In this blogpost, Sakshi Bhatnagar of National Law University Odisha, Cuttack writes about the implied conditions as to fitness and quality of goods in the sale of goods act and explores the rights of the buyer to reject accepted goods. 

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 The Act repealed and replaced Sub-sections 76 to 123 of the Indian Contract Act, 1872.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 merchantableness 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.

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.

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 Right of Buyer to Reject Accepted 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[1], the plaintiff owned a cinema theater and for the roofing of the theater, 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 defense 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.[2], 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 fulfill 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 odorless 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:

• 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.

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.

Footnotes

[1]AIR [2003] Ker 273.

[2] AIR 1932 Cal 879