in
goods but he agreed to have them put right at his own expenses. In this case
the implied condition as regards those defects got automatically negatived.

78. AIR 1962 Ker 318.

79. (1918) MWN 658.
80. (1965) 1 WLR 1013.
THE SALE OF GOODS ACT, 1930 257

From this, however, no inference can be drawn that the goods even if
defective are merchantable.
The interest of consumers requires that the goods should not only be
merchantable at the time when they are purchased but should remain
merchantable for a reasonable time thereafter so that they can be put to use.
The time period may vary in each case depending upon the circumstances of
each case. This is most important in case of perishable commodities. In this
context, in Mash & Murrel v. Joseph I. Eannel Ltd., 81 it has been observed
that a seller cannot argue that he had loaded sound potatoes on a ship if
they were rotten when they arrive at their destination.

VIII. Implied Terms by Trade Usage

Section 16(3) of the Act provides that "an implied warranty or condition as
to quality or fitness for a particular purpose may be annexed by the usage of
trade". In all contracts, the intention of the parties must be ascertained in
the light of the existing circumstances. If the transaction is connected with
a particular trade, the custom and usage of that trade must be considered as
a part of the background against which the parties contracted. That is the
basic reason that in commercial transactions, extrinsic evidence or custom
and usage is admissible to annex incidents to written contracts in matters
with respect to which they are silent.82 In Peter Darlington Partners Ltd. v.
Gosho Co., Ltd., a case regarding canary seed, the trade practice was that if
there were impurities in the seed, the buyer was entitled to proportionate
rebate on impurities but not the rejection of goods. The court held that the
contract was governed by this trade custom. 83
For consumer consciousness, it is very important to take a note of the
fact that in terms of impact there is no difference between express and
implied terms, both being part of the contract. There is no clear line of
distinction between the two, they rather tend to merge into one another.
The express terms are proved from what the parties said or wrote while
implied terms are proved by drawing inferences from what the parties said,
wrote or did. If a clear line is drawn between the express and implied terms,
the result can be hardship for buyers in transactions with express terms as to
quality or fitness of the subject of sale. This is so because the court cannot
read any implied warranty in such contracts where the seller does not deal in
such commodities or articles. This is most relevant for sale of goods taking
place as a private affair, like sale of second hand cars etc. In such situations,
the buyer would be at a loss and the courts would not imply any terms in his
favour.

81. (1961) 1 All ER 485.

82. Hutton v. Warren (1936) 1 M&W 466, 475.
83. [1964] 1 Lloyds' Rep. 149.
258 A TREATISE ON CONSUMER PROTECTION LAWS

To take a practical view of things, let us take the example of those who
purchase second hand swing machines, agriculture and horticulture
accessories, computers and other mechanical devices without having seen
them. They may be called sale by description and goods must correspond to
the description. But in such cases, the sellers are not dealers in these articles
but are merely users themselves trying to dispose of the old items. That is
the limit of their obligations. If a seller has been prudent enough to sell the
articles without actually stating that these are in good working order, no
term can be implied to this effect by the court. 84
Where in such cases, the buyer has been supplied with goods of no
worth, the courts may be of some help to them taking some advantage out
of section 15, dealing with sale by description. Guidance in this respect can
be taken from decision of the Court of Appeal in Karsales (Harrow), Ltd v.
Walks,85 in which a car had been delivered in such a condition as to be
incapable of self-propulsion except after a complete overhaul. The court
held that it was not "in the true meaning of words" a car at all.
The above analysed provisions of the Act appear at the first reading as
not lucid. The complexity lies in the basic drafting of those provisions. To
be specific, it may be pointed out that the Act excludes all implied terms
where the buyer does not rely on the seller's skill or judgment and where the
sale is not by description. These are the raminents of the maxim caveat
emptor, and in the interest of the consumers, it is necessary to eliminate them
from the provisions of the Act.

IX. Goods Must Correspond with Sample

The provisions of section 17 of the Act, dealing with the cases of sale by
sample provide that whether a sale is by sample or not depends upon the
terms of the contract. 8 6 In a sale of goods by sample, the said section
requires that the bulk of goods should correspond with the sample; s7 and
buyer can, of course, claim a reasonable opportunity of comparing the bulk
with the sample.88 The goods should be free from every latent defect which
may not be apparent on reasonable examination of the sample. 89
Thus, under section 17 any contract of sale would be a contract for
"sale by sample" only if there is a term in the contract, express or implied,
to that effect.90 It means that the mere providing of a sample by the seller
for the buyer's inspection does not make the sale a sale by sample. To

84 Supra note 31 at 79-80.

85 (1956) 1 WLR 936.
86 Supra note 2, sec. 17(1).
87 Id., sec. 17(2)(,i).
88 Id., sec. 17(2)(b).
89 Id., sec. 17(2)(c).
9C Id., nee. 17(1).
THE SALE OF GOODS ACT, 193C 259

qualify to be a sale by sample, there must be proof of an intention to that

effect. The essence of a sample is to give to the buyer a real view of the
article and make him aware of the subject matter of sale which may not be
possible to convey by words. However, it is important to note that a buyer
may not be able to examine the sample in such a way as the one who deals
in the goods of that kind. A thorough examination may reveal some more
secrets about the article or subject of sale but it is difficult to have an all-
revealing examination by a buyer exercising due care and diligence. The use
of a sample can, therefore, not protect the seller form liability in respect of
defects not reasonably discoverable on the examination of the sample,
although the bulk may in fact correspond perfectly with the sample.
Sub-section (2) (a) of section 17 contains the words "that the bulk shall
correspond with the sample in quality." It implies that the obligation of the
deliver)' of article will be fulfilled only when it will be in accordance with the
sample. If under the general trade practices, the sample is usually shown
merely for visual examination, and the supplied goods appear to correspond
to the sample on such examination, the buyer cannot complain that the bulk
does not correspond with the sample, even though there may be some
differences. In Hookway & Co. v. Alfred Isaacs?1 it has been held in the same
perspective that if the sample is only intended for a simple visual
examination, the buyer cannot be said to have been misled if the differences
in the sample and the article could only have been discovered by
microscopic examination.
T h e subsection (2) (b) of section 17, providing for the b u y e r ' s
reasonable opportunity of comparing the bulk with the sample is in fact a
special instance of the buyer's right of examination under section 41 of the
Act, which provides that where goods are delivered to the buyer which he
has 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. This section further provides that unless otherwise agreed, when
the seller tenders delivery of goods to the buyer, he is bound, on request, to
afford the buyer a reasonable opportunity of examining the goods for the
purpose of ascertaining whether they are in conformity with the contract.
It implies that the buyer is not to be deemed to have accepted the goods
until he has had an opportunity of examining them. The effect of the
acceptance is that the buyer can no longer reject the goods for breach of
condition, but is relegated to his right to claim damages.
Regarding examination of goods in case of a sale by sample, however,
section 17(2) (c)92 excludes the implied condition that the goods should be

91. [1954] 1 Lloyd's Rep. 491.

92. Section 15 (2)(c) of the Corresponding English Act.
260 A TREATISE ON CONSUMER PROTECTION LAWS

merchantable if the defect could have been discovered by reasonable

examination of the sample whether or not it has in fact been examined. The
seller can assume that the buyer will examine the sample, and would not
complain of defects which he could have discovered by the simple process
of examining the sample. Thus, if the buyer on an actual examination of the
sample finds it defective but decides to accept the goods, corresponding
with the sample, he thereby looses his right to go against the sale. It may be
noted that in a sale by sample accepting goods with all faults, it only
excludes the requirement of merchantability, but does not override the
fundamental duty of the seller to ensure that the goods correspond with the
description / sample. In Champanhac & Co., Ltd. v. Walter & Co., Ltd.,9-'' the
defendant sold some balloons to the plaintiff by sample "with all faults and
imperfections". This clause could not protect the defendant from the
consequences of the bulk not corresponding with the sample. Same is the
position in sale by description.

X. Exclusion of Implied Terms and Conditions

It has become obvious that the above mentioned provisions of the Act
envisage various implied terms in favour of buyers, but in various contracts,
as in standard form contracts, there exist some clauses which exempt the
seller from liability and negative the pro-buyer implied terms. This is
permissible under section 62 of the Act, which provides that any right, duty
or liability arising under a contract of sale by implication of law can be
negatived or varied by express agreement or by the course of dealing
between the parties, or by any usage binding on both parties to the contract.
In this regard, there are certain principles which can be of considerable
interest to consumers. For example, if a seller tries to rely on an exemption
clause, he cannot do so without proving that the given clause was a part of
the original contract rather it will have to be shown that it was part of his
offer, which was accepted by the buyer. The buyer should have actually
signed the contract incorporating the clause in question or the clause was
brought to the notice of the buyer. Where the buyer has signed the
contract, he cannot take the plea that he has not read or understood the
contract or the exemption clause. If the seller has whether fraudulently or
innocently, misrepresented the effect of the clause, he will not be allowed
any benefit out of it against the buyer. Consequently, an express oral
statement of the seller can also be treated as a condition or warranty
overriding the exemption clause. In certain circumstances, the buyer may
even take the plea that the whole contract was void because of his having
been mistaken as to the transaction. Presence of fraud can make this plea
stronger. Where the seller claims that the clause was brought to the notice

93. [1948] 2 All ER 724.

THE SALE OF GOODS ACT, 1930 261

of the buyer, he can rely on such a clause only if he proves that the buyer
did actually know of it. If the notice excluding the implied terms was fixed
in the shop, the seller will have to show that it was actually seen by the
buyer and not merely that it was fixed at a place.
The general principle is that the exemption clauses are to be construed
strictly against the parties relying on them. In view of this the courts are
supposed to attribute precise legal meaning to technical terms.

XI. Assessment of Damages

There is a need to evaluate certain principles for assessing damages to which
a buyer may be entitled on being supplied defective goods. An example in
this respect is furnished by Union of India v. A.L. Rallia Ram,94 in which on
the sale of cigarettes, the stock supplied turned out to be mildewed and unfit
for consumption. The Supreme Court awarded the damages on the basis of
the difference between the contract price and the actual price realised by the
buyer on sale of this stock. In this case the respondent had purchased and
taken delivery of a certain number of packets of cigarettes from the
government of India under a contract, which provided that "all sales will be
conducted on the distinct understanding that the goods sold are on a 'said
to contain' basis. N o responsibility for quality will be accepted whatsoever
after the delivery is made at the depot". A part of the stock of cigarettes
supplied to the respondent was unfit for consumption. Out of the packets
delivered, the respondent sold some of them in the market at a price lower
than the purchase price and returned the rest under an arrangement whereby
the government was to take back the goods in their original packing. The
contract with regard to undelivered goods was cancelled. The parties
referred their disputes to arbitration and the award granted to the
respondent three sums of money under the heads:
(i) loss suffered by the respondent in respect of packets of
cigarettes not returned by him computed on the basis of
difference between the price paid and price received by him on
sale;
(ii) incidental charges on account of expenses i n c u r r e d on
advertisement, storage, agency commission etc.; and
(iii) interest on sum refunded to respondent in respect of returned
packets.
Considering the matter, the Supreme Court held that since a part of
stock of cigarettes supplied to the respondent was mildewed and unfit for
consumption, the respondent was entitled to claim compensation for breach
of warranty, the measure of damages being the difference between the price

94. AIR 1963 SC 1685.

262 A TREATISE ON CONSUMER PROTECTION LAWS

paid and the price realised on sale. The amount awarded under the second
head as incidental charges could not be sustained because on taking delivery
of the goods, the respondent became the owner of the goods by the express
intendment of the contract. The expenditure incurred for advertisement,
storage, agency commission and other overhead expenses, was therefore in
respect of his own goods and he could not claim these expenses as part of
compensation payable for breach of warranty in respect of goods retained
by him.
The award of interest under the third head as interest on sum refunded
could not be sustained as the contract did not provide for payment of
interest in respect of amounts paid by the respondent if the contract fell
through. Comparing the arbitration award with the decision of the Supreme
Court, in the given circumstances, the former is consumer-centric.
Lastly, it may be noted that there is an urgent need to amend the above
discussed provisions of the Act on the pattern of trends in England and
make them more suited to be advancement of consumer interest.