Sales of Goods Act-1930

By Eish Taneja

CA, CPA (USA), LLB , C-IFRS (ACCA,UK)

Green Belt (6 sigma)-USA, DISA (ICAI)
Certified valuer (ICAI)
Certified Forex & Treasury (ICAI) 1
 CONTENTS
 Introduction
 General Principles
 Meaning of Contract of Sale
 Distinction between Sale and Agreement to Sell
 Essentials of Contract of Sale
 Goods
 Perishing of goods
 Price

 Transfer of Ownership
 Importance of Transfer of Ownership
 Rules regarding Transfer of Ownership

 Unpaid seller and his rights

 Conditions and warranties
 Meaning of Conditions and Warranties
 Difference between Condition and Warranty
 Express and Implied Conditions and Warranties
 Doctrine of “Caveat Emptor”

 Auction of Sale 2
 INTRODUCTION
 The law relating to sale and purchase of goods, prior to 1930
were dealt by the Indian Contract Act, 1872.
 In 1930, Sections 76 to 123 of the Contract Act was repealed
and a separate Act known as the Sale of Goods Act, 1930
was passed
 This act lays down special provisions governing the contract
of sales of goods .The general law of contract is also
applicable to the contracts for the sale of goods unless they
are inconsistent with the express provisions of the Sale of
Goods Act
3
 GENERAL PRINCIPLES
MEANING OF CONTRACT OF SALE
• According to Section 4 of the Act, a contract of Sale means “a
contract where the seller transfers or agrees to transfer the
property in goods to the buyer for price”
• Buyer and Seller
• Transfer of property/ service- Movable
• Price (need not be adequate )

Contract of Sale may be of two types

CONTRACTOF

SALE

SALE AGREEMENT TO SELL

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SALE :
• It is a contract where the ownership in the goods is transferred by
seller to the buyer immediately at the conclusion contract
EXAMPLE: A sells his house to B for Rs. 10,00,000. It is a sale since the
ownership of the house has been transferred from A to B.

AGREEMENT TO SELL :
• It is a contract of sale where the transfer of property in goods is to
take place at a future date or subject to some condition thereafter to
be fulfilled.
EXAMPLE: A agreed to buy from B a certain quantity of nitrate of soda.
The ship carrying the nitrate of soda was yet to arrive. This is `an
agreement to sale`. In this case, the ownership of nitrate of soda is to
be to transferred to A on the arrival of the ship containing the
specified goods (i.e. nitrate of soda) [Johnson V McDonald (1842)
5
 DISTINCTION BETWEEN SALE AND AGREEMENT TO SELL
BASIS SALE AGREEMENT TO SELL

The property of goods passes The transfer of property of the

1. Transfer of from the seller to the buyer goods is to take place at a future
property immediately. So the seller is no time or subject to certain
more owner of the goods sold. conditions to be fulfilled. It is an
It is an executed contract. executory contract.

A sale can only be in case of An agreement to sell is mostly in

existing and specific goods case of future and contingent
only. goods ( associated or dependent ).
2. Type of goods Although it may refer to uncertain
existing goods.

In a sale if the goods are In an Agreement to Sell if the

destroyed , the loss falls on the goods are destroyed the loss falls
3. Risk of loss buyer even though the goods on the seller even though the
are in the posssession of the goods are in the posssession of
seller. the buyer.

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 BASIS SALE AGREEMENT TO SELL
In a sale the buyer fails to pay the If there is a breach of contract
price of goods (or) if there is a by the buyer the seller can only
4.Consequences breach of contract by the buyer sue for the damages and not
of the breach the seller can sue for the price for the price.
even though the goods are still in  
his possession

In a sale the seller cannot re-sell The buyer who takes the goods
the goods. for consideration and without
notice of the prior agreement
5. Right to re- gets him a good title. The
sell original buyer can only sue the
seller for damages.

The sale of contract plus An agreement to sell is merely

conveyance and creates ‘Jus in a contract pure and simple and
6. General and rem’ i.e., gives right to the buyer creates ‘Jus in personam’ i.e.,
particular to enjoy the goods as against the gives a right to the buyer
property word and large including the against the seller to sue for the
seller. damages.

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 BASIS SALE AGREEMENT TO SELL
In a sale if the buyer In an Agreement to Sell , If
becomes insolvent before the buyer becomes
he pays for goods, the seller insolvent and has not yet
in the absence of the lien paid the price the seller is
7. Insolvency of buyer over the goods, must return not bound to part with the
them to the official receiver goods until he is paid for.
or assignee. He can only
claim the reteable dividend
for the price of the goods.
In a sale the seller becomes If the buyer who has paid
insolvent, the buyer being the price, finds that the
8. Insolvency of the the owner is entitled to seller has become insolvent
seller recover the goods from the he can only claim a reteable
official receiver of the dividend and not the goods
assignee. because property in them
has not yet passed to him.

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 ESSENTIALS OF CONTRACT OF SALE
• Two parties: There must be two parties- a buyer and a seller to constitute a
contract of sale.

• Goods: Contract of sale relates to goods i.e., movable property . Transaction

involving purchase and sale of immovable property are out of the purview of the
Sale of Goods Act.

• Transfer of general property: The object of the contract must be the transfer of
general property as distinguished from the special property in the goods by one
person to another. The term ‘general property’ refers to ownership of goods.
• Price: The consideration for the contract of sale called price must be money.

• Essential elements of a valid contract: All the essential elements of a valid

contract must be present in the contract of sale.

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 GOODS
Definition:
The subject matter of a contract of a sale must be goods .
According to Section 2(7) the term ‘goods’ means “every kind of
movable property other than actionable claims and money and
includes stock and shares , growing crops , and things attached to
or forming part of the land which are agreed to be severed before
sale or under the contract of sale”
Types of goods:
Specific

Exiting goods
Ascertained

GOODS Future goods

Unascertained
Contingent goods

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1. Existing goods: These are the goods which are owned or
possessed by the seller at the time of sale. Only existing goods can
be the subject of a sale. The existing goods may be-
a) Specific goods: Goods identified and agreed upon at the
time of making of the contract of sale of goods.
b) Ascertained goods: Goods identified subsequent to the
formation of the contract of sale. The terms ascertained and
specific, are commonly used for same kind of goods.
c) Unascertained or generic goods: Goods not identified or
agreed upon at the time of making of the contract of sale.
They are the goods defined for description only.
Example: ‘A’ who wants to buy a television set goes to a showroom where four sets
of Janta model of Oscar television are displayed. He sees the performance of a
particular set, which he agrees to buy. The set so agreed to be bought is a
specific set. If after having bought one set he marks a

11
 particular set, the set so marked becomes ascertained. Till this
all is done all sets are unascertained.

2. Future goods: Goods to be manufactured, produced or acquired

after making of the contract are called future goods.

Example: ‘A’ contract, on 1st January, to sell B 50 shares in Reliance Ltd., to be

delivered and paid for on the 1st March of the same year. At the time of making of
the contract, A is not in possession of any shares. The contract is a contract for
the sale of future goods.
3. Contingent goods : Goods, the acquisition of which by the
seller ,depends upon an uncertain contingency are called
‘contingent goods’. They are also a type of future goods.
Example: ‘A’ agrees to sell 100 units of an article provided the ship which is bringing
them, reaches the port safely. This is an agreement for the sale of
contingent goods. 12
 PERISHING OF GOODS

Perishing of goods before making of the contract(Sec. 7)

Where there is a contract for the sale of specific goods, the contract is void if
the goods without the knowledge of the seller have, at the time when the
contract was made, perished or become so damaged as no longer to answer to
their description in the contract.
• Illustration
Facts:  ‘A’ agrees to sell to ‘B’ a certain horse.  It turns out that the horse
was dead at the time of bargain, though neither party was aware of the
fact.  Discuss the validity of the contract.
Solution: The agreement is void. In case part of goods is perished, the
following rule applies :
(a)if contract is indivisible, it shall be void; and
(b)if contract is divisible, it will not be void and the part available in
good condition must be accepted by the buyer
13
Goods perishing before sale but after agreement to
sell (Sec.8)
Where there is a contract for the sale of specific goods, the contract is void if
the goods without the knowledge of the seller have, at the time when the
contract was made, perished or become so damaged as no longer to answer to
their description in the contract.
• Illustration
Facts: A buyer took a horse on a trial for 10 days on condition that
if found suitable for his purpose the bargain would become
absolute.  The horse died on 5th day without any fault of either
party.  Discuss the position of both parties.
Solution :The contract , which was in the form of an agreement
to sell, becomes void and the seller shall bear the loss.

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 PRICE
Sec.2(10) defines price “as money consideration for
a sale of goods”.
• It forms an essential part of the contract.
• It must be expressed in terms of money.
• It is not essential that the price should be fixed at the time
of sale. It must, however, be payable, though it may not
have been fixed.
Ascertainment of price
• Price in a contract of sale may be
 fixed by the contract itself, or
 left to be fixed in an agreed manner, or
 determined by the course of dealing between the parties[Sec.
9(1)] 15
• In the absence of this, the buyer must pay to seller a
reasonable price. What is the reasonable price is a question of
fact dependent on the circumstances of each particular
case[Sec. 9(2)]
Agreement to sell at valuation
• Where there is an agreement to sell goods on the terms that the price is
to be fixed by the valuation of a third party and such third party cannot or
does not make such valuation, the agreement is thereby avoided.
Provided that, if the goods or any part thereof have been delivered
to, and appropriated by, the buyer, he shall pay a reasonable price there
for.
• Where such third party is prevented from making the valuation by the
fault of the seller or buyer, the party not in fault may maintain a suit for
damages against the party in fault.
 

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 TRANSFER OF OWNERSHIP

• A contract of sale of goods involves transfer of

ownership from the seller to the buyer. Transfer of
ownership or property in goods is in fact the main
object of making a contract of sale.

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 IMPORTANCE OF TRANSFER OF OWNERSHIP

It is important to know the precise moment of

time at which the property in goods passes from
the seller to the buyer for the following reasons:-
1. Risk prima facie passes with ownership: In case of
destruction of or damage to the goods, it is the owner
who has to bear the loss because the general rule is ‘res
perit domino’ risk follows ownership or whosoever is the
owner must bear the loss. The payment of the price or
possession of goods is immaterial.

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EXAMPLE:‘A’ contracts to purchase 30 tons of apple
juice from ‘B’.B crushes the apple, puts juice in
casks and keeps them ready for delivery. A ,
however , delays to take the delivery and the juice
goes putrid and has to be thrown away. A is liable to pay the
price[Demby Hamilton & Co. Ltd. v. Barden,(1949) All E R. 435]
2. Action against third parties: In case the goods have
damaged by a third party, it is the only the owner who can
take action against him.
3. Insolvency of the seller or the buyer: In the
event of insolvency of either the seller or the buyer, the
question whether the Official Receiver/Assignee/
Resolution Professionals can take over the goods or not
depends on whether the property in the goods has passed
from the seller to the buyer. 12
 RULES REGARDING TRANSFER OF OWNERSHIP
 Goods must be ascertained
 Property passes when intended to pass.
• For Specific goods(Sec. 20 to 22)
Passing of property at the time of contract(Sec.20)
Where there is an unconditional contract for the sale of specific
goods in a deliverable state, the property in the goods passes to
the buyer when the contract is made.
EXAMPLE: B offers A for his horse a sum of Rs.1000.The horse is
to be delivered to B on a fixed day and the price is to be paid
on another fixed day. A accepts the offer. The horse becomes
B’s property as soon as the offer is accepted.

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 Passing of property delayed beyond the date of the contract
Goods not in a deliverable state(Sec.21)
Where there is a contract for sale of specific goods not
in a deliverable state, i.e., the seller has to do something
to the goods to put them into the deliverable state, the
property does not pass until such thing is done and the
buyer has notice of it.
When the price of goods is to be ascertained by weighing
(Sec. 22)
Where there is a contract for sale of specific goods in a
deliverable state, but the seller is bound to weigh,
measure, test or do some other act or thing with
reference to the goods for the purpose of ascertaining
the price, the property does not pass until such act or
thing is done and the buyer has notice thereof.
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• For unascertained/ ‘future’ goods Sec.23
In the case of a contract for a sale of unascertained or future goods by
description , property will pass from the seller to the buyer when the
goods of the same description, in a deliverable state, are unconditionally
appropriated to the contract by one party with the consent of the other.
• Goods sent on approval or ‘sale or return’ Sec.24
When the goods are delivered to the buyer on ‘approval’ or on ‘sale or
return’ basis, the property in the goods will pass from seller to the buyer,
when any of the following conditions are satisfied.
 The buyer accepts the goods, or
 The buyer does something which is similar to his act of accepting the
goods, e.g., pledges the goods or sells away the goods, or
 The buyer retains the goods without giving notice of rejection beyond the
period fixed or reasonable period if no time is fixed.

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 TRANSFER OF TITLE BY NON-OWNERS

• GENERAL RULE - NEMO DAT NON HABET

No one can give that which he has not
To protect property rights.
• EXCEPTIONS:
 Transfer of title by Estoppel.(Sec.27)
 Sale by Mercantile Agent.(Sec. 27)
 Sale by joint owner/co-owner(Sec.28)
 Sale by person in possession under voidable contract.
(Sec.29)
 Sale by a seller in possession after sale.(Sec.30(1))
 Sale by a buyer in possession of goods.(Sec.30(2))
 Sale by an Unpaid Seller.(Sec. 54)

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 UNPAID SELLER AND HIS RIGHTS
UNPAID SELLER:-
Seller :- A person who sells the goods or agrees to
sell the goods is called seller. 
Unpaid :- It means payment is not made or without
payment. In simple words, "Unpaid seller" means a person who has sold
the goods for a price but price has not been paid to him. 
Sales act defines the "unpaid seller" in the following words : 
Unpaid Seller Is A Person :- 
i. To whom the whole price has not been paid or tendered. 
ii. And where a bill of exchange or other negotiable instruments has been
accepted by him as a condition on which it was received has not been
fulfilled by reason of dishonor of the instrument or otherwise. 
EXAMPLE: Party A sells a car on cash basis to party B
and the price has not been received yet.
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 RIGHTS OF UNPAID SELLER
Rights of unpaid seller

Right against goods Right against the buyer personally

When the property in the Suit for price

goods has been transferred

Right of Lien Suit for damages for non

acceptance
Right of stoppage in
goods in transit
Suit for special damage
Right to resale and interest

When the property in the

goods has not been transferred

Right of withholding delivery 25

Right against the goods

A. When the property in the goods has been transferred

1.RIGHT OF LIEN[Sec 46(1)(a) and 47 to 49]
The right of lien means lawfully right to
retain the goods possession until the full price
is received. An unpaid seller can exercise his right of lien
in following cases.Sec47-49
I. Where the goods have been sold on the cash basis.
II. Where the goods have been sold on credit basis and the
term of credit has expired.
III. Where the buyer has become insolvent even if the period
of credit has not been expired.

26
Other rules to satisfy the conditions for this right are
I. The unpaid seller must be in actual possession of the
goods sold.
II. It can be exercised even If the documents of title have
been delivered to the buyer.
III. It can be exercised for the price and not for other
expenses.
IV. If the seller delivers some goods, it can be exercised on
the remaining
Termination of right of lien
Seller’s right of lien is terminated in following cases.
1. When he delivers the goods to the carrier or other bailey
for transmission to the buyer
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2. When the buyer or his agent lawfully obtains the
possession of the goods.
3. When seller waives his right of lien on the goods.
4. The right of lien once lost will not be restored.
5. When the buyer further sells the goods and the
seller agrees.
Example:
A seller “S” sells a TV set to “B” and delivers it
to “B” and since the TV set was not functioning
properly , “B” delivered it back to “S” for the
repairs. It was held that “S” can not exercise his
right of lien over TV set.

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 2.RIGHT OF STOPPAGE IN TRANSIT[Sec. 50 to 52]
It means stoppage of goods while
they are in transit to take possession
until the price is paid (sec.50-52)
• Unpaid seller can stop the goods in transit in the following
cases.
1. While the buyer becomes insolvent.
2. While the goods are out of actual possession of seller,
but have not reached buyer’s possession i.e. goods are
in transit with career.
3. The unpaid seller can stop the goods in transit only for
payment of the price of the goods and not for any other
charges.
29
• The unpaid seller can not stop goods in transit in following
cases.
1. When the goods reaches the destination.
2. While the buyer or his agent takes possession of
delivery even if it is not reached destination.
3. In case the carrier is agent of the buyer, the transit
comes to an end the instance carrier receives the
goods and seller can not stop the transition.
4. Carrier’s wrongful refusal to deliver goods to the buyer
Example:”A” sells TV set to “B”. “A” delivers the TV to the
carrier to carry it to “B”. Later on gets news that “B” has
become insolvent;“A” can stop delivery.

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 3.RIGHT TO RE-SALE

If a buyer fails to pay or offer the price within a

reasonable time, the unpaid seller has the right to
resell the goods in the following circumstances.
1. Where the goods are of perishable nature.
2. Where the unpaid seller has exercised his right of lien
or stoppage in transit and gives a notice to buyer of
his intension of resell the goods.
3. Where the unpaid seller has expressly reserved his
right of resale.
4. Where seller gives notice to the buyer of his intension
to resell and the buyer does not pay within a
reasonable time, he can 31
 a) Recover loss on resale of the goods, if any
b) Retain any surplus on resale of goods, if any
However if the seller sells with out the notice to
the buyer, he can not
c) Recover any loss of the goods, if any
d) Retain any surplus on the resale of the goods, if
any

Example:“M” sells 100 blankets to “N” and gives him one

week for payment. “N” does not pay. “M” can resell
those to any other person.

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B. When the property in goods has not been transferred
RIGHT OF WITHHOLDING DELIVERY
If the property in the goods has not passed to the
buyer, the unpaid seller cannot exercise right of lien ,
but gets a right of withholding the delivery of goods,
similar to and co-extensive with lien.
Rights against the buyer personally
There are some rights which an unpaid seller may
enforce against the buyer personally. These rights are
called RIGHTS IN PERSONAM
SUIT FOR PRICE[Sec. 55]
Where ownership of the goods has passed to the buyer and the
buyer refuses to pay the price according to the terms of the
33
contract, the seller can sue the buyer for price, irrespective of
delivery of the goods.(Sec. 55)
SUIT FOR DAMAGES FOR NON-DELIVERY[Sec.56]
Where the buyer refuses to accept and pay for the goods, the
seller may sue him for damages for non acceptance. The seller
can recover damages only and not the full price (Sec. 56)
SUIT FOR SPECIAL DAMAGES AND INTEREST
[Sec.61]
The seller can sue the buyer for special damages where the
parties are aware of such damages at the time of contract. The
unpaid seller can recover interest at a reasonable rate on the total
unpaid price of goods, from the time it was due until it is paid.
(Sec. 61)

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 REMEDIES FOR BREACH OF CONTRACT OF SALE

The Sale of Goods Act gives the following remedies to a

seller and buyer for a breach of a contract of sale:
• Seller’s suits
 Suit for price(Sec. 55)
 Suit for damages for non-acceptance of the goods(Sec.56)
 Suit for interest[Sec. 61(2)(a)]
• Buyer’s suits
 Suit for damages for non-delivery of the goods(Sec.57)
 Suit for specific performance(Sec.58)
 Suit for breach of warranty(Sec.59)
 Suit for interest[Sec.61(2)(a)]

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 CONDITIONS AND WARRANTIES

MEANING OF CONDITION AND WARRANTY

 A stipulation in a contract of sale with reference to goods
which are the subject thereof may be a condition or a
warranty[Sec. 12(1)].
• Condition:
A condition is a stipulation essential to the main purpose of the
contract, the breach of which gives rise to a right to treat the
contract as repudiated. [Sec 12(2)]
• Warranty:
A warranty is a stipulation collateral to the main purpose of the
contract, breach of which gives rise to a claim for damages, but
not a right to reject the goods and treat the contract as
repudiated. [Sec 12(3)]
36
• When condition to be treated as warranty[Sec.13]
o Where a contract of sale is subject to any condition to be
fulfilled by the seller, the buyer may waive the condition
or elect to treat the breach of the condition as a breach
of warranty. [section 13(1)].
o Where a contract of sale is not severable and the buyer
has accepted the goods or part thereof, the breach of
any condition to be fulfilled by the seller can only be
treated as a breach of warranty ,unless there is a term of
the contract, express or implied, to that effect. [section
13(2)].
o Nothing in this section shall affect the case of any
condition or warranty fulfillment of which is excused by
law by reason of impossibility or otherwise. [section
13(3)]. 37
 DIFFERENCE BETWEEN
CONDITION AND WARRANTY

BASIS CONDITION WARRANTY

1. Nature Condition is of a fundamental Warranty is of a subsidiary of
nature. inferior character.
Condition is essential to the main Warranty is only collateral to the
purpose of the contract. The main purpose of the contract.
main purpose of the contract Fulfillment of the main purpose
2. Value cannot be fulfilled without the of the contract does not depend
prior fulfillment of this up on the fulfillment of the
stipulation. warranty.

If there is breach of condition, In case of breach of warranty,

3. Breach the aggrieved party can the aggrieved party can claim
repudiate the contract. damages only.
4. Treatment A breach of condition may be A breach of warranty , however,
treated as a breach of warranty. cannot be treated as a breach of
This would happen where the condition.
aggrieved party is contented with
damages only.

38
 BASIS CONDITION WARRANTY
4. Example X sells food-stuff to Y. The On the other hand, if the
contract between X and Y states contract stipulates that the
that the food to be sold should be food-stuff should be packed in 1
fit for consumption and this is the kilo box but the seller packs it in
essential term in the contract. So, half-kilo box, only an auxiliary or
if it contains any poisonous minor term of the contract is
substance, Y is entitled to reject broken, Y may be able to claim
the food-stuff and to repudiate compensation in respect of its
the contract This essential term is breach, but not avoid the
called a condition.  contract. Such an auxiliary term
is called warranty. 

39
 EXPRESS AND IMPLIED
CONDITION AND WARRANTIES

• Conditions and warranties may be express or implied.

Express condition and warranties:
Express condition and warranties are those which have
been expressly agreed upon by the parties at the time of
contract of sale
Implied condition and warranties:
Implied condition and warranties are those which the
law incorporates into the contract unless the parties
stipulate to the contrary.

40
 IMPLIED CONDITION (Secs. 14 to 17)
IMPLIED
CONDITION

As to Title As to Description

As to Sample As to Quality or Fitness

As to Merchantability
As to Wholesomeness

41
• Condition as to title[Sec. 14(a)]
In a contract of sale, unless the circumstances of the contract
are such as to show a different intention, there is an implied
condition on the part of the seller that –
a)In the case of a sale, he has a right to sale the goods, and
b)In the case of an agreement to sell, he will have a right to
sell the goods at the time when the property is to pass.
Example: R bought a car from D and used it for 4 months. D had no title to the car and
consequently R had to hand it over to the true owner. Held, R could recover the price
paid [Rowland v. Divall(1923)2 K.B. 500]
• Condition as to description(Sec. 15)
 In sale by description there is an implied condition that the goods shall
correspond with description.
 This means “if you contract to sell peas, you cannot oblige the party to
take beans.”
 Hence if the description of the article tendered is different then the buyer
may not buy the goods.

42
 Example: A want to sell his typewriter. He says to B , intending buyer who has
not have seen the machine, that it is a brand new machine. B agrees to purchase
it . On delivery B finds that the machine is old and repaired. B can repudiate the
contract.
• Condition as to sample(Sec. 17)
A contract of sale is a contract for sale by sample where
there is a term in the contract, express or implied, to
that effect.
In a sale by sample, the following are the implied conditions:
1.The bulk shall correspond with the sample in quality;
2.That the buyer shall have a reasonable opportunity
of comparing the bulk with the sample; and
3.That the goods shall be free from any defects rendering
them unmerchantable, which would not be apparent on
reasonable examination of the sample.
43
 Example: Certain shoes were sold by sample for the French Army. The shoes were
found to contain paper not discoverable by ordinary inspection. Held, the buyer
was entitled to the refund of price plus damages.

– Condition as to quality or fitness[Sec. 16 (1)]

Normally, in a contract of sale there is no implied condition as to
quality or fitness of the goods for a particular purpose. The buyer
must examine the goods thoroughly before he buys them in order
to satisfy himself.
Example: An order was placed for some lorries to be
used “for heavy traffic in a hilly area”. The lorries supplied
were unfit and breakdown. There is a breach of condition as to fitness.
• Condition as to merchantability[Sec. 16(2)]
 Where goods are bought by description from a seller who
deals in goods of that description there is an implied
condition that the goods are of merchantable quality. 44
 This means goods should be such that they are
commercially saleable, as per the description by which
they are known in the market at their full value.

• Condition as to wholesomeness
In the case of eatables and provisions, in addition to the
implied condition as to merchantability, there is another
implied condition that the good shall be wholesome.
Example: X purchased milk from Y , a milk dealer. The milk
contained typhoid germs. X’s wife, on taking the milk, got
infection and died. Held, X can entitled for damages.

45
 IMPLIED WARRANTIES
IMPLIED WARRANTIES

Quiet Enjoyment Usage of Trade

Freedom from Dangerous

Encumbrance Nature

46
• Warranty of quiet possession[Sec. 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 disturbed in the enjoyment of the goods in consequence of
seller’s defective title to sell, he can claim damages from the seller.
• Warranty of freedom from encumbrances[Sec. 14 (c)].
The goods are not subject to any change or right in favour of a third party.
• Warranty as to quality or fitness by usage of trade
[Sec. 16 (4)].
An implied warranty as to quality or fitness for a particular purpose may be annexed
by the usage of trade.
• Warranty to disclose dangerous nature of goods
Where a person sell 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.

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 DOCTRINE OF “CAVEAT EMPTOR”
• Caveat Emptor is a Latin phrase meaning
“let the buyer beware”.
• Let the buyer beware: the principle that the seller of a
product cannot be held responsible for its quality unless it
is guaranteed in a warranty.
For example, you buy a used car which you are told is in
perfect condition, but it immediately breaks
down OR you buy a house, but it has termites.
• Under this doctrine the buyer takes the risk on an item he
purchases and cannot complain of a defect.
• Unless there is either fraud or warranty (guarantee) by the
seller, the rule applies to the sale of personal property.
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• The buyer and seller have equal access to information about
the item and the buyer is able to make personal inspection
Example: Suppose Ram bought 10 cows from a cattle broker. Out of those 10, 2
cows had defects. However, Ram did not know this because he didn't check
all 10 cows though he paid for them. Guess what happened? The 2 infected
cows died within three days of the purchase. Now, as there was no tacit
condition that the cows would be in great health at the time of the sale, Ram
cannot hold the cattle broker as responsible or having sold him those infected
cows. It was Ram's basic duty to check the health of those cows and not
expect the cattle broker to state all the defects.
• Case study : Jones vs. Padgett
The buyer bought cloth for making uniforms. However, the seller was not
aware of the purpose of buying the cloth. Later, the buyer found that the
cloth is not fit making uniforms. It was, however, fit for other normal
purposes. The seller was not found guilty as the principle of ‘caveat emptor’
applied in this case.

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• EXCEPTION OF CAVEAT EMPTOR
Implied condition as to quality or fitness.
Where the buyer has made know to the seller the purpose for
which he requires the goods and depends on the seller’s skill
and judgment, there is an implied condition that the seller will
supply the goods which are fit for that purpose. Section 16(1)
Example: A buys a black yarn from B and finds that it has
been damaged by white ants. The condition as to
merchantable quality is broken and therefore, the doctrine
of  broken and therefore, the doctrine of caveat emptor
does not hold good.
Sale of goods by description.
Where the goods are purchased by description from a seller,
who deals in such class of goods, there will be an implied
condition that the goods shall be of merchantable quality.

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 Example :English sainfoin seeds, duly exhibited by a
sample, are sold. The bulk corresponds to the sample
but the seeds supplied are giant sainfoins and not
English sainfoin. There is a breach of condition as to
description of goods. So the doctrine of caveat emptor
is not applicable.
Usage of trade
An implied condition or warranty as to quality or fitness for a
particular purpose may be annexed by the usage of trade and if
the seller deviates from that, the rule of caveat emptor does not
hold good.
Example: A dealer sells a refrigerator to Mohit.
The refrigerator performs all other functions
except making ice. This would amount to breach
of an implied condition and thus the doctrine of caveat
emptor will not work. 
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Consent by fraud.
When the buyer relies on false representation of the seller and
suffers damages, i.e., in a contract where the buyer’s consent
was obtained by the seller by fraud, the doctrine of caveat
emptor will not hold good.
Example: A bought 3000 tins of preserved milk
from U.S.A. The tins were labeled in such a way as to
infringe the Nestlé's trademark. As a result, they were
detained by the custom authorities. To get the
clearance certificate from the customs, A had to remove
the labels and sell them at a loss. Now A can hold the
seller responsible for fraud and claim damages.

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 AUCTION OF SALE

MEANING:
Sale of auction is the public sale where the goods
are generally sold to the highest bidder
RULES OF AUCTION SALE:
The law on auction sales is contained in Sec.64 of the
Sale of Goods Act. According to it, in the case of a
sale of auction the following rules apply :
• Where goods are put up for sale in lots, each lot is prima
facie deemed to be the subject of a separate contract of
sale;
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• The sale is complete when the auctioneer announces its
completion by the fall of the hammer or in other customary
manner; and, until such announcement is made, any bidder
may retract his bid;
• A right to bid may be reserved expressly by or on behalf of
the seller and, where such right is expressly so re­served,
but not otherwise, the seller or any one person on his
behalf may, subject to the provisions hereinafter contained,
bid at the auction; 
• Where the sale is not notified to be subject to a right to bid
on behalf of the seller, it shall not be lawful for the seller to
bid himself or to employ any person to bid at such sale, or
for the auctioneer knowingly to take any bid from the seller
or any such person;
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 and any sale contravening this rule may be treated
as fraudulent by the buyer;
• The sale may be notified to be subject to a reserved or
upset price;
• If the seller makes use of pretended bidding to raise the
price, the sale is voidable at the option of the buyer.

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THANK U

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