QUALITY OF GOODS

LAW OF CONTRACTS

3rd Semester

Submitted by: Submitted to:

Gulshan Dr. Sangeeta Taak

Roll No.: 18071 (Asst. Prof. of Law Of Contracts)

RAJIV GANDHI NATIONAL UNIVERSITY OF LAW, PUNJAB

12 th SEPTEMBER 2019

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 ACKNOWLEDGEMENT
I have put effort in this project. However, it would not have been possible without the kind
support and help of many individuals and organizations.

I would like to extend my sincere thanks to all of them. I am highly indebted to Dr. Sangeeta
Taak for his guidance and constant supervision as well as for providing information
regarding the project & also for their support in completing the project.

I would like to express my gratitude towards my parents & member for their kind
cooperation and encouragement which help me in completion of this project.

I would like to express my special gratitude and thanks to industry persons for giving
me such attention and time. My thanks and appreciation also goes to my fellow in developing
the project and people who have helped me out with their ability.

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 TABLE OF CONTENT

 INTRODUCTION
 IMPLIED CONDITIONS AS TO QUALITY OR FITNESS

 MERCHANTABLE QUALITY

 THE RIGHTS OF BUYERS TO ACCEPT REJECTED GOODS

 EXCEPTIONS : CAVEAT EMPTOR

 THE DOCTRINE OF CAVEAT EMPTOR

 SCOPE OF CAVEAT EMPTOR

 EXCEPTIONS TO THE RULE OF CAVEAT EMPTOR

 SALE UNDER TRADE NAME : SECTION 16

 CASE LAWS
 CONCLUSION
 BIBLIOGRAPHY

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INRODUCTION

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price. The Sale of Goods Act came into existence in the
year 1930. The Act repealed and replaced  Sub-sections 76 to 123 of the Indian Contract
Act, 1872. Concurrent list at item six contains the subject matter of transfer of property other
than an agricultural land which empowers both the parliament and the state to make laws in
its regard. This Act deals in goods which are defined as every kind of movable property other
than actionable claims and money; and includes stock and shares, growing crops, grass, and
things attached to or forming part of the land which is agreed to be severed before sale or
under the contract of sale. In the act, a buyer is defined as a person who buys or agrees to buy
goods and seller is defined as a person who sells or agrees to sell goods.

Section 16 of the Sale of Goods Act, 1940 deals with implied conditions as to the fitness or
quality of the good sold to a buyer by a seller. Section 16 of the Sale of Goods Act, 1930 is
analogous to Section 14 of the English Sale of Goods Act, 1979, now Section 14 of the Sale
and Supply of Goods Act, 1994. It is an exception to the rule of Caveat Emptor. 

The legal maxim Caveat Emptor or “let the buyer beware” means that the buyer relies on his
skill and judgment when he purchases. It does not mean that the buyer should ‘take a chance’,
but it means he should ‘take care.’ This Maxim leads to the presumption that a buyer relies on
his quality of skill and judgment when he purchases a good as he has the opportunity to
examine the good before purchasing it and the seller would not be responsible for any default
in the bought good. But this rule is not absolute and is limited to some exceptions. The most
important exception to the rule of Caveat Emptor is the implied condition of fitness for a
particular purpose and the merchant ableness of the product. When a man sells an article, he
thereby warrants that it is merchantable, i.e., it is fit for some purpose, and if he sells it for
some particular purpose, he thereby warrants it for that purpose. The other exceptions
of Caveat Emptor are discussed below under the Section 16 of The Sale of Goods Act, 1930.

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IMPLIED CONDITIONS AS TO QUALITY OR FITNESS

Subject to the provisions of this Act and of any other law for the time being in force, there is
no implied warranty or condition as to the quality or fitness for any particular purpose of
goods supplied under a contract of sale, except as follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are required, so as to show that the buyer relies on the seller’s
skill or judgement, and the goods are of a description which it is in the course of the seller’s
business to supply (whether he is the manufacturer or producer or not), there is an implied
condition that the goods shall be reasonably fit for such purpose. Provided that, in the case of
a contract for the sale of a specified article under its patent or another trade name, there are
no implied conditions to its fitness for any particular purpose.

(2) Where goods are bought by description from a seller who deals in goods of that
description (whether he is the manufacturer or producer or not), there is an implied condition
that the goods shall be of merchantable quality. Provided that, if the buyer has examined the
goods, there shall be no implied conditions as regards defects which such examination ought
to have revealed.

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

(4) An express warranty or conditions do not negative a warranty or condition implied by this
Act unless inconsistent in addition to that.

In General, the Section 16 of the Sale of Goods Act, 1930 wants to say that the seller does
not provide any implied condition or warranty for the quality or fitness of goods, be it for any
particular or ordinary purpose but there are certain exceptions which impose implicit
conditions on a seller for any default in the goods that are being sold by him. These
exceptions have been described under the Sub-sections of Section 16 of The Sale of Goods
Act, 1930.

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MERCHANTABLE QUALITY

There is no particular definition so as to define the term merchantable. It can be defined as

that the article of such quality and in such condition that a reasonable man, acting reasonably,
would after a full examination accepts it under the circumstances of the case in the
performance of his offer to buy that article, whether he buys for his use or to sell again. This,
however, does not give any liberty to the buyer to treat every good as merchantable rather it
would be deemed so if they are not reasonably capable of being used by any person for a
particular or more purposes. This section can be applied to the second-hand goods, but the
same standard which is applied to new goods would not apply to the second-hand goods.
Specific goods shall be defined as the goods sold by ‘description’ and if they are specified,
then, in that case, the sub-section would apply.

THE RIGHTS OF BUYERS TO ACCEPT REJECTED GOODS

What happens when goods are brought for a specific purpose, but it turns out that it doesn’t
serve that purpose?

In Eternit Everest Ltd v C v Abraham, the plaintiff owned a cinema theatre and for the
roofing of the theatre, he purchased asbestos sheets and accessories manufactured by the
defendant. During the time of the monsoon, it was found that the water was seeping through
the sheets. On complaining to the defendant, he asked the plaintiff to add more ventilators.
Accordingly, the plaintiff complied with his advice. But still, the leakage did not stop. It was
found later that the leakage was due to the manufacturing defect of the sheets.

The issue that was formed in the case was that if a seller is made to know the particular
purpose for which the goods are bought, would he be liable for the damages if the product
does not serve that purpose.

It was held that implied condition of fitness for a particular purpose and merchantability of
the product are the two important exceptions to the rule of Caveat Emptor. For attracting the

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defence of Section 13(1), a person has to prove that he had brought it to the notice of the
seller about the particular purpose of buying the product. 

What happens when the goods don’t fit the particular description?

In Re Andrew,  Yule and Co., it was evident from the fact that the plaintiff had bought the
semi-corrugated asbestos sheets for covering the roofs and that the function of it is to protect
the building from sun and rain. Thus, here lies an implied condition as to the particular
purpose of buying the sheets and since these sheets did not fulfil the particular purpose of
stopping the water from seeping in, thus the defendants were held liable to pay the plaintiffs
for the damages.

Facts: Jute bags were sold from Jute Manufacturing Co. to Andrew Yule and co. They sold
the goods further to sub-buyers who rejected a portion of the goods nearly 100 out of the 150
bales. This was because due to the bad smell in those bags which was because of the batching
process which these bags underwent. This smell made them unfit to be used for packaging of
food stuff. Since the sub-buyers returned the goods to the Andrew Co., they filed a suit
against the manufacturers for selling goods that were unfit for the purpose for which they had
bought the goods.

The issues formed in the case were:

 Whether buyers have a right to the rejection of the accepted goods if it does not fit the
description.
 Whether in contract there is an implied condition of fitness for particular purpose

It was held that smell was a part of the description of the goods as it is of quality. Where
odourless paraffin oil was to be sold, goods that carried a particular kind of peculiar smell
would not meet up to the level of description. But in this case, the buyer had not conveyed the
particular purpose for which the goods were supposed to be used. Hence, the implied
condition of fitness related to the goods would not be applied in this case, i.e., for the purpose
of packing foodstuffs.

This case brought three circumstances in which the buyer might lose his right to rejection.
They are:

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  If the buyer is involved in the sub-sale for which the sold good is to be used.
 If the buyer delays in giving notice of the rejection of the good.
 If he retains the goods partly and asks for the rejection of the other part of the goods.
Thus, if the buyer without satisfying himself with the product send it forward with sub-
buyer then, it would be presumed that he has accepted the goods, and he would lose
his right to reject.

EXECEPTIONS : CAVEAT EMPTOR

“Caveat Emptor” is a Latin phrase that translates to “let the buyer beware”. What exactly does
this mean? Does the seller have no responsibilities? The answers lie in the Doctrine of Caveat
Emptor. Let us learn more about it along with its exceptions.

THE DOCTRINE OF CAVEAT EMPTOR

The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act. It translates to “let
the buyer beware”. This means it lays the responsibility of their choice on the buyer themselves.
It is specifically defined in Section 16 of the act “there is no implied warranty or condition as
to the quality or the fitness for any particular purpose of goods supplied under such a contract
of sale“A seller makes his goods available in the open market. The buyer previews all his
options and then accordingly makes his choice. Now let’s assume that the product turns out to be
defective or of inferior quality. This doctrine says that the seller will not be responsible for this.
The buyer himself is responsible for the choice he made.

So the doctrine attempts to make the buyer more conscious of his choices. It is the duty of the
buyer to check the quality and the usefulness of the product he is purchasing. If the product turns
out to be defective or does not live up to its potential the seller will not be responsible for this.

Let us see an example. A bought a horse from B. A wanted to enter the horse in a race. Turns
out the horse was not capable of running a race on account of being lame. But A did not inform
B of his intentions. So B will not be responsible for the defects of the horse. The Doctrine of
Caveat Emptor will apply.

However, the buyer can shift the responsibility to the seller if the three following conditions are
fulfilled.

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 If the buyer shares with the seller his purpose for the purchase
 The buyer relies on the knowledge and/or technical expertise of the seller
 And the seller sells such goods

SCOPE OF CAVEAT EMPTOR

In Ward v.  Hobbes (1878) 4 AC 13, the House of Lords held that a vendor cannot be
expected to use artifice or disguise to conceal the defects in the product sold, since that would
amount to fraud on the vendee; yet the doctrine of caveat emptor does not impose duty on
vendor to disclose each and every defect in the product. The caveat emptor imposes such
obligation on vendee to use care and skill while purchasing such product.

In Wallis v. Russel (1902) 2 IR 585, the Court of Appeal explained the scope of caveat

emptor-

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

Exceptions To The Rule Of Caveat Emptor- Section 16 of The Sale of Goods Act, 1930

1. Section 16(1) – Fitness for buyers purpose

Sub section (1) of Section 16 of the said Act prescribes the circumstances in which the seller
is obliged to supply goods to the buyer as per the purpose for which he intends to make a
purchase. It states that when the seller either expressly or by necessary implication is aware
of the purpose for which buyer makes purchase thereby relying on seller’s skill and judgment
and the goods to be purchased are of a description which the seller in his ordinary course of
business supply, then there is as implied condition that the goods shall be reasonably in
accordance with the purpose

Requirements of the Section 16(1) are as follows:-

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  The buyer should make the seller aware of the particular purpose for which he is
making purchase;
 The buyer should make purchase on the basis of seller’s skill or judgment;
 The goods must be of a description which it is in the course of the seller’s business to
supply.

In the case of Shital Kumar Saini v. Satvir Singh, the petitioner purchased a compressor
with one year warranty. The defect appeared within three months. The petitioner asked for a
replacement.  The seller replaced it but without providing any further warranty. The State
Commission allowed it to be rejected stating that there was an implied warranty guaranteed
under Section 16 of the Sale of Goods Act, 1930 that the goods should be reasonably fit for
the purpose for which they are sold.

SALE UNDER THE TRADE NAME [Provision to S. 16 (1)]

Sometimes a buyer purchases goods not on the basis of skill and judgment of the seller but by
relying on the trade name of the product. In such case, it would be unfair to burden the seller
with the responsibility for quality. The proviso to Section 16 of the Sale of Goods Act, 1930
deals with such cases.  The proviso says:

“Provided that, in the case of a contract for the sale of a specified article under its patent or
other trade name, there is no implied condition as to the fitness for any particular purpose.”

CASE LAWS ,

1. In Raghava Menon v. Kuttappan Nair1, the plaintiff purchased a wrist watch from
the defendant. The watch did not give satisfactory service in spite of the fact that the
seller had tried to set it right a number of times. The buyer sued the seller for the
replacement of the watch or the refund of the price. It was held that the seller was
bound to replace the watch or, in the alternative, to Pay back its price. It was observed
that "the plaintiff is a layman and he approaches a fairly reputed firm like the
defendant dealing in watches and purchases a watch from them, not for any special
purpose, but for the common purpose of knowing the correct time. In such a case,

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A.I.R. 1962 Kerala 318

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 Sec. 16(1) of the Sale of Goods Act must apply, because the buyer makes known to
the seller, by implication, the purpose for which he purchases the watch and also
relies on the seller’s skill or judgment.

2. In Priest v. Last2, the plaintiff went to the defendant, a chemist, and asked for a hot-
water bottle. The defendant sold him an American rubber bottle, saying that it would
stand hot but not boiling water. The plaintiff had purchased the bottle for his wife and
while she was using it, it burst and injured her. Since the bottle was not fit for being
used as a hot-water bottle, the ‘particular purpose’ for which the buyer had purchased
it, the defendant was held liable to pay compensation for the breach of the implied
condition

3. In Chaproniere v. Mason,3 the buyer purchased a bun from a bakery'. and as he tried
to bite it. his teeth struck on a stone in the bun as a consequence of which one of his
teeth was broken and an ,abscess formed in the jaw. Such a bun was held to be
unsuitable for the purpose of eating, i.e., the purpose for which the buyer had
Purchased the same. Moreover, the fact that the buyer had purchased the bun from a
particular bakery was sufficient to show that the buyer had relied on the seller's skill
and judgment.

4. In Frost v. Aylesbury Dairy Co4,‘ the plaintiff purchased milk from a milk dealer for
his family’s use. The milk contained typhoid germs, the plaintiff’s wife was infected
by it and died. Here the purpose for which the milk was to be used was, by
implication, made known to the seller. Since the milk was unfit for human
consumption, there was a breach of implied condition for which the defendant was
held liable.

5. In Grant v. Australian Knitting Mills Ltd 5.," the plaintiff purchased two
underwears from a retailer who dealt in that type of The underwears contained certain
chemicals and he contracted dermatitis by wearing them. Since the garments in
question were only intended to be worn next to skin as had been done by the buyer,

2
(1903) 2 K.B. 633
3
(1905) 1 T.L.R 633
4
(1905) 1 K.B 608
5
(1936) A.C. 85 : (1935) ALL E.R. 209

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 there was no need to expressly specify the purpose for which the buyer required them.
It was held by the Privy Council that the buyer had made known to the seller,
impliedly, the purpose for which he wanted the garments and relied on the seller’.
skill or judgment. There was a breach of implied condition that the goods shall be
reasonably fit for a certain purpose, and, as such, the seller was liable to the buyer in
damages.

It may be noted that the implied condition discussed above is that the goods shall be
suitable for a particular purpose. It does not mean that they shall be suitable for every
buyer. If they are generally suitable for a normal buyer and would not have caused
any harm to him but cause harm to a particular buyer due to the buyer’s over
sensitiveness, the seller cannot be blamed for the same.

6. In Griffith’s v. Peter Conway Ltd6. the plaintiff bought a Harris tweed coat and
caught dermatitis by using it. It was found that the plaintiff had caught the disease as
her skin was abnormally sensitive and a normal wearer would not have been effected
by using the coat. It was held that the plaintiff could not claim any compensation
because there was no implied condition that the goods shall suit an abnormal buyer
like the plaintiff.

7. The implied condition of fitness is applicable not only to the goods which are sold, it
is also applicable to the goods which are supplied under a contract of sale. In
Gedding v. Marsh7, the defendant supplied some bottles of mineral water to the
plaintiff. The bottles were not the subject-matter of sale as the empty bottles had to be
returned after the contents had been consumed. One of the bottles, being defective,
burst in the plaintiff’s hand and injured her. Although the bottles were not sold and
they were not to become the buyer’s property, it was held that there was, nevertheless,
an implied condition that both the bottles and their contents were reasonably fit for the
purpose for which they were required, and the sellers were liable to the plaintiff to
compensate her for breach of the implied condition

6
(1939) 1 ALL E.R 685.
7
(1920) 1 K.B. 688 : (1920) ALL E.R. 631

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CONCLUSION

Section 16 which deals with the exceptions to the rule of Caveat Emptor has made a liability
on the seller to sell a qualitative and merchantable product. Earlier, with the mentioned rule,
many times an innocent buyer was caught in the clever tricks of the seller by which he was
cheated and he had no remedy for damages he suffered. Though the Section 16 does not
provide absolute liberty to the buyer but it under certain conditions gives the buyer right to
seek the help of the court in claiming damages from the seller.

Section 16 includes exceptions with conditions. Exception one would only apply the buyer
has to convey to the seller the particular purpose of buying the goods and he would have to
let him know that he relies on the skill and judgment of the seller in buying the product.
Exception two tells that the goods sold must be of merchantable quality, and the seller would
be responsible for all the defects, latent or discoverable, if the buyer had not had any
opportunity to examine the good, whereas if the buyer had examined the goods, then the
seller would only be responsible for the latent defects in the goods. Thus, Section 16 has
restricted the seller in selling a fit and merchantable product according to the necessities of
the buyer and on the other hand has also made the buyer trust the seller in relying on the
seller’s judgment rather than his own he would now, have a remedy for any default on the
part of the seller.

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