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Commercial Law

Notes 2. Sale under a patent or trade name. In the case of a contract for the sale of a specifi ed article
under its patent or other trade name, there is no implied condition that the goods shall be
reasonably fit for any particular purpose [Proviso to Sec. 16 (1)].

3. Merchantable quality. 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. But if the buyer
has examined the goods, there is no implied condition as regards defects which such
examination ought to have revealed [Sec. 16 (2)].

4. Usage of trade. An implied warranty or condition as to quality or fitness for a particular
purpose may be annexed by the usage of trade [Sec. 16(3)].
5. Consent by fraud. Where the consent of the buyer, in a contract of sale, is obtained by
the seller by fraud or where the seller knowingly conceals a defect which could not be
discovered on a reasonable examination (i.e., where there is a latent defect in the goods),
the doctrine of caveat emptor does not apply.

15.4 Summary

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)]. A condition is a stipulation essential to the main purpose of
the contract. In a contract of sale, conditions and warranties may be express or implied. Express
conditions and warranties are those which are agreed upon between the parties at the time of
the contract. Implied conditions and warranties are those which are implied by law unless the
parties stipulate to the contrary. Its breach gives a right to the buyer to treat the contract as
repudiated [Sec. 12 (2)]. A warranty is a stipulation collateral to the main purpose of the contract.
Its breach gives rise to claim for damages but not a right to reject the goods and treat the contract
as repudiated [Sec. 12 (3)].

The condition as to quality or fitness is implied where (a) the goods sold are such as the seller

deals in the ordinary course of his business; (b) the buyer relies on the seller’s skill or judgment
as to the fitness of the goods for any particular purpose; and (c) the buyer expressly or impliedly

makes known to the seller that he wants the goods for that particular purpose [Sec. 16 (1)].
An implied condition as to quality or fitness for a particular purpose may be annexed by the

usage of trade. In the case of a contract for sale by sample there are few implied conditions
(a) that the bulk shall correspond with the sample in quality; (b) that the buyer shall have a
reasonable opportunity of comparing the bulk with the sample; and (c) that the goods shall
be free from any defect, rendering them unmerchantable, which would not be apparent on a
reasonable examination of the sample (Sec. 17).

15.5 Keywords

Condition: A condition is a stipulation essential to the main purpose of the contract. Its breach
gives a right to the buyer to treat the contract as repudiated [Sec. 12 (2)].
Warranty: A warranty is a stipulation collateral to the main purpose of the contract. Its breach
gives rise to a claim for damages but not a right to reject the goods and treat the contract as
repudiated [Sec. 12 (3)].
Implied warranties. In a contract of sale, unless there is a contrary intention, there is an implied
warranty that (1) the buyer shall have and enjoy quiet possession of the goods [Sec. 14 (b)], and
(2) the goods are free from any charge or encumbrance in favour of any third party [Sec. 14 (c)].

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