CHAPTER: SEVEN IMPLIED CONDITIONS AND WARRANTIES: AND EXEMPTION CLAUSES IN THE AGREEMENTS OF SALES OF GOODS

Transcription

1 295 CHAPTER: SEVEN IMPLIED CONDITIONS AND WARRANTIES: AND EXEMPTION CLAUSES IN THE AGREEMENTS OF SALES OF GOODS This chapter deals with the aspect of "Implied conditions and warranties" and the question of their exclusion. The subject matter of this part of the chapter will be discussed under the following heads. A. Implied conditions and warranties. B. Exclusion of implied stipulations and Exemption clauses in the Agreements of Sale of Goods. a A Implied Undertaking Seller's Title: (1) Implied undertaking regarding Seller's Title: Section 14(a) of the [Indian] Sale of Goods Act provides: "There is an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and that, in the caspr,of an agreement to sell, he will ' have a right to sell the goods at a time when the property is to pass." From the above it can be stated that the seller has a right to sell when he has a good tit-le to the goods. This means that the goods are not stolen or they are not in the seller's possession merely as a hirer under the hire-purchase agreement and that the seller himself has a good title which he will be able to transfer to the buyer. Apart from a good title, it also

2 296 means that there is nothing else which prevents the seller from selling the goods, for instance, the goods do not bear labels infringing the trade ma'rk of somebody else. If for the seller's want of title the buyer suffers some loss, the seller is bound to compensate him for the same. If the goods happen to be stolen property and the buyer has to restore them to the true owner, and, therefore, he is not able to return the same to the seller, he is still entitled to claim back the price which he has paid to the seller, because when the buyer is deprived of the goods on account of the seller's want of title, there is total failure of consideration, for which the seller should be held liable. In Powland v. Divall1, there was sale of a P car to a car dealer, who further sold the same after two months to a customer. The car was a stolen one and the customer had to surrender the same to the true owner. The car dealer refunded the price to the customer and in his own turn brought an action against his seller to recover back the price, although he was no more in a position to return the car. It was held that the car dealer was entitled to claim back the price because he did not get what he had paid for, namely, a car to which he would have a good title, there being thus a total failure of consideration. In Niblett v. Confectioners' Materials Co. Ltd, the seller was held to be having.no right to sell his own goods, which were bearing labels infringing the trade mark of third person. In this case, the plaintiffs purchased a quantity of tins of condensed (1 923) 2 KB 500. (1 949) 2 KB 545.

3 297 milk from the defendants. The goods were shipped from New York to London. But on arrival they were seized by the custom authorities on a complaint by third parties that the goods were bearing the labels "Nissly brand", which infringed the trade mark of. the third parties. The goods were released only when the labels were removed The plaintiffs had to sell the un-labeled tins, which resulted a loss to them'. The 'loss had occurred due to the fact that the sellers did not have a right to sell the goods as they had been sent. They were held liable for the loss suffered by the plaintiff. There is also an implied warranty contained in Section 14(b) of the Act. This lays down that the buyer shall have and enjoy quiet * possession of the goods. The buyer's possession is generally disturbed when the seller makes a breach of the condition as to title. If the seller sells goods which he does not have a right to sell either for want of title or otherwise, the buyer's possession gets affected thereby. For example, if the type-writer sold is a stolen one and the buyer has to surrender the same to^t'he true 'owner, he cari ''hiake the seller liable "for the loss. In such a case he can make the seller liable for the consequential loss which arises directly and naturally due to the breach of such warranty. Thus, if the buyer had spent some amount on the overhauling of the type writer purchased by him and then the same was surrendered, the buyer could recover from the seller the price paid by him as well as the overhauling charges. Similarly, if the car sold is illegally imported and the buyer has to pay customs duty on the 3. Mason v. Burmingham, (1921) 3 KB 387.

4 298 same,4 or there is litigation in respect of the goods purchased because of their defective title,5 the buyer is entitled to recover such sum from the seller. In India, the provisions of Section 14 are identical to the provisions contained in Section 12 of the (English) Sale of Goods Act, The English Sale of Goods Act has undergone an amendment. The important features of the amendment requires a brief mention. There is a possibility that when the seller has a limited title in respect of the goods, this fact may be known to the parties at the time of contract and the contract may be to transfer to the buyer such a title only. In such a case there is no implied condition as to the right to sell, but there are implied warranties: (i) that all encumbrances which the seller knows, have been disclosed; (ii) that the buyer's title shall not be disturbed either by the seller, or any other person.5 The modification introduced into the law is justified on the ground that when the buyer takes the goods knowing about the limited title of the seller, he should not obviously expect 4. Stock v. Urey, (1941), QB Bowmaker (Commercial) v. Day AIR Section 12, Sub-Secs.(3) to Goods Act, (1 965) 2 All ER 856: (1 965) (5), The English Sale of

5 299 anything more than that in the bargain. Subject to this limited title which the buyer gets, his right to quiet possession has been preserved by the law. It may be noted here that this provision is simply reiteration of the rule that if any contract is subject to certain terms which have been brought to the knowledge of the buyer, the buyer is bound by those terms. In other words, if a seller having a limited title in respect of certain goods sells them with that fact brought to the knowledge of the buyer, under such a contract the buyer cannot expect anything more than what is being transferred to him. Since even without this additional provision, which has been introduced into the English law by amendment, the respective position of the parties would be the same, there is no need of any amendment of the Indian law in this respect. (2). Implied Condition in Sale by Description: According to Section 15, (Indian) Sale of Goods Act: Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. When the sale of goods is by description, the description serves the purpose of identifying what exactly is to be supplied. It is, therefore, expected that the seller shall supply the goods of that description. "If you contract to sell peas, you cannot

6 300 oblige a party to take beans". " If the description of the article tendered is different in any respect, it is not the i article bargained for, and the other party is not bound to take *7 8 it."' Description may be regarding how old the goods are, q in their size and dimensions, the quantity in each package, the 1 *1 number of tins which each case should contain, the proportion of different-kind of goods mixed together, the time when the shipment is to arrive, or anything which identifies what exactly is the subject matter of the contract. The term 'sale of goods by description* must apply to all cases where the purchaser has not seen the goods, but is relying on the description alone.14 Even if the buyer has seen the goods but is relying on the description of the same as given by the seller, the sale of goods is by description.1^ 7. Bowes v. ' Shand, Blackburn). (1 877) 2 AC 455 at 480, (Per Lord 8. Varley v. Whipp, ( 1900) 1 QB Arcos Ltd. v. E.A. Fonaasen and Son, (1933) AC Manbre Seccharine Re Moore and Co Co. v. Corn Products Co. (1919) 1 KB Ltd. v. Landauer and Co. (1919) 1 KB 12. Antony Thomas v. Ayuppunnia Mani, A.I.R Ker Mecpherson Train and Co. Ltd., (1955) 2 All. ER 445. Ltd. v. Howard Ross and Co. 14. Verley v. Whipp, J.) (1 900) 1 QB 513 at 516., (Per Channel, 15. Ibid.

7 301 When the sale is by sample as well as description it is not enough that the goods correspond to the sample. Such goods must correspond to both sample as well as description, otherwise the seller would be liable for the breach of condition. Thus if there is sale by sample of seeds which are described as "English sainfoin", and if the seeds which are supplied are of different description known as "giant sainfoin: seeds, the seller would:be liable. for the breach of the implied condition even though the goods supplied correspond to the sample. When the sale is by sample and description, even if the agreement spells out that the goods are warranted only equal to samples, the seller would.be liable if the goods do not correspond to the description. In Nichol v. Godts,^ there was sale of "foreign refined rap^ oil" warranted only equal to samples. The oil supplied though in conformity with the sample, was adulterated with hemp oil, and could not be commercially known as "foreign refined rape oil". The seller was held liable for the breach of the implied condition. English law on this point.was identical to thg Indian one but the same has been amended by the Supply of Goods (Implied Terms) Act, By this amendment the scope of what constitutes "sale by description" has been extended and there could be a sale by description even of such goods which the buyer has seen and selected. The relevant provision which is contained in Section 13(3) of the (English) Sale of Goods Act,1979 is as under: 16. Wallis v. Pratt, (1911) AC (1854) 1 0 Ex. 191.

8 302 A sale of goods is not prevented from being a sale by description by reason only that, being exposed for sale or hire, they are selected by the buyer. According to the above stated provision, even if the buyer purchases the goods after having seen them, or even from,a self-» service shop it may still be a sale by description. Thus, if a person purchases a car after having seen the same and the car is described as that of a 'particular model', or having run only a certain mileage, or having certain other features, that would be considered to be a sale by description. The object of this i provision is to keep the responsibility of the seller intact in sale by description inspite of the fact that the buyer has seen or selected the goods. «The interest of the buyer in India also needsl to be protected in this regard. It is submitted that a proviso be appended to Section 15 of the (Indian) Sale of Goods Act, which may read as under: Provided that a sale of goods would not cease to be a sale by description by the mere fact that the goods are exposed for sale, or the buyer has selected or examined the same. (3). Implied Condition as to Quality or Fitness: Section 16 of the Indian Act incorporates two implied I conditions: one as to the quality of fitness of the goods for a particular purpose second, as to merchantable quality of the goods. These implied conditions are aimed at protecting the interest of the buyer from the application of the common law principle of Caveat Emptor, which is incorporated in the opening

9 303 words of Section 16. The general principle (Known as Caveat Emptor) to which the. two implied conditions constitute an exception, is set out in the opening words of Section 16, which reads as under:...there is no implied warranty or condition as to the quality or fitness for any particular purpose of the goods supplied under and contract of sale. The common law rule of Caveat Emptor, 'or buyer beware', meaning thereby that the buyer himself was to watch his interest while purchasing goods and there was no implied warranty or condition as to the quality or fitness of the goods for any particular purpose from the seller. The origin of the rule can be found from the time when the markets were confined to ;small geographical areas, there was not much trade or business, and invariably the seller and the buyer came in personal contact while the transaction was made, the sale was generally only in 'market overt', the buyer having lot of opportunity and time to examine the goods and ascertaining the suitability of the goods to purpose which he has in view.. With the changing times when the buyer made the purpose known to the seller, ^ or had.no opportunity of examining the goods, and he purchased the goods by on! their description, w the courts construed the contracts as implying terms as to the quality of the goods for a particular purpose, or as to their merchantable quality.- The English Sale of ' ' i 18. Morley v. Attenborough, (1849) 3. Hxch 500 at Randall v. Newson, (1877) 2 QBD 102 (CA). 20. Jones v. Just, (1 868) LR 3..QB 197. I '

10 304' Goods Act, 1893, and also the Indian Sale of Goods Act, 1930 contained identical provisions in Sections 14 and 16, I respectively, incorporating the exceptions to the rule of Caveat Emptor, which modified the rigour of the rule and granted protection to the buyer. An implied condition as to quality or fitness of the goods for a particular purpose is contained in' the following exception to the rule as incorporated in Section 16(1) of the Act: 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 judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose. When the buyer makes the particular purpose, for which the goods are required, known to the seller, and he relies on the seller's skill and judgment, then it becomes seller's duty to see that the goods supplied are suitable for such purpose. When the goods can be used for a number of purposes the particular purpose which the buyer has in mind has to be expressly told to the seller, whereas, when the goods can be used only for one purpose, the purposes impliedly known to the seller, and the reliance on

11 305 the seller's skill and judgment is also implied from the circumstances of the case. The mere fact that the buyer goes to a particular shop implies that he relies on the seller's skill and judgement in having selected his stock with skill and confidence. Regarding this aspect, in Grant v. Australian Knitting Nille, Lord Wright observed as under: 71 It is clear that the reliance must be brought home to the mind of the seller, expressly or by implication. The reliance will seldom be express: it will usually arise by implication from the circumstances : thus to take a case of a purchase from a retailer, the reliance will in general be inferred from the fact that a buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment: the retailer need know nothing about the procase of manufacture: it is immaterial whether he be manufacturer or not: the main inducement to deal with a good retail shop is the expectation that the tradesman will have bought the right goods of a good make... In Chaproniere v. Nason, *** 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 his jaw. It was held that bun was! meant for eating, and due to the presence of stone in it, it was not suitable for the required purpose. Moreover, the fact that the 21. (1 936) AC 85 at (1905) 21 AC 633.

12 306 buyer has preferred to purchase his bun from a particular bakery was sufficient to show that he has relied on the seller s skill and judgment. In Grant v. Australian Knitting Mills. Ltd., the plaintiff purchased two underwear from a retailer. As the underwears contained certain chemicals, the plaintiff contracted dermatitis after wearing the same. Since the underwears were meant only for one purpose, of being put next to skin, and they were unsuitable for the purpose, the seller was held liable for the same. Similarly, in Priest v. Last24 a hot water bottle was defective and it burst and injured the buyer's wife while it was being used in a normal way, the seller was held liable on account of the goods being unsuitable for the only purpose forwich they were deemed to have been purchased on the supposed reliance on the seller's skill and judgement. In the same way if the milk contained typhoid germs and the buyer's wife after having consumed the same was infected by the disease which resulted in her death, the seller could be made liable for the same. If a wrist watch does not give satisfactory service inspite of repeated repairs by the seller the same is deemed to be unsuitable for the purpose for which it is normally purchased, and the seller is bound to either replace the watch or refund the price. When a tin of salmon is unfit for human consumption and results in the death of the buyer's wife after consuming the contents of that tin, the seller would be liable to the buyer for 23. (1936) AC (1903) 2 KB Frost v. Aylesbury Dairy Co., (1905) 1 KB Raghava Menon v. Kuttappon Nair, A.I.R Ker. 318.

13 307? 7 the loss of wife's services. When the goods are' generally fit for a particular purpose, but do not suit a particular person because of some abnormality with him, the seller cannot be held liable for the breach of this implied condition. In Griffithas v. Peter Conway Ltd. - the plaintiff bought a Harris Tweed Coat and contracted dermatitis after using the same for sometime. It was found that there was nothing wrong with the cloth which would have affected the skin of the normal wearer, the dermatitis was caused in this case because of abnormally sensitive skin of the buyer, Mrs. Griffiths. The coat being ' reasonably fit' for a normal wearer the seller was held not liable for the breach of the condition. It has, however, been held that the position would be different if the coal is purchased for a "particular ship', and the seller is expected to supply only such coal which is suitable for the on ship itself. Similarly, if herring meal is sold for compounding into animal feeding stuffs, and the meal is contaminated with some toxic element, and such meal is generally harmful to most animals, but creates serious damage to mink, who are peculiarly susceptible to the toxic element, the seller would be liable for on such a stuff. This case is different from the case of Griffiths v. Peter Conway Ltd., in so far as the herring seal was not only harmful to animals of peculiar susceptibility, but harmful to most animals also. 27. Jackson v. Watson, (1909) KB (1939) 1 All. ER Manchester Liners v. Rea, (1922) 2 AC Ashington Piggeries- Case, (1 972) AC 441.

14 308 In order that the buyer can avail of the above stated implied condition he has to further establish that "the goods are l of a description which it is in the course of the seller's business to supply". (i) Sale under a patent or trade name:... I According to proviso to Section 16(1) of the Sale of Goods, Act, 1930: "In the case of. a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.", A seller cannot be made liable when the buyer buys the goods on the basis of a patent or other trade name. The presence of this proviso could of great hardship to a buyer, who would purchase various articles by mentioning the trade name.' The effect of the implied condition would be negatived for him., The courts have limited the scope of the proviso in such a way that! it could not play much mischief from the buyer's point of view. The scope of the proviso has been limited in two ways. Firstly, when the buyer though ordered goods by a "patent or other trade name", was entitled to avail of the implied condition as to fitness of the goods for a particular purpose, if he could show that inspite of mentioning the trade name he has relied on the seller's skill and judgment while purchasing the goods. In 31. Chanter v. Hopking, 4 M and W 399.

15 309 Bristol Tramways v. Fiat Motors Ltd.^^ there was sale of "Fiat" buses which were known to be required for heavy passenger work in I Bristol. The buses having been found unsuitable for the purpose, the seller was held liable. In Baldry v. Marshall,^ there was sale of "Fiat" buses which were known to be required for heavy passenger work in Bristol. The buses having been found unsuitable for the purpose, the seller recommended their "Bugatti car" for the purpose. The buyer then ordered for the "eight- cylinder. Bugatti car", and the same was supplied. The car having been found unfit, uncomfortable and unsuitable for touring purposes, the buyer claimed to reject the car and recover back its,price. It was held that in this case even though the car had been purchased by mentioning the trade name, the buyer had, relied on the skill and judgment of the seller while placing the order. The car being unsuitable for the required purpose, the seller was liable for the breach of implied condition. The decision in the above cases virtually interpreted the proviso out of existence, and the only situation where the proviso operated was when the buyer did not rely on the skill and judgment of the seller. Secondly, even though when the goods were purchased by their trade name and the implied condition as to the quality or fitness for a particular purpose was not there, another implied condition, contained in Section 16 (2) of the Sale of Goods Act, i.e., the goods should be of merchantable quality could be (1910) 2 KB 831. (1 925) 1 KB 260.

16 310 invoked. The illustration for the same is provided by Wilson v. Rickett Cockerell and Co. Ltd.34 In this case the plaintiff I ordered for a consignment of "Coalite" from the defendant. The Colitis contained an explosive substance and when used in the plaintiff's fireplace it blew up and caused danger to the room and furniture. It was held that in view of the goods having been purchased under a trade name, implied condition as to quality or fitness could not be applicable, but the seller was, however, liable as the coal was not of merchantable quality. The English Sale of Goods Act, 1893, which contained identical provisions to those of the Indian Sale of Goods Act, has now been amended. After the amendment, Section 14 (3)* of the English Act, 1979, contains provisions regarding implied condition as to quality or fitness of the goods for a particular purpose and reads as under: Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes knowna) to the seller, or b) where the purchase price or part of it is payable by installments and the goods were previously sold by a credit broker to the seller, to that credit broker, any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly 34. (1954) 1 QB 598.

17 supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller or creditbroker. The amended sale of Goods Act in England makes certain new provisions which are, in the following ways, different from the provisions in India: (1) According to the provision in the (Indian) Sale of Goods Act, the implied condition as to quality or fitness for a particular purpose is available when the goods sold "are of a description which is in the course of seller's business to supply', whereas according to the new provision under the English Sale of Goods Act, the implied condition is available whenever "the seller sells goods in the course of a business." It means that in England now the implied conditions available even though the goods sold are not such which come within the category of goods sold in the course of seller's business which he. is carrying on. Thus, it would cover a case where a factory manufacturing cloth sells its office typewriter, or a car or a car shop disposes of the office furniture or the like. (2) According to the existing provision in the Indian Sale of Goods Act the buyer has to show that he has "made known to the seller the particular purpose for which the goods are required, so as to show that the buyer relied on the seller's skill or judgment", whereas now under the English Act the implied conditions available "whether or not that is the purpose for which such goods are commonly supplied." The

18 seller may however, avoid his liability by proving that there are circumstances to show "that the buyer does not i rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller." Under the new provision in England the burden of proof is put on the seller to show that the buyer did not rely, or it was unreasonable for him to rely on the seller's skill or judgment. This provision confers greater protection on the buyer. (3) Another important provision under the new English Sale of Goods Act, 1979 is to repeal the proviso which excluded an implied condition as to fitness for a particular purpose when the goods were purchased under a patent or trade name. The scope of this proviso had been limited because»inspite of the fact that the goods were purchased under a trade name, the implied condition as to merchantable quality was not negatived thereby. The repeal of the provision under English Law also confers a greater degree of protection to the buyer and he can rely on the implied conditions as to fitness of the goods even in those cases when he purchases goods under a patent or trade name. In view of the modern complexities of trade and numerous diverse situations arising in the modern trade enabling the seller to contract himself out of the implied condition as to quality or fitness of the goods for a particular purpose, there is an urgent need for the amendment of the (Indian) Sale of Goods Act the lines of the (English) Sale of Goods Act, It is submitted that Section 16, sub-section (1) of the Act may be amended on the following lines:

19 (1) The burden of proof should not be on the buyer to show that he relied on the seller's skill or judgement. The fact that the buyer purchases goods from a seller, who in the course of a business sells them, should raise a presumption of an undertaking from the seller that they are suitable for a particular purpose. The seller should, however, be permitted to rebut the presumption. (2) For the availability of this implied condition it should not be insisted that "the goods are of a description which it is in the course of the seller's business to supply", as is being done at present. It should be enough that "the seller sells goods in the course of a business", as is the^present position under English Law. By such an amendment the interest of the buyer would be protected even in such transactions where the seller sells the goods of a kind, the sale of which is not his regular business. (3) The provision to the sub-section should be repealed,.even if the buyer purchases the goods under a patent or a trade name, he has still a right to expect that they should be having a certain quality or fitness for a particular purpose. The seller should not be exonerated from his responsibility in this regard. merely because of the fact that the buyer purchases the goods under a patent or trade name. Thus the amended sub-section (1) to Section 16 would read as under: Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, there is an implied condition that the

20 314 goods supplied are reasonably fit for that purpose, whether or not that is a purpose for which the goods are commonly j supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgement of the seller. (4). Implied Condition as to Merchantable Quality: According to Section 16(2) of the Indian) Sale of Goods Act, in a sale by description, there is another implied condition and that is that the goods shall be of merchantable quality. The provision is as under: Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. According to the above stated provision: (i) In a sale of goods by description; (ii) there is an implied condition that the goods should be or merchantable quality; (iii) There is no such implied condition if the buyer has examined the goods, as regards such defects which such examination ought to have revealed. The term 'merchantable quality' has not been defined in the Act. It means that the article is of such quality and in such condition that a reasonable man acting reasonably would after a full examination accept it under the circumstances of the case in

21 315 performance of his offer to buy that article, whether he buys for his own use or to sell again.35 If underwear contain some chemicals which cause skin disease,36 or motor horns are dented and badly polished,3^ or a bottle of wine is so defective that O O it would break while being opened in the normal way, or the O Q grains have been damaged by rains, such goods are not of merchantable quality.^6 The merchantable quality of the goods does not merely mean the condition of the goods themselves but also of the containers as well. Thus, if the tins contain labels infringing the trade mark of a third person, ^ or the bottle is defective and the same breaks or bursts and injures the buyer's hands, ^ they are not of merchantable quality. In case the goods, to the knowledge of the seller, are to undergo some transit, it is necessary that the goods shall be able to with stand such transit and should remain of merchantable quality for the duration of transit and until they are normally to be 35. Bristol Tramways v. Fiat Motors Ltd., (1910) 2 KB 831 at 841, (Per Farwell, L.J.) 36. Grant v. Australian Knitting Mills, (1936) AC Jackson v. Rotax Motor and Cycle Co. (1910) 2 KB Morelli v. Fitch and Gibbons, (1928) 2 KB S.S. Mendse v. Balakrishna and Son, A.I.R Mad Grant v. Australian Knitting Mills. Ltd. (1936) AC Niblett v. Confectioners Materials Co., (1921) 3 KB Ceddling v. Marsh, (1 920) 1 KB 668; Morelli v. Fitch and Gibbons, (1928) 2 KB 636.

22 316 disposed off.43 As in India, the. term "merchantable quality" was also not I defined under the English Act, The term has now been defined. The definition of the term as contained in the English Act, 1979 runs as under:44 Goods of any kind are of merchantable quality... if they are as fit for the purpose or purposes for which goods of that kind are commonly, bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances. According to this definition the merchantable quality of the goods is determined by taking into account the description applied to such goods, their price, and other relevant circumstances. The same goods may be deemed to be of merchantable quality at a certain price, and not of merchantable quality at a different price. Thus, 'Merchantable...' is a composite quality comprising elements of description, purpose, condition and price. The relevant significance of each of those elements will vary from case to case according to the nature of the goods in question and the characteristics of the market which exists 43. Beer v. Walker, (1 877) LJ QB 677; Mash and Murrell v. Emanuel, (1961), 1 All ER 485; Hardwick Game Farm v. Suffolk Agricultural and Poultry Producers Association Ltd., (1964) 2 Lloyd's Rep 227; Georgetown Seafoods Ltd. v. Usen Fisheries, (1977) 78 DLR (3d) Section 14(6), The English Sale of Goods Act, 1979.

23 317 4 R for them. J Earlier, English 'law as regards the implied condition as to merchantable quality was similar to the Indian law. English law has now been changed. The position as contained in Section 16(2) of the Indian Sale of Goods Act, 1930 and the corresponding English position as is now contained in Section 14(2) of the English Act,1979 is discussed as under: Section 16(2) of the Indian Act reads: Where goods are bought by description from a seller who deals in goods of that description (Whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. Section 14(2) of the English Sale of Goods Act, 1979 is as follows: Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality, except that there is no such condition: a) as regards defects specifically drawn to the buyer's attention before the contract 45. Cehave N.V. v. Bremer Handelgesellshaft, (1 975)' 3 All. ER 739 at 763 and 780 (Per Ormrod L.J.)

24 318 is made; or b) if the buyer examines the goods before contract ip made, as regards defects which that examination ought to reveal. The points of difference between the existing English and Indian position emerge as under : (1) There is difference between the circumstances when the implied condition as to merchantable quality is available. (2) There is also difference as regards the circumstances when such an implied condition may not be available. (i) Circumstances when implied condition as to merchantable quality is available: It may be mentioned that so far as implied condition as merchantable quality is concerned that is there according to the Indian provision "Where goods are bought by description from a seller who deals in goods of that description." On tjie other hand, according to the English law such an implied condition is there, "where the seller sells goods in the course of a business". English law, as is apparent from the comparison from the language of the two provisions, is different from the Indian counter part in two ways: Firstly, in England implied condition as merchantable quality can be there even if the sale is not by description, whereas in India it is operative only if the sale of goods is by description. English position in this regard is more logical. Whether the sale is by description or not, seller should supply goods of merchantable quality. It is unreasonable that if the sale is not by description the seller is allowed to

25 319 supply goods which are not of merchantable quality. The Indian law needs to be changed in this regard. Secondly, for this implied condition in England the seller should sell goods "in the course of a business", whereas in India the goods should be bought from a seller " who deals in the goods of that description." According to the present English law it is not necessary that the seller should have dealt with the sale of such goods, or even for the sale of any goods, previously. It is enough that it is a transaction of sale in the course of a business. Indian law requires that the seller must be one who deals in the goods of the description as the goods sold. English law provides greater protection to the buyer, and such protection is in every transaction of sale irrespective of the fact that the seller is not the dealer in such goods. There is need for a similar provision in India also. (ii) Circumstances when implied condition as to merchantable quality is not available: According to proviso to Section 16(2) of the Indian Sale of Goods Act:... If the buyer has examined the goods, there shall be no. implied condition as regards defects which such examination ought to have revealed. When the goods are supplied and the buyer examines them, the seller's responsibility is over as regards such defects which

26 320 such examination ought to have revealed. Thus, if the barrels of glue are not of merchantable quality, but the buyer having an l opportunity to examine the same, does not discover the patent defect therein, and takes the delivery, the seller cannot there A / after be made responsible for the same. If the defect is a latent one, for examples, when the skins of "fair average quality" are supplied for leather goods, but the defect therein cannot be discovered at the time of delivery while they are in a dry salted state, and the same is discovered only when the goods are subsequently put to the manufacturing process, the seller's responsibility as regards such latent defects does not come to an end merely because the buyer had examined the goods and then taken their delivery.^ Before the amendment of the English law prior to 1973, the law on the point was similar to that in India, but after the amendment there is no such condition "if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal." Unlike provision under the Indian Law, the English provision implies that if the buyer examines the goods after the contract is made and inspite of a patent defect takes delivery of the goods and does not raise any objection, the implied- condition as to merchantable quality still continues. In other words, the law of estoppel does not apply against a buyer who is negligent himself in accepting the goods with a patent defect, which he comes across after the making of the contract. This appears to 46. Thornett and Fehr v. Beers and Sons, (1919) 1 KB A.M. Khoyee and Co., v. Gorden, Woodroffe and Co., A.I.R.' 1937 Mad. 40.

27 321 be a case of over-protection to the buyer by the English legislature and undue responsibility of the seller in respect of the goods examined b^ the buyer after making the contract as regards defects which that examination ought to reveal. The Indian law which enables the seller to exclude the liability when the buyer has examined the goods whether before making the contract or thereafter, appears to be more just, and that should be retained as such. The amended provision in England makes the exclusion of implied condition as to merchantable quality possible, "as regards defects specifically drawn to the buyer's attention before the contract is made." The basis of the provisions that when the defects are specifically drawn to the buyer's attention before the making of the contract, the contract between the parties is subject to those defects in the goods for which attention of the seller was drawn. Certain condition of the goods is a term of the contract, which is accepted by the buyer. There was no need of this provision, because even without this provision the rule that the parties to a contract are bound by the terms thereof would apply. For instance, in Ward v. Hobbs, when there was sale of pigs "with all faults", the seller was held not liable for the consequences of the illness of the pigs, which they had been suffering from at the time of sale. It is submitted that Section 16 sub-section(2) should be amended on the following lines: (1) The implied condition as to merchantable quality should be there in every contract of sale, irrespective of the fact 48. (1 878) 4 AC 13.

28 322 that the goods are sold by description or not. (2) The implied condition should be available when the seller sells the goods "in the course of a business". There should be no insistence that "the goods have been bought from a seller who deals in the goods of that description", as at present. The amended sub-section (2) to Section 16 would read as under: Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied are of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. (5). Implied Conditions in Sale by Sample: Section 17(2) of the Sale of Goods Act, contains the following series of implied conditions in a contract of sale by sample: (i) That the bulk shall correspond with the sample in quality; (ii) That the buyer shall have a reasonable opportunity of comparing the bulk with the sample; and (iii) That the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. An identical provision is also contained in Section. 15 (2) of the English Sale of Goods Act, The above stated provision is, therefore, quite reasonable and takes due care of the seller's as well as the buyer's interest.

29 323 B: EXCLUSION OF IMPLIED STIPULATIONS AND EXEMPTION CLAUSES IN THE AGREEMENTS OF SALE OF GOODS: I With a view to provide protection to the buyer's interest, a number of implied conditions and warranties have been incorporated in the (Indian) Sale of Goods Act. It is not uncommon to find that the seller may provide clauses in the agreement excluding his liability in general or in respect of particular conditions and warranties. For instance, in Ward v. Hobbs50, the seller sold pigs with the stipulation that they were being sold "with all faults". The pigs were suffering from typhoid fever, and the disease was also conveyed to the other healthy pigs of the buyer. The newly purchased pigs and the other pigs, which were infected with the disease, died. Since the pigs had been sold "with all faults", seller's responsibility for any fault in the goods was thereby excluded, and he was hold not liable for any loss to the buyer. The seller, generally being in a better bargaining position, is able to incorporate various exemption clauses in the agreement. The problem has become more acute in view of the increase in the volume of trade and business, and consequent introduction of pre-drafted standard form agreements, which in most of the cases the buyer has to, or sometimes is supposed to have, entered into. Sections 16(4) and 62 of the Sale of Goods Act, 1930 expressly permit the seller to exclude implied 49. Various implied conditions and warranties are contained in Sections 14(a), 15,16,17, and the implied warranties in Sections 14(b) and (c), of the Sale of Goods Act, respectively. 50. (1878) 4 AC 13.

30 324 conditions and warranties, which have been incorporated in the Act, or otherwise exclude his duty or liability that would arise under a contract of sale. The provisions are as under: Section 16(4). An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. Section 62. Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both parties to the contract. 0 The position in England as regards the implied conditions and warranties and the possible exclusion thereof by the seller was identical to the Indian one. Until recently, the seller in England has an unfettered freedom to exclude various implied terms in a contract of sale of goods. Section 55 of the English Sale of Goods Act, 1893, which permitted such freedom, is as under: 55. Exclusion of implied Terms. Where a right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement, or by the course of dealing between the parties, or by such usage as binds both the parties to the contract. 51. The freedom to exclude implied terms has been restricted by the Supply of Goods (Implied Terms) Act, 1973, the Unfair Contract Terms Act, and the English Sale of Goods Act, 1979.

31 325 The buyer's interest has been tried to be protected against undue exclusion of implied terms through judicial interpretation, and legislative provisions. The position in Kngland as brought about by: (I) The Judicial attitude, and (1!) The Statutory modifications is discussed hereunder. (I) The Judicial Attitude: The Courts have devised the following methods of interpretation in order to disallow a seller from negativing his liability through exemption clauses: (a)by requiring that there should be no "Fundamental Breach of Contract", (b) By "Strict Interpretation of the exemption clause". (a) Fundamental Breach of Contract: The court have insisted that so that an exemption clause is valid it should not result in fundamental breach of contract. In other words, when giving effect to the exemption clause would negative the main contractual obligation, the exemption clause is not to be given effect to. In Pinnock Brothers v. Lewis and Peat C O Ltd. there was a contract to supply 100 bags of copra cake, with a wide exemption. Calsue saying the "the goods are not warranted free from defect rendering the same unmerchantable, which would not be apparent on reasonable examination, any statute or rule of law to the contrary notwithstanding." The goods contained considerable mixture of castor seeds and the same made it poisonous resulting in illness of the cattle. It was held 52. (1 923) 1 KB 690.

32 326 that the seller could not claim exemption on the. basis of exemption clause because copre cake with that mixture could not be called copra cake at all, and the supply of such goods had resulted in the fundamental breach of contract for which the seller was liable. The kind, seriousness and combination of various faults in an article might render the performance so defective that may amount to fundamental breach of contract. In Yeoman Credit Ltd. v. Appa^^, there was sale of a second hand car with a clause in the agreement exempting the seller from any liability. The brakes, clutches and steering of the car were in a hopeless condition and the same was unworthy and unsafe, and when used it covered a distance of about four miles in one and a half hours. The cost of likely repairs of the care was $100. In view of the condition of the car and the cumulative defects therein there was held to be fundamental breach of contract, making the seller liable to pay damages equal to the cost of repair of the car. Another illustration to explain similar position is provided by the case of Karsales (Harrow) Ltd. v. Wallis,^ concerning a hire-purchase agreement. There was transfer of a second hand Buick car on hire-purchase basis with the stipulation that "no condition or warranty that the vehicle is roadworthy, or as to its age, condition, or fitness for any purpose, is given by the owner or Implied herein." The car was shown to the hirer. After the conclusion of the agreement the car was towed to the hirer's 53. (1962) 2 QB (1956) 1 WLR 936.

33 327 house in such deplorable condition that it would not run. Before delivery its new tyres had been replaced by old ones, there were two broken pistons, and chrome strips round the body had been removed. The cost of putting the car in that condition in which the hirer had seen it, was estimated at $150. It was held that inspite of the exemption clause excluding the liability of the owner, of the car, the hirer was entitled to reject the car on the ground that there was fundamental breach of contract in so far as the car supplied was fundamentally different from the one showed to the hirer. (b) Strict Interpretation of the Exemption Clause: Another device adopted by the courts to negative the attempt of the seller to exclude or restrict his liability by an exemption clause in the agreement has been by strict C C interpretation of the exemption clause. In. Wallis v. Pratt there was sale by sample of gods described as "English sainfoin seeds". There was an exemption, clause in the agreement readings: "The sellers give no warranty express or implied, as to growth, description or any other matters." An inferior quality of seeds known as "Giant sainfoin seeds" were actually supplied. The two kinds of seeds were indistinguishable and the defect could be known when the crop was ready. The buyers claimed damages equivalent to the value of the crop out of the two kinds of seeds, and the seller pleaded the exemption clause in support of his defence. It was held that the exemption clause excluded liability only in respect of a 'warranty', whereas in this case 55. (1911) AC 394.

34 328 there was a breach of 'condition' that when the goods are sold by sample as well as description they should correspond not only to the sample but description also, and therefore the seller was held liable for the breach of condition.. Another illustration of a similar illustration is the case of Andrews Brothers v. Singer and Co. Ltd.,In this case there was contract for the sale of a "new saloon car" from the manufacturers of Singer cars. A second hand car was supplied instead. The sellers pleaded non-liability on the ground that the contract was entered into subject to an exemption clause reading: "All conditions, warranties and liabilities implied by statute, common law or otherwise are excluded." It was held that what was a excluded was the liability in respect of an 'implied' condition or warranty, whereas in this case there was breach of an express condition that the car was a new one. The seller was therefore held liable. (II) Statutory Modifications: Despite a favorable attitude towards the buyer, the courts could not adequately protect the buyer's interest in all the situations. The statutory modifications, therefore, became imperative. Such modifications have been brought about by the Supply of Goods (Implied Terms) Act, 1973, The Unfair Contract Terms Act, 1977, and now by the re-framing of the Sale of Goods Act, In view of the statutory modifications brought about since 1973, the position of law as exhibited by various 56. (1934) 1 KB 17.