Conditions & Warranties (Part-3) - The Sale of Goods Act, 1930 CA CPT Notes | EduRev

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CA CPT : Conditions & Warranties (Part-3) - The Sale of Goods Act, 1930 CA CPT Notes | EduRev

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SUMMARY:

While entering into a contract of sale, certain stipulations are put by both the parties i.e. the buyer and the seller. These stipulations with reference to goods may be ‘conditions’ or ‘warranties’ depending upon the construction of the contract. A stipulation essential to the main purpose of the contract is a ‘condition’ whereas collateral stipulations are called warranties. Breach of a ‘condition’ gives right to repudiate the contract and to claim damages whereas Breach of a ‘Warranty’ gives right to claim damages only. Every contract of sales have certain conditions and warranties implied by law. Besides, the parties may provide for ‘conditions’ and ‘warranties’ by an express agreement.

Regarding implied condition or warranty as to the quality of fitness for any particular purpose of goods supplied, the rule is ‘let the buyer beware’ i.e., the seller is under no duty to reveal unattering truths about the goods sold, but this rule has certain exceptions.


TEST YOUR KNOWLEDGE

Multiple Choice Questions

1. A stipulation which is essential to the main purpose of the contract is called-

(a) Warranty

(b) Guarantee

(c) Condition

(d) Indemnity

2. Breach of condition gives the aggrieved party-

(a) Right to sue for damages

(b) Right to repudiate the contract

(c) Both (a) and (b)

(d) None of these

3. Condition may be treated as a warranty when there is–

(a) Waiver of condition by the buyer

(b) Buyer elects to treat breach of condition as a breach of warranty

(c) Acceptance of goods by the buyer in case of non-severable of contract of sale

(d) All the above

4. The doctrine of Caveat Emptor does not apply, when

(a) the goods are bought by sample

(b) the goods are bought by sample as well as description

(c) The exact purpose is known to the seller and is a regular dealer

(d) all of the above

5. Which of the following is not an implied condition in a contract of sale?

(a) condition as to title

(b) condition as to description

(c) condition as to free from encumbrance

(d) condition as to sample

6. The conditions and warranties may be in the form of

(a) express

(b) implied

(c) either (a) or (b)

(d) none of the above

7. Which one of the following is not an implied warranty

(a) warranty as to undisturbed possession

(b) warranty as to existence of encumbrance

(c) disclosure of dangerous nature of goods

(d) warranty as to quality or fitness by usage of trade

8. In case of goods sold by sample, the goods should correspond with the sample other wise

(a) buyer can reject the goods

(b) buyer cannot reject the goods

(c) contract is automatically terminated

(d) seller is liable to punishment

9. M, a shopkeeper, sold a Television set to N, who purchased it in good faith. The set had some manufacturing defect and it did not work after a few days in spite of repairs. In this case, the television was not merchantable as it was not fit for ordinary purpose

(a) the buyer has no right to reject the television

(b) the buyer has the right to reject the television and to have refund of the price

(c) both of the above

(d) none of the above [(a) & (b)]

10. Where the buyer is deprived to goods by their true owner, then the buyer

(a) may recover the price for breach of the condition as to title

(b) can not recover the price for breach of the condition as to title

(c) either (a) or (b)

(d) none of the above

Answers to MCQs

1.

(c)

2.

(c)

3.

(d)

4.

(d)

5.

(c)

6.

(c)

7.

(d)

8.

(a)

9.

(b)

10.

(a)


Theoretical Questions

Question 1: What do you understand by “Caveat-Emptor” under the Sale of Goods Act, 1930? What are the exceptions to this rule?

Question 2: What are the implied conditions in a contract of ‘Sale by sample’ under the Sale of Goods Act, 1930? State also the implied warranties operatives under the said Act.

Question 3: “There is no implied warranty or condition as to quality or fitness for any particular purpose of goods supplied under a contract of sale.” Discuss the significance and State exceptions, if any.

Question 4: Distinguish between a ‘Condition’ and a ‘Warranty’ in a contract of sale.  When shall a ‘breach of condition’ be treated as ‘breach of warranty’ under the provisions of the Sale of Goods Act, 1930?  Explain.

Answer to Theoretical Questions

1: Caveat emptor’ means “let the buyer beware”, i.e. in sale of goods the seller is under no duty to reveal unflattering truths about the goods sold. Therefore, when a person buys some goods, he must examine them thoroughly. If the goods turn out to be defective or do not suit his purpose, or  if he depends upon his skill and judgment and makes a bad selection, he cannot blame any body excepting himself.

The rule is enunciated in the opening words of section 16 of the Sale of Goods Act, 1930 which runs thus: “Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale.”

The rule of caveat emptor does not apply in the following cases:

(i) Fitness for buyer’s purpose: Where the buyer, expressly or by implication, makes know to the seller the particular purpose for which he requires the goods and relies on the seller’s skill or judgment and the goods are of a description which it is in the course of the seller’s business to supply, the seller must supply the goods which shall be fit for the buyer’s purpose. (Section16(1).

(ii) Sale under a patent or trade name: In the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition that the goods shall be reasonably fit for any particular purpose. (Section 16(1).

(iii) Merchantable quality: Where goods are bought by description from a seller who deals in goods of that description (whether he is in the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality. But if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed. (Section 16(2).
(iv) Usage o f trade: An implied warranty or condition as to qualify or fitness for a particular purpose may be annexed by the usage of trade. (Section 16(3).
(v) Consent by fraud: Where the consent of the buyer, in a contract of sale, is obtained by the seller by fraud or where the seller knowingly conceals a defect which could not be discovered on a reasonable examination, the doctrine of caveat emptor does not apply.

2:  The following are implied conditions in a contract of sale by sample in accordance with Section 17 of the Sale of Goods Act, 1930;
(a) that the bulk shall correspond with the sample in quality;

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

(c) that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample [Section 17(2)].

Implied Warrants:

1. Warranty of quiet possession [Section 14(b)]: In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. If the buyer is in any way distributed in the enjoyment of the goods in consequence of the seller’s defective title to sell, he can claim damages from the seller.

2. Warranty of freedom from encumbrances [Section 14(c)]: The buyer is entitled to a further warranty that the goods are not subject to any charge or encumbrance in favour of a third party. If his possession is in any way disturbed by reason of the existence of any charge or encumbrances on the goods in favour of any third party, he shall have a right to claim damages for breach of this warranty.

3. Warranty as to quality or fitness by usage of trade [Section 16(3)]: An implied warranty as to quality or fitness for a particular purpose may be annexed by the usage of trade.

4. Warranty to disclose dangerous nature of goods: Where a person sells goods, knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, otherwise he will be liable in damages.

3: The statement given in the question is the fundamental principle of law of sale of goods, sometime expressed by the maximum ‘Caveat Emptor’ meaning thereby ‘Let the buyer be aware’.  In other words, it is no part of the seller’s duty in a contract of sale of goods to give the buyer an article suitable for a particular purpose, or of particular quality, unless the quality or fitness is made an express terms of the contract.  The person who buys goods must keep his eyes open, his mind active and should be cautious while buying the goods. If he makes a bad choice, he must suffer the consequences of lack of skill and judgement in the absence of any misrepresentation or guarantee by the seller.

There are, however, certain exceptions to the rule which are stated as under:

(i) Where the buyer expressly or by implication, makes known to the seller the particular purpose for which he needs the goods and depends on the skill and judgement of the seller whose business is to supply goods of that description, there is an implied condition that the goods shall be reasonably fit for that purpose;
(ii) If the buyer purchasing an article for a particular use is suffering from an abnormality and it is made known to the seller at the time of sale, implied condition of fitness will apply.
(iii) If the buyer purchases an article under its patent or other trade name and relies on seller’s skills and judgement which he makes known to him, the implied condition that are articles are fit for a particular purpose shall apply.

(iv) If the goods can be used for a number of purposes the buyer must tell the seller the particular purpose for which he required the goods otherwise implied condition of fitness of goods for a particular purpose will not apply.

(v) Where the goods are bought by description from a seller who deals in goods of that description whether he is the manufacturer or producer or not, there is an implied condition that the goods are of merchantable quality.
(vi) An implied condition as to quality or fitness for a particular purpose may be annexed by the usage of trade or custom;

In a sale by sample there is an implied condition that

(a) The bulk shall correspond with the sample in quality;
(b) The buyer shall have reasonable opportunity of comparing the bulk with the sample; and

(c) The goods shall be free from any defect, rendering them unmerchantable;

(viii) In the case of eatables and provisions in addition to the implied condition of merchantability, there is an implied condition that the goods shall be wholesome.

4: Difference between Condition and Warranty
(i) A condition is a stipulation essential to the main purpose of the contract whereas a warranty is a stipulation collateral to the main purpose of the contract.

(ii) Breach of condition gives rise to a right to treat the contract as repudiated whereas in case of breach of warranty, the aggrieved party can claim damage only.

(iii) Breach of condition may be treated as breach of warranty whereas a breach of warranty cannot be treated as breach of condition.

According to Section 13 of the Sale of Goods Act, 1930 a breach of condition may be treated as breach of warranty in following circumstances:

(i) Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition.

(ii) Where the buyer elects to treat the breach of condition as breach of a warranty.

(iii) Where the contract of sale is non-severable and the buyer has accepted the whole goods or any part thereof.

(iv) Where the fulfillment of any condition or warranty is excused by law by reason of impossibility or otherwise.

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