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All questions of Unit 2: Conditions & Warranties for CA Foundation Exam

 A condition is : 
  • a)
    Not essential to the main purpose of the contract 
  • b)
    A stipulation essential to the main purpose o the contract 
  • c)
     It does not goes to the root of the transaction
  • d)
    None of these 
Correct answer is option 'B'. Can you explain this answer?

Tejas Chaudhary answered
**Explanation:**

A condition in a contract refers to a term or provision that is crucial and central to the main purpose of the contract. It is a fundamental term that goes to the root of the contract and forms the basis of the agreement between the parties involved. The correct answer to this question is option 'B', which states that a condition is essential to the main purpose of the contract. Let's explore this further:

**Essential to the main purpose of the contract:**
- A condition is a term that is considered vital and necessary for the contract to be valid and enforceable.
- It is a requirement that must be fulfilled in order for the contract to be completed and for the parties to have their obligations met.
- Failure to comply with a condition may result in the contract being breached or terminated, and the innocent party may seek remedies or damages for the breach.

**Not essential to the main purpose of the contract:**
- A term that is not essential to the main purpose of the contract is known as a warranty.
- While a warranty is still a part of the contract and carries legal significance, its breach does not typically allow the innocent party to terminate the contract or seek damages for the breach.
- Instead, the innocent party may be entitled to claim damages for any loss or harm suffered as a result of the breach.

**Stipulation collateral to the main purpose of the contract:**
- A stipulation collateral to the main purpose of the contract refers to a term that is subsidiary or incidental to the main purpose of the contract.
- It may be a secondary obligation or promise that is not directly related to the main purpose of the contract, but still carries legal significance.
- Breach of a stipulation collateral to the main purpose of the contract may entitle the innocent party to claim damages, but it does not typically allow for termination of the contract.

In conclusion, a condition in a contract is essential to the main purpose of the contract. It is a fundamental term that must be fulfilled for the contract to be valid and enforceable. Failure to comply with a condition may result in a breach of contract and the innocent party may seek remedies or damages for the breach.
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 The seller must warn the buyer of the probable danger related to the goods. This is known as: 
  • a)
    Express warranty 
  • b)
    Implied warranty 
  • c)
    Implied condition 
  • d)
    Express condition 
Correct answer is option 'B'. Can you explain this answer?

Jayant Mishra answered
Implied warranty is a legal term for the assurances – written or oral – that a product is fit for the purpose intended and is merchantable, i.e., conforms to an ordinary buyer’s expectations. The warranty of merchantability is implied, unless expressly disclaimed by name, or the sale is identified with the phrase "as is" or "with all faults."

Conditions which are presumed by law to be present in the contract are called 
  • a)
    Express Conditions 
  • b)
    Qualified Conditions 
  • c)
    Implied Conditions 
  • d)
    Unqualified Conditions
Correct answer is option 'C'. Can you explain this answer?

Taha Merchant answered
Implied means that exists without words for example on railway station Ur luggage was taken by coolie and u didn't tried to stop him this is implied and now u are bound to pay . Therefore conditions which are not spoken but are presumed is called implied condition

A stipulation in a contract of sale with reference to goods which are the subject thereof may be---------------.
  • a)
    A fair price 
  • b)
    A lawful price 
  • c)
    Condition and warranty 
  • d)
    Delivery
Correct answer is option 'C'. Can you explain this answer?

Arun Khanna answered
A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. ... 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.

 Doctrine of caveat emptor does not apply when:
  • a)
    Goods are purchase by sample 
  • b)
    Goods are purchased by sample and description 
  • c)
    Goods are purchased under its brand name.
  • d)
    All of the above.
Correct answer is option 'D'. Can you explain this answer?

Srsps answered
When the consent of the buyer in a contract of sale, is obtained by the seller by fraud or when the seller knowingly conceals the defect, which could not be discovered on a reasonable examination (i.e., there is some latent defect), the doctrine of caveat emptor does not apply.

Remedies of breach of warranty includes:
  • a)
    Diminution or extinction of price
  • b)
    Refusal to pay the price of goods
  • c)
    Suit for loss exceeding price of good
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Ishan Goyal answered
Remedies for Breach of Warranty

There are several remedies available to a buyer in case of a breach of warranty. These remedies are as follows:

1. Diminution or Extinction of Price
If the seller breaches the warranty, the buyer may claim a proportionate reduction in the price of the goods. In case of a serious breach, the buyer may also reject the goods and claim a refund of the purchase price.

2. Refusal to Pay the Price of Goods
If the seller breaches a warranty, the buyer may refuse to pay the price of the goods. This remedy is available only in cases where the breach is serious.

3. Suit for Loss Exceeding Price of Goods
If the buyer suffers a loss due to the breach of warranty, he can sue the seller for damages. The amount of damages would depend on the nature and extent of the loss suffered by the buyer.

Conclusion
In conclusion, the remedies available to a buyer in case of a breach of warranty include a proportionate reduction in the price of goods, refusal to pay the price of goods (in case of serious breach), and a suit for damages exceeding the price of goods.

A condition is : 
  • a)
    Not essential to the main purpose of the contract 
  • b)
    Essential to the main purpose of the contract 
  • c)
    A stipulation collateral to the main purpose o the contract 
  • d)
    None of these 
Correct answer is option 'B'. Can you explain this answer?

Arun Khanna answered
Contracts: The central instrument in a contract. A condition invests or divests the rights and duties of the parties to the contract, or stipulates that the occurrence or nonoccurrence of a certain event creates or terminates a contract.An actual or stipulated condition is called an express condition or condition in deed, and a condition deemed to be automatically present is called an implied condition or condition in law.

 In case of a breach of a condition in a contract of sale the aggrieved party
  • a)
    Has to pay the price
  • b)
    Can claim only damages
  • c)
    Can refuse to accept the goods
  • d)
    Cannot refuse to accept the goods
Correct answer is 'C'. Can you explain this answer?

Sounak Jain answered
Explanation:

In a contract of sale, if there is a breach of a condition by the seller, the aggrieved party (usually the buyer) has certain rights and remedies available to them. One of these rights is the ability to refuse to accept the goods.

What is a breach of a condition?

A breach of a condition occurs when the seller fails to fulfill a fundamental term of the contract. Conditions are important terms that go to the root of the contract and are essential for the completion of the transaction. If a condition is breached, it gives the aggrieved party the right to terminate the contract and seek remedies.

Refusing to accept the goods:

When there is a breach of a condition in a contract of sale, the buyer can refuse to accept the goods. This means that the buyer is not obligated to take ownership of the goods or pay the price agreed upon in the contract. By refusing to accept the goods, the buyer can avoid any further obligations under the contract.

Other remedies:

In addition to refusing to accept the goods, the buyer also has other remedies available to them in case of a breach of a condition. These remedies include:

1. Rescission: The buyer can choose to rescind the contract, which means that both parties are released from their obligations under the contract.

2. Damages: The buyer can claim damages from the seller for any losses suffered as a result of the breach. These damages are meant to compensate the buyer for any financial loss or harm caused by the breach.

3. Specific performance: In certain circumstances, the buyer may seek a court order requiring the seller to fulfill their obligations under the contract. This remedy is usually sought when the goods are unique or cannot be easily replaced.

Overall, the buyer has the right to refuse to accept the goods in case of a breach of a condition in a contract of sale. This allows the buyer to avoid any further obligations under the contract and seek other remedies such as rescission, damages, or specific performance.

 Implied condition of merchantability is _______ when buyer examines the good. 
  • a)
    Exists
  • b)
    Pre-assumed 
  • c)
    Is applicable 
  • d)
    Not applicable 
Correct answer is option 'B'. Can you explain this answer?

Arun Khanna answered
Implied condition of merchantability: According to section 16 sub-section 2 where goods are purchased by description from a person who usually sells them (although he may be a manufacturer or producer or not) there is an implied condition that the goods supplied shall be of merchantable quality. For example : (Pir Mohammed V/s Dallo Ram) where black woollen yarn was supplied by the seller to the buyer and the same was found moth-eaten, it was decided that there was a breach of this condition. 

The work merchantable has not been defined anywhere in the Act but it has been taken by the courts to mean the quality of the goods of which, if properly tendered to the buyer will compel him to accept their delivery but this does not imply that the seller is guaranteeing the goods to be easily saleable. 

A milk vendor supplied X with milk, which contained typhoid germs. X got infected after consuming the milk. Is the milk vendor bound to pay damages?
  • a)
    Yes, breach of condition as to wholesomeness 
  • b)
    Yes, conditions as to merchantability 
  • c)
    No, A never knew himself 
  • d)
    No, B should have seen it 
Correct answer is option 'A'. Can you explain this answer?

Srestha Shah answered
**Breach of Condition as to Wholesomeness**

The correct answer is option 'A', which states that the milk vendor is bound to pay damages because there has been a breach of condition as to wholesomeness. Let's understand why this is the correct answer.

**Explanation:**

1. **Condition as to Wholesomeness:** When a vendor supplies milk, it is implied that the milk is fit for human consumption and free from any harmful substances or germs. This is a condition that is inherent in the contract between the vendor and the customer.

2. **Breach of Condition:** In this case, the milk supplied by the vendor contained typhoid germs, which is a clear breach of the condition as to wholesomeness. The milk was not fit for human consumption and posed a risk to the health of the customer.

3. **Infection of the Customer:** As a result of consuming the contaminated milk, the customer (X) got infected with typhoid. This establishes a direct causal link between the consumption of the milk and the subsequent health issue faced by the customer.

4. **Vendor's Liability:** The milk vendor is liable for the damages caused to the customer due to the breach of condition as to wholesomeness. The vendor had a duty to supply milk that is safe for consumption, and by supplying contaminated milk, they have failed to fulfill this duty.

5. **Remedy: Damages:** As a consequence of the vendor's breach of condition, the customer is entitled to claim damages. Damages refer to the monetary compensation that the injured party is entitled to receive to compensate for the losses suffered as a result of the breach.

In conclusion, the milk vendor is bound to pay damages to the customer because they supplied milk that contained typhoid germs, which is a breach of the condition as to wholesomeness. The customer suffered health issues as a direct result of consuming the contaminated milk, establishing the vendor's liability. The appropriate remedy in this case is the payment of damages to compensate for the losses suffered by the customer.

M purchased a hot water bottle from a chemist. The bottle burst and injured his wife. The chemist is liable on account of: 
  • a)
    Breach of express condition as to quality 
  • b)
    Breach of implied condition as to quality 
  • c)
    Personal injury caused to the Buyer’s wife 
  • d)
    Hot water bottle sales are illegal 
Correct answer is option 'B'. Can you explain this answer?

Akshay Saini answered
B) Breach of implied condition as to quality. The chemist is responsible for selling a faulty product that caused harm to M's wife, which is a breach of the implied condition that the product is of merchantable quality and fit for its intended purpose.

A warranty is a stipulation _________to the main purpose of contract: 
  • a)
    Collateral 
  • b)
    Optional 
  • c)
    Contingent 
  • d)
    Essential 
Correct answer is option 'A'. Can you explain this answer?

Jayant Mishra answered
Other stipulations, which are not essential are termed as 'warranty'. Both of these are collateral to a contract of sale of goods. Contract cannot be avoided for breach of warranty, but aggrieved party can claim damages.

 The implied warranties as per the Sale of Goods Act, 1930 includes __________.
  • a)
    Enjoyment of undistributed possession 
  • b)
    Disclosure of dangerous nature of goods
  • c)
    Quality or fitness by usage of trade
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Rajat Patel answered
In case the buyer is content is content with his right to damages or can't reject the goods, a condition (implied or express) may reach to the level of a warranty. Implied Warranties are disclosed in Section 14 and 16 of the Sale of Goods Act, 1930 and are the warranties which the law implies into the contract.

X, contracts to buy from Y 1000 bags of cement. Y sends 1000 bags through truck. When cement arrives it becomes stone by the contract of rainwater. Can X reject the goods?
  • a)
    Yes – breach of condition as to wholesomeness 
  • b)
    Yes – conditions as to merchantability 
  • c)
    No – Y never knew himself 
  • d)
    No – X should have seen it 
Correct answer is option 'B'. Can you explain this answer?

Rajveer Jain answered
, X can reject the goods if they do not meet the specifications outlined in the contract. Since the cement has become stone due to rainwater, it can be argued that it does not meet the agreed-upon condition of being cement. Therefore, X has the right to reject the goods and request a refund or replacement from Y.

Enjoying of goods without any disturbance, free from any charges and quality by usage of trade. These imply:  
  • a)
    Implied condition 
  • b)
    Implied warranty 
  • c)
    Both (a) and (b)
  • d)
    Neither (a) nor (b)
Correct answer is option 'B'. Can you explain this answer?

Jayant Mishra answered
Express and Implied Conditions / Warranties : A Sale
Conditions and warranties may be express or implied.
Express conditions and warranties are which, are expressly provided in the contract. Implied conditions and warranties are those which are implied by law or custom; these shall prevail in a contract of sale unless the parties agree to the contrary.

i) Condition as to title -- In every contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied condition on the part of the seller, that :
In case of a sale, 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 at the time when the property is to pass.
The words 'right to sell' contemplate not only that the seller has the title to what he purports to sell, but also that the seller has the right to pass the property. If the seller's title turns out to be defective, the buyer may reject the goods.

M purchased a hot water bottle from a chemist. The bottle burst and injured his wife. The chemist is liable on account of: 
  • a)
    Breach of express condition as to quality 
  • b)
    Breach of implied condition as to quality 
  • c)
    Personal injury caused to the Buyer’s wife 
  • d)
    Hot water bottle sales are illegal 
Correct answer is option 'B'. Can you explain this answer?

Sanjana Khanna answered
B)Breach of implied condition as to quality.

When a buyer purchases a product from a seller, there is an implied condition that the product will be of merchantable quality and fit for its intended purpose. In this case, the hot water bottle burst and injured M's wife, indicating a breach of this implied condition. The chemist is therefore liable for any harm caused to the buyer or their property as a result of the defective product.

 Doctrine of Caveat Emptor requires the buyer :
  • a)
    To be careful while making a purchase.
  • b)
    To depend on representation made by seller.
  • c)
    To warn a seller not to sell any fake goods.
  • d)
    Not to make any advance payment.
Correct answer is option 'A'. Can you explain this answer?

Rajat Patel answered
The doctrine of caveat emptor is enshrined in Section 16 of the Sale of Goods Act, 1930. This provision corresponds to Section 14 of the English Act of 1893. This doctrine of caveat emptor is based on the fundamental principle that once a buyer is satisfied with the product’s suitability, then he has no subsequent right to reject such product. The objective of introducing this provision was to ensure that the buyer purchases the product at his own risk after being assured of the quality of the product. He is required to use his own skill and judgment except in cases of fraud where the doctrine of caveat emptor does not apply.

A sells his cat to B saying it is very lucky. B buys the cat but it does not proves lucky. Has B any cause of action against A?
  • a)
    Yes for cheating 
  • b)
    Yes, trial period should be given 
  • c)
    No, mere expression of opinion 
  • d)
    None of these 
Correct answer is option 'C'. Can you explain this answer?

Sounak Jain answered
Answer:

Explanation:

The correct answer is option 'C' - No, mere expression of opinion.

The situation described in the question is a case of a mere expression of opinion and not a case of cheating or any actionable offense. Here's a detailed explanation:

Mere Expression of Opinion:
When A sells his cat to B and claims that it is very lucky, it is considered a mere expression of opinion. A is expressing his belief or subjective view that the cat is lucky. This is different from making a false statement of fact or intentionally deceiving B. In this case, A is not making any false claims or misrepresenting the cat's qualities. It is simply his personal belief.

No Guarantee of Luck:
There is no guarantee or objective measure of luck associated with the cat. Luck is a subjective concept that cannot be objectively proven or disproven. Therefore, B cannot hold A responsible for the cat not bringing luck.

No Trial Period:
The concept of a trial period, where B can test the cat's luck before making a final decision, does not apply in this case. The question does not mention any such agreement between A and B. B voluntarily bought the cat based on A's opinion, and there was no obligation on A's part to provide a trial period.

Legal Considerations:
In legal terms, for B to have a cause of action against A, certain conditions need to be met, such as misrepresentation, fraud, or breach of contract. However, none of these conditions are present in this case. A has not made any false statements, committed fraud, or breached any contract.

Conclusion:
Based on the given information, B does not have any cause of action against A. The statement made by A regarding the cat's luck is a mere expression of opinion, and there is no legal obligation for A to guarantee or provide a trial period.

 X bought milk which contained typhoid germs. His wife consumed the milk and died. He could recover damages. These facts are of the case: 
  • a)
    Priest vs. Last 
  • b)
    Folkes vs. King 
  • c)
    Frost vs. Aylesbury Dairy Company 
  • d)
    Jones vs. Just 
Correct answer is option 'C'. Can you explain this answer?

Akshay Das answered
Case Details:

X bought milk which contained typhoid germs. His wife consumed the milk and died. He could recover damages.

Answer Explanation:

The correct answer to the given question is option 'C' i.e. Frost vs. Aylesbury Dairy Company.

Frost vs. Aylesbury Dairy Company is a landmark case in the law of torts. The case was heard in England in the year 1905. The case dealt with the liability of a dairy company for selling contaminated milk that caused death and illness.

Here are the key points of the case:

Facts of the case:
- Frost purchased milk from the Aylesbury Dairy Company.
- The milk was contaminated with typhoid germs.
- Frost's wife and child consumed the milk and became ill.
- Frost's wife died due to the contamination.

Legal Issues:
- Whether the dairy company was liable for selling contaminated milk.
- Whether Frost was entitled to recover damages for the death of his wife.

Judgment:
- The court held that the dairy company was liable for selling contaminated milk.
- The court awarded damages to Frost for the death of his wife.
- The court also held that the dairy company was negligent in its production and distribution of milk.

Significance:
- The case established the principle of strict liability in tort law.
- It also established that a manufacturer or producer is liable for harm caused by its product, regardless of whether it was negligent or not.

Conclusion:

Frost vs. Aylesbury Dairy Company is an important case in tort law. The case established the principle of strict liability, which has been followed in many other cases since then. The case also highlighted the importance of product safety and the responsibility of manufacturers to ensure that their products are safe for consumers.

 Breach f warranty gives a right to: 
  • a)
    Reject goods 
  • b)
    Treat the contract as repudiated 
  • c)
    Claim new goods 
  • d)
    Claim damages but not a right to reject the goods and treat the contract as repudiated 
Correct answer is option 'D'. Can you explain this answer?

Jayant Mishra answered
(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 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 case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.

The rule of caveat emptor does not apply in the case of :
  • a)
    Fitness for buyer’s purpose
  • b)
    Sale under a patent or trade name
  • c)
    Usage of trade or consent by fraud
  • d)
    All of these
Correct answer is option 'D'. Can you explain this answer?

Jayant Mishra answered
The “old rule” of caveat emptor had been superseded by caveat venditor such change being “rendered necessary by the conditions of modern commerce and trade.” LORD WRIGHT In expression ‘Caveat Emptor’ usually finds a place in laws related to business. The phrase Caveat Emptor means “let the buyer beware.” The doctrine of caveat emptor is enshrined in Section 16 of the Sale of Goods Act, 1930. This provision corresponds to Section 14 of the English Act of 1893. This doctrine of caveat emptor is based on the fundamental principle that once a buyer is satisfied with the product’s suitability, then he has no subsequent right to reject such product. The objective of introducing this provision was to ensure that the buyer purchases the product at his own risk after being assured of the quality of the product. He is required to use his own skill and judgment except in cases of fraud where the doctrine of caveat emptor does not apply.                          

 Merchantable quality of goods means:
  • a)
    Goods are free from latent defects
  • b)
    Goods are marketable at their full value 
  • c)
    Goods can be used for the purpose for which those are purchased
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Aarya Sharma answered
Merchantable quality of goods refers to the standard or condition that goods must meet in order to be considered suitable for sale in the market. It implies that the goods must be of a certain quality, free from defects, and capable of fulfilling their intended purpose. This concept is important as it protects consumers from purchasing substandard or faulty goods.

1. Free from latent defects:
- Goods being free from latent defects means that they do not possess any hidden or concealed flaws that may affect their performance or safety.
- Latent defects are not immediately apparent upon inspection and may only become evident after the goods have been used for some time.
- For example, a television may appear to be in good working condition at the time of purchase, but it may have a latent defect that causes it to malfunction after a few months of use.
- Merchantable quality requires that goods are free from such defects and are capable of performing as expected.

2. Marketable at their full value:
- Goods being marketable at their full value means that they are in a condition that allows them to be sold in the market without any significant reduction in their value.
- This implies that the goods must be in a state that is acceptable to potential buyers and that they can be sold at a price that reflects their true worth.
- If goods have defects or are in a condition that significantly diminishes their value, they may not be considered to have merchantable quality.
- For example, if a car has a damaged engine or a cosmetic flaw that affects its resale value, it may not be marketable at its full value.

3. Fit for the purpose:
- Goods being fit for the purpose means that they are suitable and capable of being used for the specific purpose for which they were purchased.
- If goods cannot fulfill their intended purpose, they may be considered to lack merchantable quality.
- For instance, if a blender is unable to blend ingredients properly or a pair of shoes is uncomfortable to wear, they would not be considered fit for their intended purpose.

Conclusion:
Merchantable quality of goods encompasses the idea that goods should be free from hidden defects, marketable at their full value, and able to fulfill their intended purpose. It ensures that consumers receive goods of a certain quality and protects them from purchasing substandard or faulty products.

Chapter doubts & questions for Unit 2: Conditions & Warranties - Business Laws for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.

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