Q.

1) What do you mean by registration of a firm in Indian

partnership act, 1932 and explain the procediure of its registration
under this ac t. What are effects of non-registration of a firm under
this act?

Ans- Introduction
The Indian Partnership Act of 1932 serves as the cornerstone for understanding
statutory provisions concerning partnerships in India. Originating from India's colonial
past, it remains a significant legal framework, yet lacks explicit codification of the
fundamental principle of partnership as an act of mutual trust.

Despite its historical importance, the Act necessitates substantial modifications to

align with contemporary legal standards. Judicial precedents have failed to address
this need adequately, highlighting the Act's rigidity. Partnership inherently relies on
mutual trust and dignity, values that cannot be compromised, necessitating a
balance between statutory compliance and ethical considerations.

In today's dynamic business landscape dominated by impersonal entities like

corporations, partnerships require adaptation to maintain relevance and legitimacy.
The emergence of Limited Liability Partnerships (LLPs) represents a notable shift,
offering businesses a hybrid model with reduced risk and liability. This flexibility
caters to modern enterprises, including startups, garnering global recognition for its
adaptability.

While LLPs offer a welcomed departure from traditional partnerships, the registration
process under the Indian Partnership Act remains exclusive. This discrepancy
underscores the Act's outdated nature and the imperative for comprehensive legal
reform to accommodate evolving business practices.

While the Indian Partnership Act of 1932 laid a foundational framework for
partnerships in India, its inadequacies in addressing contemporary business needs
necessitate reform. The rise of LLPs exemplifies the demand for flexibility and
adaptability in partnership structures, signaling a broader shift towards modernized
business models.
The Process of Registering a Partnership under
Indian Partnership Act, 1932
The primary initiative regarding the process of registration or incorporation of
partnership firm is to forward an application filling Form No. 1. As per the
provision of section 58 it should include following details:

1. The name of the firm.

2. The full names and permanent resident address of the partners.
3. The timespan of the firm.
4. Business the date when each partner effuse to the firm.
5. The principal place of business transaction of the firm.
6. The names of any other places where the firm carries its functional
obligations.
This undertaking is needed to be signed by all the associate partners, or by
their respective agents principally given authority in their behalf.

Secondly, all partners should necessarily solicit their signature application form
or their authorised agents in their behalf in the occupancy of a witness who
must be Advocate, Gazetted Officer, Vakil or Magistrate of Registered
Accountant. If a partner declines to sign the application form, registration
cannot happen unless that partner’s name is dribbled.

The application as mentioned above has to be sent to the Registrar at the

enumerated address along with the prescribed fees. As per section 71 of Indian
Partnership Act, states are authorized to make their own regulations with
respect to prescribe the fee structure for registration or incorporation of
partnership. However, Schedule I of Indian Partnership act states the at most
or maximum prescribed fees that can be charged by the states. As per
Schedule I, the maximum registration fees for a statement under section 58 is
Rs.525.

When is Partnership Registered

As provided in the Section 59, a partnership is said to be registered when a
registrar is well pleased with the fidelity of application filed according to section
58 and an entry of statement in the register known as Register of Firms is
recorded.
 Proof of Registration
According to Rule 9 under Indian Partnership Act, a documented proof of
registration or incorporation for that matter is a registration certificate signed
by Registrar.

Advantages of Registration
The registration of a firm is done not only towards the benefit of the firm but
also for those who deal with it. The following benefits are obtained from the
registration of a firm:

(i) Benefits to the Firm

The firm gets an unmitigated right towards the third parties in civil suits for
getting its rights discharged. In the non-existence of registration, the firm is
not entitled to sue outside partners in courts.

(ii) Benefits to Creditors

A creditor can employ any partner for recuperating his money due from the
firm. All partners whose names are set in the registration are personally
accountable to the unknowns. So, creditors can restore their money from any
partner of the firm.

(iii) Benefits to Partners

The partners can seek the help of a court of law against each other in case of
disagreement among partners. The partners can sue external parties also for
restoring their amounts, etc.

(iv) Benefits to Incoming Partners

A new partner can contest for his rights in the firm if the firm is registered. If
the firm is not registered then he will have to rely upon the trustworthiness of
other partners.

(v) Benefits of Outward-bound Partners

The registration of a firm acts as an advantage to the outward-bound partners
in numerous ways. The outward-bound partners may be divided into two
categories:

(a) On the demise of a partner,

(b) On the superannuation of a partner.

On the demise of a partner his heirs are not accountable for the obligations
acquired by the firm after the date of his demise. In case of a superannuation
partner, he remains to be accountable up to the time he does not give public
notice. The public notice is not recorded with the Registrar and he terminates
his liabilities from the date of this notice. So, it is vital to get a firm registered
for getting this benefit.

Consequences of Non Registration of Firm

Section 69 of the Indian Partnership Act, 1932 offers a detailed explanation of the
consequences of not opting for firm registration. These are:

1] No suit in a civil court by the firm or other co-partners

against any third party
If the firm registration is not done, then the firm or any other person on its behalf
cannot file a suit against a third party for breach of contract which the firm has
entered into. Further, the person filing the suit on behalf of the firm should be in the
register of the firm as a partner.

2] No relief to partners for set-off of claim

Without firm registration, any action brought against the firm by a third party
having a value of more than Rs. 100 cannot be set-off by the firm or any of its
partners. Pursuance of other proceedings to enforce rights arising from the contract
cannot be done either.

3] An aggrieved partner cannot bring legal action against other

partner or the firm
A partner of the firm or any person on his behalf cannot bring legal action against
the firm or against any partner (or alleged to be a partner) if firm registration is not
done. However, if the firm is dissolved, then such a person can sue the firm for
dissolution it accounts and realization of his share in the firm’s property.

4] A third party can sue the firm

Even if the firm registration is not done a third party can bring legal action against
the firm.

It is also, important to note that despite these disabilities, the non-registration of a

firm does not affect the following rights:

1. The right of a third party to sue the firm or any partner

2. Partners’ right to sue the firm for dissolution or settlement of accounts (in case
of dissolution)
3. The power of the Official Assignees, Receiver of Court to release the property
of the insolvent partner and bring an action
4. The right of the firm and partners to sue or claim set-off of the value of the suit
does not exceed Rs. 100.

Types of Partnerships
A partnership is divided into different types depending on the state and where the
business operates. Here are some general aspects of the three most common types
of partnerships.

 General Partnership

A general partnership comprises two or more owners to run a business. In this

partnership, each partner represents the firm with equal right. All partners can
participate in management activities, decision making, and have the right to control
the business. Similarly, profits, debts, and liabilities are equally shared and divided
equally.

In other words, the general partnership definition can be stated as those partnerships
where rights and responsibilities are shared equally in terms of management and
decision making. Each partner should take full responsibility for the debts and
liability incurred by the other partner. If one partner is sued, all the other partners are
considered accountable. The creditor or court will hold the partner’s personal assets.
Therefore, most of the partners do not opt for this partnership.
  Limited Partnership

In this partnership, includes both the general and limited partners. The general
partner has unlimited liability, manages the business and the other limited partners.
Limited partners have limited control over the business (limited to his investment).
They are not associated with the everyday operations of the firm.

In most of the cases, the limited partners only invest and take a profit share. They do
not have any interest in participating in management or decision making. This non-
involvement means they do not have the right to compensate the partnership losses
from their income tax return.

You might also want to know: Different modes of reconstitution of Partnership Firm

 Limited Liability Partnership

In Limited Liability Partnership (LLP), all the partners have limited liability. Each
partner is guarded against other partners legal and financial mistakes. A limited
liability partnership is almost similar to a Limited Liability Company (LLC) but
different from a limited partnership or a general partnership.

 Partnership at Will

Partnership at Will can be defined as when there is no clause mentioned about the
expiration of a partnership firm. Under section 7 of the Indian Partnership Act 1932,
the two conditions that have to be fulfilled by a firm to become a Partnership at Will
are:

 The partnership agreement should have not any fixed expiration date.
 No particular determination of the partnership should be mentioned.

Therefore, if the duration and determination are mentioned in the agreement, then it
is not a partnership at will. Also, initially, if the firm had a fixed expiration date, but
the operation of the firm continues beyond the mentioned date that it will be
considered as a partnership at will.
Q.2) What is partnership? What are the essential features of partnership?

Ans-

Introduction
When two or more people come together as partners, they can form a
partnership firm. This partnership firm is governed by the rules and regulations
of the Indian Partnership Act, 1932. The partnership is also governed by the
Indian Contract Act in areas where the Partnership Act, 1932 is silent. Let us
have an overview of this act by understanding its meaning, scope, and different
kinds of partnerships.

Definition of Partnership
Section 4 of the Indian Partnership Act defines a partnership as “Partnership is
the relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all”.

Meaning of Partnership
In a partnership firm, two or more people come together to carry out a business
for the purpose of earning profits and sharing those profits. The partners
combine their capital resources and work jointly to carry on the business.
According to Section 12 of the Indian Partnership Act, a partnership must be
formed for the purpose of carrying a business that is legal in nature. Co-
ownership of a property is not considered as a partnership.

Number of Partners in a Partnership

According to the Indian Partnership Act, there is no limit on the maximum
number of partners that can be there in partnership but there must be a
minimum of two partners. However, according to Companies Act 2013, the
maximum number of partners must not exceed 100 in case of a partnership. If
the number of members in a partnership exceeds 100 then it is termed as an
illegal association as per Section 464 of the Companies Act, 2013. As per
Section 11 of the Companies Act, the maximum number of partners for banking
purposes is 10 and for other purposes is 10.

Essential Features of a Partnership

1. Two or More than Two Persons – in order for a firm to come into
existence, it should involve two or more than two partners, who have a
vested interest in a common goal. However, according to section 464 of
the companies act of 2013, the central government has prescribed a limit
on the maximum number of partners a firm can hold. Therefore,
According to the central government, the maximum number of partners a
firm can hold is 50.
2. Legal Agreement- Partners who come together to form a firm, already
have a mindset that they will be sharing both profits and losses of the firm
 equally. These agreements, if made orally are valid however it is advised
to get these agreements written in a legal form to avoid disputes in the
future.
3. Partners in Business- In order to be partners in business, there should
be some business going on in the firm that only then can they be called
Business partners and only then can the Indian partnership act of 1932
be applicable to them.
4. Mutual Agreements - In order for a partnership to take place, a Mutual
agreement on the mutual agency is extremely important. Partners of a
firm can make rules and bind other partners to it and also bound to the
rules that are made by other partners of the firm. Every partner is allowed
to make decisions and conduct the affairs of the business according to
him/her.

Q.3) How a partnership can be dissolved? And what is compulsory

agreement and dissolution by agreement?
Ans-

Modes of Dissolution of a Firm

A firm can be dissolved either voluntarily or by an order from the Court.

Voluntary Dissolution of a Firm (without the order of the Court)

Voluntary dissolution can be of four types. Let us take a look.

1] By Agreement (Section 40)

According to Section 40 of the Indian Partnership Act, 1932, partners can dissolve
the partnership by agreement and with the consent of all partners. Partners can also
dissolve the partnership based on a contract that has already been made.

K.R. Mallesha v. Ramnath, MANU/AP/0061/1974 : AIR 1974 AP 53:

It has been held by the Andhra Pradesh High Court that if partnership
exists between two partners and one of them after receiving his share
becomes separate then this agreement shall be treated as dissolution deed
for partnership.
2] Compulsory Dissolution (Section 41)
An event can make it unlawful for the firm to carry on its business. In such cases, it
is compulsory for the firm to dissolve. However, if a firm carries on more than one
undertakings and one of them becomes illegal, then it is not compulsory for the firm
to dissolve. It can continue carrying out the legal undertakings. Section 41 of the
Indian Partnership Act, 1932, specifies this type of voluntary dissolution.

Illustration

(1) A and B charter a ship to go to a foreign port and receive a cargo on

this joint ventures. War breaks out between England and the country
where the port is situated before the ship arrives at the port and continues
until after the time appointed for loading. The partnership between A and
B is dissolved.

(2) A is a partner with ten other persons in a certain business. An act is

passed which makes it unlawful for more than ten persons to carry on that
business in partnership. The partnership is dissolved.

(3) A an Englishman and domiciled in England is a partner with B, a

domiciled foreigner. War breaks out between English and the country of
B’s domicile. The partnership between A and B is dissolved. The true test
is not domicile but voluntary residence.

3] On the happening of certain contingencies (Section 42)

According to Section 42 of the Indian Partnership Act, 1932, the happening of any
of the following contingencies can lead to the dissolution of the firm:

 Some firms are constituted for a fixed term. Such firms will dissolve on the
expiry of that term.

 Some firms are constituted to carry out one or more undertaking. Such firms
are dissolved when the undertaking is completed.
 Death of a partner.
Nandlal Sohanlal, Jullunder v. C.I.T., Patiala, AIR 1977 P&H 320:

Thus on the death of a partner the firm is dissolved provided that there is no
contract to the contrary between partners. If the remaining as surviving partners
 continue the business of the firm, it will be deemed that they have constituted a
new firm by mutual consent.

 Insolvent partner.
4] By notice of partnership at will (Section 43)
According to Section 43 of the Indian Partnership Act, 1932, if the partnership is at
will, then any partner can give notice in writing to all other partners informing them
about his intention to dissolve the firm.

In such cases, the firm is dissolved on the date mentioned in the notice. If no date is
mentioned, then the date of dissolution of the firm is the date of communication of
the notice.

Dissolution of a Firm by the Court

According to Section 44 of the Indian Partnership Act, 1932, the Court may
dissolve a firm on the suit of a partner on any of the following grounds:

1] Insanity/Unsound mind
If an active partner becomes insane or of an unsound mind, and other partners or the
next friend files a suit in the court, then the court may dissolve the firm. Two things
to remember here:

 The partner is not a sleeping partner

 The sickness is not temporary

2] Permanent Incapacity
If a partner becomes permanently incapable of performing his duties as a partner,
and other partners file a suit in the court, then the court may dissolve the firm. Also,
the incapacity may arise from a physical disability, illness, etc.

3] Misconduct
When a partner is guilty of conduct which is likely to affect prejudicially the
carrying on of the business, and the other partners file a suit in the court, then the
court may dissolve the firm.
Further, it is not important that the misconduct is related to the conduct of the
business. The court looks at the effect of the misconduct on the business along with
the nature of the business.

4] Persistent Breach of the Agreement

A partner may willfully or persistently commit a breach of the agreement relating to

 the management of the affairs of the firm, or

 a reasonable conduct of its business, or

 conduct himself in matters relating to business that is not reasonably

practicable for other partners to carry on the business in partnership with him.
In such cases, the other partners may file a suit against him in the court and the
court may order to dissolve the firm. The following acts fall in the category of
breach of agreement:

1. Embezzlement
2. Keeping erroneous accounts
3. Holding more cash than allowed
4. Refusal to show accounts despite repeated requests, etc.
5] Transfer of Interest
A partner may transfer all his interest in the firm to a third party or allow the court
to charge or sell his share in the recovery of arrears of land revenue. Now, if the
other partners file a suit against him in the court, then the court may dissolve the
firm.

6] Continuous/Perpetual losses
If a firm is running under losses and the court believes that the business of the firm
cannot be carried on without a loss in the future too, then it may dissolve the firm.

7] Just and equitable grounds

The court may find other just and equitable grounds for the dissolution of the firm.
Some such grounds are:

 Deadlock in management
 Partners not being in talking terms with each other
 Loss of substratum (the foundation of the business)

 Gambling by a partner on the stock exchange.

Compulsory dissolution- sec. 41

Dissolution of agreement- sec. 40

 SOGA
Q.1) Who is an unpaid seller and what are its rights?
Ans-
He is the seller to whom:-

1. Whole of the price is not paid

2. Conditional payment

Bill of exchange/ promissory note/ cheque has been received by seller but it dishonours. Till the time
bill of exchange/ promissory note/ cheque is with the seller so, till that time he is only called as seller
but when any of the mentioned instruments dishonours then after this seller is called unpaid seller.

Features of an unpaid seller

1. Seller must sell the goods on cash basis and must be unpaid (in cash transactions payment
becomes due instantly)

2. Seller must be unpaid either wholly or party

3. The decided period has expired and the price has not been paid to seller

4. Seller must not refuse to accept the payment

5. Where the price paid through negotiable instrument (bill of exchange/ promissory note/ cheque)
and the same has been dishonoured.

Example: A sells his bike to B for Rs. 60,000 and receives a cheque for the price. Till this time seller
will only be called as seller. But when subsequently, the cheque is dishonoured due to insufficiency
of funds in B’s bank account, then only A becomes an unpaid seller.

Section- 45 & 46

 Rights of unpaid seller

Rights of Lien

The seller of goods has certain rights against the goods and the buyer. As per
the right of lien in the Sale of Goods Act, when a seller delivers the goods to the
buyer, the buyer promises to pay the amount decided as per the contract. This
is a reciprocal promise that forms the consideration for the contract. When the
buyer refuses to pay for the goods, the unpaid seller has certain rights against
the goods. This is called the right of lien. Let us understand in detail the rights
of unpaid seller against goods and what the right of lien means.

Lien is the right of the seller to hold on to the goods until the payment for those
goods has been made by the buyer. The right of lien meaning as per Section
47 (1) of the Sale of Goods Act, 1930 is that an unpaid seller in possession of
the goods can retain their possession until payment is made by the buyer.

The Rights to Lien are Applicable in the Following Instances:

 The seller has sold the goods without any credit stipulation.
 The goods have been sold on credit, the term of which has expired.
 The buyer of the goods has become insolvent. In this case, the seller can
exercise his right of lien even though goods were offered on credit and
the credit duration has not expired.

According to Section 47(2), the unpaid seller can exercise his rights of lien while
he is in possession of the goods by acting as an agent or bailee for the buyer.
This is called possessory lien and can be exercised by the seller as long as he
is in possession of the goods.

Lien in Case of Part Delivery of Goods -Section 48

If an unpaid seller has made part delivery of the goods then he can exercise his
right of lien on the remainder of the goods. The rights of unpaid seller against
the buyer are applicable only when there is no agreement to the contrary for
waiving of the lien of the seller in case of part-delivery of goods.

Lien Termination- Section 49(1)

An unpaid seller loses his lien over the goods:
 If the goods have been delivered to a carrier for their delivery to the buyer,
without reserving the right to dispose of the goods.
 When the buyer or his agent gets lawful possession of the goods.
 If the rights of lien are waived.

Section 49(2) states that lien rights can also be exercised by the unpaid seller
even if he has received a decree for the price of the sold goods.
In Grice V Richardson, the sellers had delivered a part of the goods, and they had not been paid
for the part which remained with them. They were allowed to keep it until the payment of the price.
This case study highlights the practical application of lien rights, emphasizing the seller's ability to
retain possession until the buyer fulfills their payment obligations.

in Valpy V Gibson, the goods were delivered to the buyer’s shipping agent,
who had put them on board a ship. But the goods were returned to the seller
for repacking, while they were still with the sellers the buyer became insolvent
and seller being unpaid seller claimed to retain the goods in the exercise of
their lien. It was held that they have lost their lien by delivery to the shipping
agent. On the contrary, when the seller has reserved the rights of disposal his
right of lien continues till the end of the transit. And the seller cannot lose his
right to lien just because he has obtained a decree for the price of goods.

Right of the Seller Against the Buyer in Stoppage of Goods in Transit

The seller of goods can exercise the right of stoppage of the goods in transit as
an extension to the right of lien. He can regain possession of the goods and
retain them until the payment is made by the buyer.

According to Section 50, This Right can be Exercised by the Seller:

 If the buyer becomes insolvent while the goods are in transit. The seller
can ask the carrier to return the goods to him.
 The goods are in transit route- The goods are neither with the seller nor
with the buyer or his agent. In this case, the goods must be with the carrier
who is acting as an intermediary. This carrier must not be an agent of
either the seller or the buyer.

Duration of Transit (Section 51)

The duration of transit for goods starts from the time they are delivered to the
carrier by the seller for transmission to the buyer or his agent. The transit of
goods ends when:
 Delivery of the goods is taken by the buyer or his agent before the goods
reach the destination.
 The carrier informs the buyer or his agent that the goods have reached
the destination and are being held by him.
 If the buyer refuses the goods and the seller refuses to take them back it
is not considered the end of the transit.
 If goods are delivered to a ship chartered by the buyer, it needs to be
determined if the master is acting as an agent or carrier of the goods.
 If the carrier or bailee wrongfully refuses to deliver the goods to the buyer
or his agent, it is considered the end of the transit.
  If part-delivery of the goods is done, the delivery of the remaining goods
can be stopped by the unpaid seller. It is the end of transit for the
remaining goods if there is no agreement to give up the possession of all
the goods.

Also Sec.-52

Q.2) What is a condition and warranty in SOGA? When a condition becomes

warranty?

Ans- Definition
Certain provisions need to be fulfilled as demanded in the contract of sale or
any other contract. The condition is a fundamental precondition on the basis
of which the whole contract is based upon, on the other hand, warranty is the
written guarantee wherein the seller commits to repair or replace the product
in case of any fault in the product. Section 11 to 17 of the Sale of Goods Act
enlightens the provisions relating to Conditions and Warranties.

Section 12 of the Act draws a demarcation between a condition and a warranty.

The determination of condition or warranty depends upon the interpretation of
the stipulation. The interpretation should be based on its function rather than
the form of the word used.

Condition
In the context of the Sale of Goods Act, 1930, a condition is a foundation of
the entire contract and integral part for performing the contract. The breach
of the conditions gives the right to the aggrieved party to treat the contract as
repudiated. In other words, if the seller fails to fulfil a condition, the buyer has
the option to repudiate the contract or refuse to accept the goods. If the buyer
has already paid, he can recover the prices and also claim the damages for the
breach of the contract.

For example, Sohan wants to purchase a horse from Ravi, which can run at a
speed of 50 km per hour. Ravi shows a horse and says that this horse is well
suited for you. Sohan buys the horse. Later on, he finds that the horse can run
only at a speed of 30 km/hour. This is the breach of condition as the
requirement of the buyer is not fulfilled. The conditions can be further classified
as follows.

Kinds of conditions

Expressed Condition
The dictionary meaning of the term is defined as a statement in a legal
agreement that says something must be done or exist in the contract. The
conditions which are imperative to the functioning of the contract and are
inserted into the contract at the will of both the parties are said to be expressed
conditions.

Implied Condition
There are several implied conditions which are assumed by the parties in
different kinds of contracts of sale. Say for example the assumption during
sale by description or sale by sample. Implied conditions are described
in Section 14 to 17 of the Sale of Goods Act, 1930. Unless otherwise agreed,
these implied conditions are assumed by the parties as if it is incorporated in
the contract itself. Let’s study these conditions briefly:

 Implied condition as to title

In every contract of sale, the basic yet essential implied conditions on the part
of the seller are that-

1. Firstly, he has the title to sell the goods.

2. Secondly, in case of an agreement to sell, he will have the right to
sell the goods at the time of performing the contract.
Consequently, if the seller has no title to sell the given goods, the buyer may
refuse or reject those goods. He is also entitled to recover the full price paid
by him.

In Rowland v. Divall (1923), the party bought a second-hand motor car from
the former and paid for the same. After six months, he was deprived of it as
the seller had no title to sell the car. It was held that the aggrieved party is
entitled to recover the money.

 Implied condition as to the description

Moving to Section 15 of the Act, In the contract of sale, there is an implied
condition that the goods should be in conformity with the description. The
buyer has the option to either accept or reject the goods which do not conform
with the description of the good. Say for example: Where Ram buys a new car
which he thinks to be new from “B” and the car is not new. Ram’ can reject
the car.

Referring to Section 16(2) of the given Act, goods must be of merchantable

quality. In other words, the goods are of such quality that would be accepted
by a reasonable person. For eg: A purchased sugar sack from B which was
damaged by ants. The condition of merchantability is broken here and it is
unfit for use. It must be noted from this section that the buyer has the right
to examine the goods before accepting it. But a mere opportunity without an
actual examination would not suffice to deprive the buyer of his rights. If
however, the examination does not reveal the defect but within a reasonable
time period the goods are found to be defective, He may repudiate the contract
even if he approves the goods.

The implied conditions especially in case of eatables must be wholesome and

sound and reasonably fit for the purpose for which they are purchased. For eg:
Amit purchases milk that contains typhoid germs and because of its
consumption he dies. His wife can claim damages.

 Implied condition as to sale by sample

In the light of Section 17 of the Act, in a contract of sale by sample, there may
be following implied conditions:

1. That the actual products would correspond with the sample with
respect to the quality, size, colour etc.
2. That the buyer gets a reasonable opportunity to compare the goods
with the sample.
3. Further, the goods are free from any defect rendering them
unmerchantable.
For example, A company sold certain shoes made of a special kind of sole by
sample sale for the French Army. Later when the bulk was delivered it was
found that they were not made from the same sole. The buyer was entitled to
the refund of the price and damages.

 Implied condition as to Sale by sample as well as a

description
Referring to Section 15 of the Sale of Goods Act, 1930, in a sale by sample as
well as description, the goods supplied must be in accordance with both the
sample as well as the description. In Nichol v. Godis(1854), there was a
sale of foreign refined rape-oil. The delivered oil was the same as the sample
but it was having a mixture of other oil too. It was held in this case that the
seller was liable to refund the amount paid.

Warranty
Warranty is the additional stipulation and a written guarantee that is collateral
to the main purpose of the contract. The effect of a breach of a warranty is
that the aggrieved party cannot repudiate the whole contract however, can
claim for the damages. Unlike in the case of breach of condition, in the breach
of warranty, the buyer cannot treat the goods as repudiated.

Kinds of Warranty

Expressed Warranty
The warranties which are generally agreed by both the parties and are inserted
in the contract, it is said to be expressed warranties.

Implied Warranty
Implied warranties are those warranties which the parties assumed to have
been incorporated in the contract of sale despite the fact that the parties have
not specifically included them in the contract. Subject to the contract, the
following are the implied warranties in the contract of sale:

 Warranty as to undisturbed possession

Section 14(2) of the given Act provides that there is an implied warranty that
the buyer shall enjoy the uninterrupted possession of goods. As a matter of
fact, if the buyer having got possession of the goods, is later disturbed at any
point, he can sue the seller for the breach of warranty.

For eg: ‘X’ purchased a second-hand bike from ‘Y’. Unknown to the fact that
the bike was a stolen one, he used the bike. Later, he was compelled to return
the same. X is entitled to sue Y for the breach of warranty.

 Warranty as to freedom from Encumbrances

In Section 14(3), there is an implied warranty that the goods shall be free
from any charge or encumbrances that are in favour of any third party not
known to the buyer. But if it is proved that the buyer is known to the fact at
the time of entering into the contract, he will not be entitled to any claim.

For eg: A pledges his goods with C for a loan of Rs. 20000 and promises him
to give the possession. Later on, A sells those goods to B. B is entitled to claim
the damages if he suffers any.

 Implied warranty to disclose Dangerous nature of the

goods sold
If the goods sold are inherently dangerous or likely to be dangerous and the
buyer is not aware of the fact, it is the duty of the seller to warn the buyer for
the probable danger. If there would be a breach of this warranty, the seller
will be liable.

For eg: A purchases a horse from B if the horse is violent and then It is the
duty of the seller to inform A about the probable danger. While riding the
horse, A was inflicted with serious injuries. A is entitled to claim damages from
B.

When does Condition sink to the level of Warranty?

Section 13 of the Act specifies the cases wherein a breach of Condition sink to
the level of breach of Warranty. In the first two following points, it depends
upon the will of the buyer, but the last one is compulsory and acts as estoppel
against him:

1. When the buyer waives the condition, the condition is considered a

warranty.
2. A condition would sink to the level of warranty where the buyer on
his own will treat the breach of condition as a breach of warranty.
3. Wherein the contract is indivisible and the buyer has accepted the
whole or part of goods, the condition is treated as a warranty.
Consequently, the contract cannot be repudiated. However, the
damages can be claimed.
Q.3) What is caveat emptor and its exception in SOGA? What are
characteristics of SOGA?
Ans-

he Doctrine of Caveat Emptor

The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act. It
translates to “let the buyer beware”. This means it lays the responsibility of their
choice on the buyer themselves.

It is specifically defined in Section 16 of the act “there is no

implied warranty or condition as to the quality or the fitness for any particular
purpose of goods supplied under such a contract of sale“

A seller makes his goods available in the open market. The buyer previews all his
options and then accordingly makes his choice. Now let’s assume that the product
turns out to be defective or of inferior quality.

This doctrine says that the seller will not be responsible for this. The buyer himself
is responsible for the choice he made.

So the doctrine attempts to make the buyer more conscious of his choices. It is the
duty of the buyer to check the quality and the usefulness of the product he
is purchasing. If the product turns out to be defective or does not live up to its
potential the seller will not be responsible for this.

Let us see an example. A bought a horse from B. A wanted to enter the horse in a
race. Turns out the horse was not capable of running a race on account of being
lame. But A did not inform B of his intentions. So B will not be responsible for the
defects of the horse. The Doctrine of Caveat Emptor will apply.

However, the buyer can shift the responsibility to the seller if the three following
conditions are fulfilled.

 if the buyer shares with the seller his purpose for the purchase
 the buyer relies on the knowledge and/or technical expertise of the seller

 and the seller sells such goods

Exceptions to the Doctrine of Caveat Emptor
The doctrine of caveat emptor has certain specific exceptions. Let us take a brief
look at these exceptions.

1] Fitness of Product for the Buyer’s Purpose

When the buyer informs the seller of his purpose of buying the goods, it is implied
that he is relying on the seller’s judgment. It is the duty of the seller then to ensure
the goods match their desired usage.

Say for example A goes to B to buy a bicycle. He informs B he wants to use the
cycle for mountain trekking. If B sells him an ordinary bicycle that is incapable of
fulfilling A’s purpose the seller will be responsible. Another example is the case
study of Priest v. Last.

2] Goods Purchased under Brand Name

When the buyer buys a product under a trade name or a branded product the seller
cannot be held responsible for the usefulness or quality of the product. So there is
no implied condition that the goods will be fit for the purpose the buyer intended.

3] Goods sold by Description

When the buyer buys the goods based only on the description there will be an
exception. If the goods do not match the description then in such a case the seller
will be responsible for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The sections state
that the seller who is selling goods by description has a duty of providing goods of
merchantable quality, i.e. capable of passing the market standards.

So if the goods are not of marketable quality then the buyer will not be the one who
is responsible. It will be the seller’s responsibility. However if the buyer has had a
reasonable chance to examine the product, then this exception will not apply.

5] Sale by Sample
If the buyer buys his goods after examining a sample then the rule of Doctrine of
Caveat Emptor will not apply. If the rest of the goods do not resemble the sample,
the buyer cannot be held responsible. In this case, the seller will be the one
responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where
the car is red. The rest of the cars turn out orange. Here the doctrine will not apply
and B will be responsible.

6] Sale by Description and Sample

If the sale is done via a sample as well as a description of the product, the buyer will
not be responsible if the goods do not resemble the sample and/or the description.
Then the responsibility will fall squarely on the seller.

7] Usage of Trade
There is an implied condition or warranty about the quality or the fitness of
goods/products. But if a seller deviated from this then the rules of caveat emptor
cease to apply. For example, A bought goods from B in an auction of the contents
of a ship. But B did not inform A the contents were sea damaged, and so the rules
of the doctrine will not apply here.

8] Fraud or Misrepresentation by the Seller

This is another important exception. If the seller obtains the consent of the buyer by
fraud then caveat emptor will not apply. Also if the seller conceals any material
defects of the goods which are later discovered on closer examination then again the
buyer will not be responsible. In both cases, the seller will be the guilty party.