Date: 21st Dec 2022

VIRTUAL COACHING CLASSES

ORGANISED BYBOS, ICAI
FOUNDATION LEVEL
PAPER 2A: BUSINESS LAWS

Faculty: CA. Harleen Kaur

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15 July, 2020 © The Institute of Chartered Accountants of India
 THE SALE OF GOODS ACT, 1930

UNIT – 2: CONDITIONS & WARRANTIES

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 Session Layout

Introduction – When Condition

Stipulation as to Conditions and to be treated as
time Warranties Warranty

Express and
Implied
Conditions and Caveat Emptor
Warranties

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 Stipulation as to time
▪Stipulation as to the time of payment are not
deemed to be of the essence from the terms of
the contract of sale.......unless terms of
contract state otherwise.
▪ Delivery of goods must be made without delay
▪Stipulations as to time of delivery are usually the
essence of the contract

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 • A Condition is a stipulation
Condition • essential to the main purpose of then contract,
• the breach of which gives rise to a right to treat the
contract as repudiated.

• A Warranty is a stipulation
• co-lateral to the main purpose of then contract,
• the breach of which gives rise to a claim for
Warranty damages
• but not to a right to reject the goods and treat
the contract as repudiated.

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 Example 1
“A” asked “B” to give a washing machine which is fit for washing woollen
clothes.

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 Example 2
Condition: R consults S, a car dealer for Warranty: R buys the Car, later
suggesting car suitable for touring experiences manufacturing defects in
purposes certain parts

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 Difference b/w Condition and
Warranty

W.r.t. Meaning
Condition: Stipulation is essential to the main purpose
of the contract
Warranty: Stipulation is only collateral to the main
purpose of the contract

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 Difference b/w Condition and
Warranty

W.r.t. Rights in case of breach

Condition: Repudiate or claim damages or both
Warranty: Claim only damages

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 Difference b/w Condition and
Warranty
W.r.t. Conversions of stipulations: Breach of condition may be
treated as breach of warranty and not vice versa
▪ Option of the buyer
▪ Circumstances are such that goods cannot be returned
▪ Acceptance of only part of goods – If divisible, buyer can reject the
remaining goods otherwise need to accept remaining part
▪ Fulfilment of any condition or warranty is excused by law by reason
of impossibility or otherwise

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 Express and Implied Conditions
1. Condition as to title: A purchased 2. Condition as to description: A sells
tractor from B who had no title. Later to B 12 bags of waste silk ….it should
true owner claimed it back be such as known in market

Tractor Waste Silk

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 Express and Implied Conditions
3. Sale by Sample: Seller allows the
buyer to inspect wheat as sample
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4. Sale by Sample as well as
description: sold sunflower oil by
sample but also had mixture of hemp
oil
 Express and Implied Conditions
5. Condition as to quality or fitness: 6. Condition as to merchantability:
A bought a set of false teeth but the A bought a black velvet cloth but
set was not fit for A's mouth. found it to be damaged by white ants.

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 Express and Implied Conditions
7. Condition as to Wholesomeness: A supplied F with milk which
was contaminated

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 Implied Warranty as to undisturbed
Warranties possession
Warranty as to non-existence of
encumbrances
Disclosure of dangerous nature of
goods
Warranty as to quality or fitness by
usage or trade

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 Examples of Implied Warranties
Undisturbed possession: A Purchased
a second hand typewriter which
happened to be stolen
Non existence of encumbrances: S
sells a car which was given as
security by Y against a loan

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 Examples of Implied Warranties
Disclosure of dangerous nature: Lid of Usage of trade: Shares purchased
disinfectant powder to be opened with from broker expected to be free from
care. bad deliveries

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 Previous Year Question Paper

May, 2019
1(c) Discuss the various types of implied
warranties as per the Sale of Goods Act, 1930
(4 marks)

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 DOCTRINE OF CAVEAT EMPTOR

It means: Let the buyer beware

Conditions:
1. If the buyer had made known the purpose of purchase
2. The buyer relied on the seller's skill and judgement
3. Seller's business to supply goods of that business

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 Duties of the Buyer

▪It is the duty of the buyer to satisfy himself before buying

the goods that the goods will serve the purpose for which
they have been bought.
▪If they turn out to be defective or do not serve his purpose
or depends on his own skill or judgement, the buyer cannot
hold the SELLER liable.
▪ Seller not bound to disclose the defects in the goods.

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 Let the Buyer Beware

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 Wards vs. Hobbs (1878)

● B bought the pigs by auction

● Very soon they fell sick and died
There is no implied condition or
●

warranty as to the quality or

fitness for any particular purpose
B 's duty
● to find out the
healthiness
● B could not recover damages

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 Exceptions (Duty of the Seller)
Goods
Fitness as to Goods of
purchased Goods sold by
the quality or merchantable
under patent or description
use quality
brand

Seller actively
Goods by
conceals a
Sale by sample sample as well Trade usage defect or is
as description
guilty of fraud

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 Previous Year Question
May, 2018: Explain the doctrine of Caveat
emptor and what are its exceptions?
(6 marks)

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 Previous Year Question Paper
May, 2019 Q.5(a) M/s Woodworth & Associates, a firm dealing with the
wholesale and retail buying and selling of various kinds of wooden logs,
dealt with Rose wood, Mango wood, Teak wood, Burma wood etc. Mr.
Das, a customer asked for wooden logs of certain dimensions as required
by his carpenter. Mr. Das mentioned that the wood were needed for
making doors and window frames. When the shopkeeper delivered, he
gave mango wood which was unfit and carpenter rejected it.
The shop owner refused to take the wood back as he had already cut
them and he could not resell them. (6 marks)

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 Continued…
(i)Explain the duty of the buyer as well as the seller
according to the doctrine of “Caveat emptor” ?
(ii)Whether Mr. Das would be able to get the money
back or the right kind of wood as required serving his
purpose ?

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12/21/2022 © The Institute of Chartered Accountants of India
 Test your knowledge - 1
1. The goods must correspond with sample. This is the
case of:
a) Condition as to sample
b) Condition as to wholesomeness
c) Condition as to description
d) All of the above

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 Test your knowledge - 2
2. Breach of condition gives the aggrieved party
a) Right to sue for damages
b) Right to repudiate the contract
c) Both (a) and (b)
d) None of these

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 Test your knowledge - 3
3.Which of the following is not an implied condition in
contract of sale:
a) Right Condition as to title
b) Condition as to sample
c) Condition as to encumbrances
d) Condition as to description

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 Test your knowledge - 4
4.The Condition and Warranties may be in the form of:
a) Expressed
b) Implied
c) Both
d) None of these

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 Test your knowledge - 5
5. Warranty is a stipulation essential to main purpose of
the contract
a) True
b) False

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 Test your knowledge - 6
6. A stipulation which is collateral to the main purpose
of contract is
a) Condition
b) Warranty

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 Test your knowledge - 7
7. Breach of warranty may be treated as breach of
condition.
a) True
b) False

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 Test your knowledge - 8
8. A woman purchased fairness cream without disclosing
to the seller that her skin is abnormally sensitive and
resulted into allergy consequently. Is seller liable for it?

a) Seller is liable
b) Seller is not liable
c) Seller is liable for medical expenses
d) None of the above

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 Test your knowledge - 9
9. The doctrine of Caveat Emptor does not apply, when
a) When the goods are bought by sample
b) When the goods are bought by sample as well as description
c) When exact purpose is known to the
seller and is a regular dealer
d) All the above

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 Test your knowledge - 10
10.In case the goods are sold by sample, the goods should
correspond with the sample otherwise

a) Buyer can reject the goods

b) Buyer cannot reject the goods
c) Contract is terminated
d) Seller is liable to punishment

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 Thank You

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