IMPLIED WARRANTY OF MERCHANTABILITY AND

MERCHANTABLE QUALITY

(Term project for the fulfilment for term project in the subject of Commercial Transactions)

Commercial Transactions

Submitted by: Submitted to

Ghulam Mohd. Hayderi Mr. Bipin Kumar

Roll Number: 1437 Faculty of Law

B.A. LL.B. (Hons)

National Law University, Jodhpur

(July November 2017)

Semester III
 TABLE OF CONTENTS

TABLE OF CONTENTS ................................................................................................................ 1

LITERATURE SURVEY ............................................................................................................... 2

INDEX OF AUTHORITIES........................................................................................................... 4

CASES ........................................................................................................................................ 4

STATUTES ................................................................................................................................ 4

BOOKS....................................................................................................................................... 5

ARTICLE................................................................................................................................... 5

INTRODUCTION .......................................................................................................................... 6

THE PERSPECTIVE OF IMPLIED WARRANTY ...................................................................... 7

LAW AND THEORY OF IMPLIED WARRANTY ................................................................... 10

FREEDOM FROM DEFECTS ..................................................................................................... 13

SALE BY DESCRIPTION ........................................................................................................... 15

RESPONSIBLITY OF DEALERS ............................................................................................... 18

INSPECTION ............................................................................................................................... 21

CONCLUSION ............................................................................................................................. 23

1
 LITERATURE SURVEY

Benjamins Sale of Goods Act, Vol 3, Part III

Benjamins Sale of Goods provides practitioners with comprehensive advice on case law and
legislation regarding sale of goods in India, UK and globally. First published in 1868, this title is
now seen as a must-have purchase for its core readership of commercial practitioners in medium
and large-firms, academics and commercial lawyers. It provides a comprehensive explanation of
the law of sale of goods, including terms and conditions, rights and obligations. This book covers
all the cases needed for this project. This book clearly makes the reader understand the various
concepts and terms relating to Implied Warranty and Merchantable Quality. This book has been
instrumental for this project.

Pullock and Mulla, Sale of Goods Act, Edition 8

The book originally authored by Sir Frederick Pollock & Sir Dinshaw Fardunji Mulla, provides a
section-wise study of the Sale of Goods Act, 1930 in light of judicial and legislative developments.
The commentary also compares the provisions of the Indian Act with the relevant sections of the
English Act. This edition covers case law developments in India and UK on the subject. The
researched has gone through this book to get a bare understanding of the concept. This book has
been vital in understanding the rule of caveat emptor. This books also gives us the various
exceptions to it.

Nayak R.K., Consumer Protection Law in India ,1991

The book published by Indian Law Institute Publications, New Delhi paints a whole picture of the
very concept of implied warranty and merchantable quality. This book dealt with the Indian
context of merchantable quality. It gives us a thorough view of the history of implied warranty law
in India today. It has various case laws which are essential for reading this topic.

2
G.C.L, The Implied Warranty of Merchantability, Virginia Law Review Vol. 48

This article digs deep into the history of warranty of merchantability, giving us insights on the
cases before and after Gardiner vs Gray,1 decided in 1815, is usually cited as expressive of the
warranty's original character. It also gives us a American perspective of the said concept in
Uniform Sales Act. This review shows us idea behind the concept of warranty of merchantability
and why it is what it is.

Robert W.G, Implied Warranty Of Merchantability, Winter 19972

This article by Robert W.G has been helpful in determining the origins of the Implied Warranty of
Merchantability. According to him Breach of warranty was originally a tort; it was viewed as a
form of misrepresentation. To make a successful case, a buyer had to show that the seller made a
false statement of fact about the quality of goods sold, on which the buyer relied. By the early
1800s warranties had entered the realm of contract. He talks about the origins and subsequent
cases.

1
Gardiner vs Gray, 4 Camp. 144, 171 Eng. Rep. 46 (H.L. 1815).
2
Robert W.G, Implied Warranty Of Merchantability, 1997, Volume 16, Article 6
Issue 2 Journal of Computer & Information Law

3
 INDEX OF AUTHORITIES

CASES
Amos V. Walter N Kelly Co (1927) 240 Mich. 257, 215 N.W. 397 ............................................ 19
Bajrang Parshad v. Provincial Government of C.P. & Berar S. A. No. 531 of 1946 D 23149
(Nag.) Ind. Dig. 708 (1950). ..................................................................................................... 18
Bigge v.Parkinson 31 L.J. Exch. 301: (1862) 7 H. & N. 955 ....................................................... 11
Eternit Everest Ltd v C v Abraham AIR [2003] Ker 273 ............................................................. 12
Gardiner v. Gray (1815) 4 Camp. 144; 171 E.R.46. ....................................................................... 8
Gardiner vs Gray, 4 Camp. 144, 171 Eng. Rep. 46 (H.L. 1815). ................................................... 3
Hall v. Berte (1886) 3 T.L.R. 165 (C.A.)...................................................................................... 16
Jendwine v. Slade (1797) 2 Esp.572. .............................................................................................. 8
Jones V. Just (1868) L.R.. 3 Q.B. 197 ......................................................................................... 19
Laing v. Fidgeon (18J5) 4 Camp. 169, 171 E.R.; 128 B.R. 974. .................................................... 7
R. S Mohta v. M.P. state (1970) 2 SCR 445 (454) ....................................................................... 23
Raghava Menon v. Kuttappann Nair AIR 1962 Ker.318.............................................................. 16
Re Andrew, Yule and Co AIR 1932 Cal 879................................................................................ 17
Sorabji H. Joshi & CO. v. M. Ismail, A.I.R, 1960 Mad. 520 ....................................................... 12
vinator sales Corp v. Quabbin Improvement Co (1931) 234. App. D.N. 96,254 NYS 123. .......... 6
Wetzel V. Bingman Laboratories, Inc., 104 So. 2d 452, 39 Ala.App. 506 .................................... 6

STATUTES
Sales of Goods Act, 1930................................................................................................................ 7
Section 14(3), English Sale of Goods Act, 1893. ......................................................................... 12
Section 14, The Sale of Goods Act, 1930 ..................................................................................... 10
Section 16 (2), The Sale of Goods Act, 1930 ............................................................................... 16
Section 16 of Sales of Goods Act, 1930 ......................................................................................... 7
Section 16, The Sale of Goods Act, 1930 ..................................................................................... 24
Uniform Sales Act, sec, 15(2),2 Muon'. 1927, Minn. Stats. lee. 8390(2) ..................................... 19

4
 BOOKS
Agarwala, O.P., The Sale of Goods Act ....................................................................................... 10
Halvey, History of the English People, 1815 .................................................................................. 7

ARTICLES
George L. Priest, "A Theory of the Consumer Product Warranty", 90 Yale L.J. 1297 .................. 9
J. W Wade, "On the Nature of Strict Tort Liability for Products", 44 Miss. L.J. 826 .................. 14
J.B. Waite, "Retail Responsibility and Judicial Law Making", 34 Mull. L. Rev. 494 ................. 19
Le Viness, "Caveat Emptor Versus Caveat Venditor", 7 Mi. L. Rev. 177 at 182 (1943). ............. 7
Robert W.G, Implied Warranty Of Merchantability, 1997, Volume 16, Article 6 ......................... 3
Williston, "Liability for Honest Misrepresentation", 24 Harv. L. Rev. 415 at 420 (1911) ............ 9

5
 INTRODUCTION

Merchantability at common law and under Sales Act refers to acceptability for commerce rather
than appeal to buyers, that is, it connotes a quality of inherent soundness and refers to the quality
referable to a standard and not to intangible appeal to whims or psychological reactions of
buyers.3The term of merchantability is synonym with the saleable and generally given a proper
connotation to include adoptability to the minimum use of which is put. Its exchange value will
depend certainly upon its utility value. But exchange value is not the only sole test of
merchantability under this sub-division.4 Goods are not merchantable if they cannot be put to use
and merchantable quality essentially takes into consideration some reasonable fitness for the
ordinary purpose for which such goods are intended, designed and sold. Probert Encyclopedia of
Money defines merchantable quality as an implied condition regards about the state of goods
which sold in the field of business. The goods that sold should be regard as to fit the common
purpose of the buyers, as well as the descriptions of the goods need to take into account. This
also includes price if it is relevant and all the other related and relevant circumstances. If the
buyer has checked the goods that sold by the seller when the contract is made, the condition is
not applicable to the defects that specifically drawn to the buyers attention or the defects that the
buyer has realized or noticed. So, in general, it means that the goods that sold to the buyers are
required to fit for the particular purpose to the extent that they were sold. However, the goods are
failed or unable to perform the purpose when they have been sold, they are considered as
unmerchantable. Merchantable quality is mentioned in Sale of Goods Act, 1930 in Section
16(2)5, while Implied warranty is mentioned in Section 14(b), 14(c), and 16(3).6

3
Wetzel V. Bingman Laboratories, Inc., 104 So. 2d 452, 39 Ala.App. 506
4
Kelvinator sales Corp v. Quabbin Improvement Co (1931) 234. App. D.N. 96,254 NYS 123.
5
Section 16 of Sales of Goods Act, 1930
6
Sales of Goods Act, 1930

6
 THE PERSPECTIVE OF IMPLIED WARRANTY

The implied warranty of merchantable quality or fitness for particular purpose was first developed
in Anglo-American jurisprudence in the early 19th century. Lord Ellenborough established implied
warranty of merchantability in terms of resaleability in 18I5 for the first time when the sizeable
section or the English population was employed in commercial navigation and manufacturing in
any agricultural and mining work.7 Prior to this time particularly in the seventeenth century
commerce and trade were subjected to intolerable abuse and fraud.8 A report system and trade
regulation guide, developed in England during the fourteenth to seventeenth century, did not work
well due to lack of administrative energy with the result that trade and commerce declined and
gave impetus for the development of the concept of implied warranty of merchantability. Even
today, the concept of merchantability connotes the additional definition of fitness of the
commodity for some purposes.9

Trade and commerce continued to play an important role in the development of concept of implied
warranty in the early twentieth century. From its inception, breach of warranty was a tort. Action
was passed on breach of assumed duty and the wrong was considered to be a form of
misrepresentation in the nature of deceived. Lord Kenyon said that breach of warranty is a form
of fraud.10Warranty never lost its character as tort. It is generally agreed that tort is a form of action
which is available for the breach of warranty without any proof of international misrepresentation
or even negligence. But the tort element involved damages which may not be recoverable for just
the breach of contract such as wrongful death. or application of a different statute of limitations.

It is served as a sound argument for those who intend to extend implied warranties of quality from
the purchaser to the ultimate consumer in the absence of any privity of contract between the two.

7
Halvey, History of the English People, 1815
8
Le Viness, "Caveat Emptor Versus Caveat Venditor", 7 Mi. L. Rev. 177 at 182 (1943).
9
Laing v. Fidgeon (18J5) 4 Camp. 169, 171 E.R.; 128 B.R. 974.
10
Jendwine v. Slade (1797) 2 Esp.572.

7
In the leading case Gardiner v. Gray,11 Lord Ellenborough on the fundamental principle of implied
warranty of merchantable quality said:

I am of opinion, however, that under such circumstances, the purchaser has a right to expect a
saleable article answering the description in the contract. Without any particular warranty, this
is an implied term in every such contract. Where there is no opportunity to inspect the commodity,
the maxim of caveat emptor does not apply. He cannot without a warranty insist that it shall be of
any particular quality or fineness, but the intention of both parties must be taken to be, that it shall
be saleable in the market under the denomination mentioned in the contract between them. The
purchaser cannot be supposed to buy goods to lay them on a dunghill. The question then is,
whether the commodity purchased by the plaintiff be of such quality as can be reasonably brought
into the market to be sold as waste silk. The witnesses describe it as unfit for the purpose of waste
silk, and of such a quality that it cannot be sold under that denomination.

In this case there is no mention of the word 'misrepresentation' conscious or otherwise or in any
way no reliance has been placed by the buyer upon the sellers knowledge or judgment. The
decision is based on that the seller contracted to deliver one thing and has delivered another with
the result that effect is given to the "intention of both parties as the contract they have made is
interpreted. " In this case it is simply a breach of contract.

Seller's warranty as a matter of contract should mean not only that goods delivered must be genuine
according to the name, kind or description specified but with them must be of quality (O pass in
the market under that description. However, the Uniform Commercial Code of the United States
explicitly provides:

The Uniform Commercial Code implies a warranty of merchantability in all sales contracts. The
warranty requires that the item be of sufficient quality to "pass without objection in the trade" and
that it be "fit for... ordinary purposes." The Code allows a disclaimer of the warranty of
merchantability provided that certain technical requirements are met. If the warranty of
merchantability or any other general warranty is breached, the Code awards the buyer the costs
of repairing or replacing the product as well as consequential damages. Consequential damages

11
Gardiner v. Gray (1815) 4 Camp. 144; 171 E.R.46.

8
represent losses that result from the inability of the buyer to make use of the product for a purpose
that could be anticipated by the seller.".' In modern times, consequential damages of the greatest
magnitude occur where product failure causes personal injury, and may include hospitalization
costs, disability income, and the value of pain and suffering.12

This actually means that they must be reasonably fit for the ordinary use for which such goods are
put in the market for the consumption of the buyer. The warranty is recognised as a dealer's
warranty only, and trade usage must be taken into account. The concept of implied warranty for
the fitness for the buyer's particular purpose got developed and was recognised as something
separate and distinct from that of merchantable quality. The idea of express warranty has become
more important in the present-day world where the consumer is guided that the development of
modem notion is based on increase in products of reputable sellers expect responsibility for the
defective goods sold to the consumers. This kind of notion of the consumer accompanied with
responsibility has best influence upon the seller in running his business. As a result it is often said
that implied warranty on qualities could come into operation by an operation of law rather than
independent of any intention to agree upon the seller's terms. As a matter of fact, there are many
cases at least in which to hold that the warranty is a term of contract, meaning "speak language of
pure fiction.13

12
George L. Priest, "A Theory of the Consumer Product Warranty", 90 Yale L.J. 1297
13
Williston, "Liability for Honest Misrepresentation", 24 Harv. L. Rev. 415 at 420 (1911)

9
 LAW AND THEORY OF IMPLIED WARRANTY

The Indian Sale of Goods Act, 1930 in sec. 14 provides that in a contract of sale, unless the
circumstances of the contract are such as to show a different intention, there is an

(a) implied condition on the part of the seller that in the case of a sale, he has a right to sell
the goods and that 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;
(b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods;
(c) an implied warranty that the goods shall be free from any charge or encumbrance in favour
of any third party not declared or known to the buyer before or at the time when the contract
is made.14
This section is a reproduction of sec. 12 of the British Sale of Goods Act, 1893. The same section
has been repeated in the new Sales of Goods Act, 1979. Prior to passing of this Act, sec. 109 of
Indian Contract Act implied that a stipulation regarding title was merely a warranty and breach of
it entitled the buyer as well as persons claiming a thing to recover a loss sustained by him from the
seller.15

Under the Indian Sale of Goods Act, 1930 it is provided in section 16 that there is an implied
condition that the goods shall be reasonably fit for the purpose it was bought. The section provides
specifically that 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 expected in certain goods. Condition
of doctrine in which implied warranty will be applied are well spelt out in section 16 which are as
follows:

I. Where the buyer, expressly or by implication, makes known to the seller the particular
purpose by which the goods are required so as to show that the buyer relies on the
seller's skill or judgment, 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

14
Section 14, The Sale of Goods Act, 1930
15
Agarwala, O.P., The Sale of Goods Act

10
 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 other
trade name, there is no implied condition as to its fitness for any particular purpose.

II. Where the 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 condition as regards
defects which such examination ought to have revealed.

III. An implied warranty or condition as to quality or fitness for particular purpose may be
annexed by the usage of trade.
IV. An express warranty or condition does not negative a warranty or condition implied by
this Act unless inconsistent therewith.
Section 16 of the Indian Sale of Goods Act, 1930 corresponds to section 14 of English Sale of
Goods Act, 1893. Sub-sec. (I) of section 14 of the Indian Sale of Goods Act is based upon judgment
in Bigge v.Parkinson16, In this case the Court said:

Where a buyer buys a specific article, the rule caveat emptor applies, but where the buyer orders
goods to be supplied and trusts to the judgment of the seller to select the goods which shall be
applicable for the purpose for which they are intended and which is known to both the parties,
though there is no express stipulation that they shall be fit for the purpose, there is an implied
warranty that they are fit for that purpose. There is no reason why such a warranty should not be
implied in the case of a sale of provisions.

This principle of implied warranty which is spelt out in sub-sec. (I) of sec. 16 also forms the basis
of sec. 114 of the Indian Contract Act. The proviso to section 114 0) has re-enacted and the
provisions contained in section 115 of the said Act, and sub-section (3) those of section 110 of the
same, with only certain verbal changes necessitated by the adoption of sub-section (3) of section
14 of the English Act17. Section 16 deals with implied conditions as to quality or fitness of goods

16
Bigge v.Parkinson16 31 L.J. Exch. 301: (1862) 7 H. & N. 955
17
Section 14(3), English Sale of Goods Act, 1893.

11
for a particular purpose. In the section no distinction is drawn between contracts for the sale of
specific as distinguished from those for the sale of unascertained goods. The first paragraph of
section 16 provides that subject to the provisions of this Act and of any other law for the time being
in force there is no implied warranty or conditions as to the quality or fitness for any particular
purpose of goods supplied under a contract of sale, except as provided in this section. After the
Indian Sale of Goods Act, 1930 came into force, the Privy Council in a case decided that:

"Merchantable" does not mean that it is fit for one particular use only or it is saleable in market.
Merchantable means that the article sold if meant for one particular use is fit for that use.

In a case decided by Madras High Court that merchantable quality means that the goods comply
with the description in contract so that to a purchaser buying goods of that description the goods
would be good lender.18

Now what happens when goods are brought for a specific purpose, but it turns out that it doesnt
serve that purpose?

In Eternit Everest Ltd v C v Abraham19, the plaintiff owned a cinema theatre and for the roofing
of the theatre, 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

18
Sorabji H. Joshi & CO. v. M. Ismail, A.I.R, 1960 Mad. 520
19
Eternit Everest Ltd v C v Abraham AIR [2003] Ker 273

12
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.

FREEDOM FROM DEFECTS

The good must befit for use without any merchantable defect, or any defect which make the
product unmerchantable or not worthy of selling in the market. Defect in any good would
obviously interfere with the sale and use. It is not necessary that defects be obvious one and any
unthinkable foreign elements in a packet of bread either pin or cockroach could certainly be a
merchantable defect and render unfit for human use and would certainly prevent the purchase of
the same if it is divulged to the consumer. If the insignificant deficiency is known to the buyer, for
example a dent in the car, a single screw or a bolt is missing in a machine or loaf of bread little
open in packing or a handle in an almirah is little loose or a seat in an automobile is not properly
fixed and loose, do not render unfit for use and cannot be called commodities with merchantable
defects.

JW Wade, in "On the Nature of Strict Tort Liability for Products", has laid down certain criteria
in determining whether a product, in his opinion, is defective and unduly dangerous or not that
will also ascertain and reveal the merchantability or unmerchantabitity of the product.20 They are:

(I) The usefulness and desirability of the product-its utility to the user and to the public as a whole.

(2) The safety aspects of the product-the likelihood that it will cause injury, and the probable
seriousness of the injury.

(3) The availability of a substitute product which would meet the same need and not be as unsafe.

(4) The manufacturer's ability to eliminate the unsafe character of the product without impairing
its usefulness or making it too expensive to maintain its utility.

(5) The user's ability to avoid danger by the exercise of care in the use of the product.

20
J. W Wade, "On the Nature of Strict Tort Liability for Products", 44 Miss. L.J. 826
(1973)

13
(6) The user's anticipated awareness of the dangers inherent in the product and their availability,
because of general public knowledge of the obvious condition of the product, or of the existence
of suitable warnings or instructions.

(7) The feasibility, on the part of the manufacturer, of spreading the loss by setting the price of the
product or carrying liability insurance.

14
 SALE BY DESCRIPTION

Section 16 (2) of the Indian Sale of Goods Act, 1930 provides that "where the goods are bought
by description from a seller who deals in goods of that description (whether he is a 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 condition as regards
defects which such examinations sought to have revealed"21. Any warranty of merchantable
quality, the question remains when does it arises. It is limited by sec. 16 (2) of the Sale of Goods
Act to the products bought by description. In an earlier case from warranty sprang an executory
contract for the delivery of described goods which the buyer had never seen. Consequently the
description in terms was the only identification of the subject matter of the contract. The
description of the product indicates that the product is of merchantable quality which was easily
understood.

It was held in Hall v. Berte22 that when goods are bought by a buyer for manufacturing purpose
and the buyer exclusively relies on seller's description or judgment by reason that the buyer
supports alterations in the mode of manufacture or the use of a particular material, if such
alterations or materials, even where they are because of the unfitness, are adopted without
objections by the manufacturer.

In Raghava Menon v. Kuttappann Nair23 it was held:

Where a layman purchases a watch of a particular make from a reputed firm which exclusively
deals in such watches the sale is governed by exceptions (1) to section 16 of the Sale of Goods Act,
because in such a case the purpose is only the common purpose and not any special purpose, the
seller knows it, and the purchaser being only a layman he relies on the seller's skill or judgment.
Further, such transaction being a sale by description from a dealer who deals in goods of that
description exception (2) to sec 16 also applies.

21
Section 16 (2), The Sale of Goods Act, 1930
22
Hall v. Berte (1886) 3 T.L.R. 165 (C.A.)
23
Raghava Menon v. Kuttappann Nair AIR 1962 Ker.318

15
The defendant in this case was liable for breach of warranty under the Sale of Goods Act, 1930
and was bound to replace the watch or refund its price. The description includes brand or trade
name and the buyer places the order of goods by such name. It is clear that he is not relying upon
the skill or judgment of the seller but upon his own experience, reputation, advertising of the maker
or what he has been told by others so that no warranty of fitness for a particular purpose is to be
implied but it is expressed.

Now the question arises as to what happens when the goods dont fit the particular description?

In Re Andrew, Yule and Co24 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: Jaute 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:

1. Whether buyers have a right to the rejection of the accepted goods if it does not fit the
description.
2. 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 odourless
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

24
Re Andrew, Yule and Co AIR 1932 Cal 879

16
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.

In Bajrang Parshad v. Provincial Government of C.P. & Berar25 it was held that manufacturer
cannot escape liability in respect of a defect which arose not because he carried out the work
according to the specification in the contract nor because he was compelled to do something by
the buyer or his agent in the course of his manufacture but because of something else such as
negligence or want of skill..

25
Bajrang Parshad v. Provincial Government of C.P. & Berar S. A. No. 531 of 1946 D 23149 (Nag.) Ind. Dig. 708
(1950).

17
 RESPONSIBLITY OF DEALERS

In England, merchantable quality was from the very beginning considered to be dealers warranty
even in the situation when the dealer is not the manufacturer and not responsible for disclosing the
defects in the Goods.26 This was the position in the English Sales of Goods Act. There is no implied
warranty in the sale of second-hand goods or goods once used for a long time by its owner.
American courts accepted warranty for products as to manufacturers dealing in their own products
but many of them were surprisingly reluctant to acknowledge it in the case of a dealer who is not
the maker.27 The reason for this has been due to the un-certainty or confusion prevailing about the
warranty of merchantable quality in relation to the fitness of the product for the buyer with a
particular purpose. In this regard the seller's skill or judgment is necessary to reveal the fitness or
merchantability of the product. The warranties must be assured by the seller on the basis of his
superior knowledge concerning the qualities of the product which he is selling in the market. The
buyer must be conversant with the fact that a dealer who is selling the product is not the maker and
he could not give all the possible knowledge about the product.

Therefore, no reliance or complete warranty could be expected impliedly or expressly by the seller.
This was the position which the American courts adopted before the passing of Uniform Sales Act.
This Act adopted the English rules and introduced changes in the law of American States which
imposes warranty upon every dealer "whether he be a grower or manufacturer or not."28

Thee argument that the buyer does not have enough information or skill or judgment to judge the
quality of the product will have to rely on the skill or judgment of the seller. Therefore, there
cannot be any warranty of fitness for that particular purpose to be guaranteed by the seller.29 Even
if the buyer is convinced that the seller is not aware of what is contained in the sealed tin, but it
can be argued that the sellers being in trade the seller's skill or judgment differ from influence will
be of some use to the buyer. The reliance in relation to the cause of action to constitute any form

26
Jones V. Just (1868) L.R.. 3 Q.B. 197
27
Amos V. Walter N Kelly Co (1927) 240 Mich. 257, 215 N.W. 397
28
Uniform Sales Act, sec, 15(2),2 Muon'. 1927, Minn. Stats. lee. 8390(2)
29
J.B. Waite, "Retail Responsibility and Judicial Law Making", 34 Mull. L. Rev. 494
(1936)

18
of misrepresentation may not be dependent upon the sale reliance or any kind of inducement to act
on behalf of the seller may be enough to constitute a misrepresentation or fraud on behalf of the
seller. The plaintiff may rely in constituting a fraud or misrepresentation on the part of the seller
and he will have to apply his mind what constitute a fraud and what not. This is also true of
warranties. When the buyer buys a product from a dealer he is aware of the fact that the dealer is
in the business of selling products of the kind to be purchased and whatever he buys he buys on
the advice and disclosed information which the seller provides to him. The buyer thinks that the
information provided to him is reliable and the seller or the dealer has enough past experience in
dealing with the smaller goods and product of a particular purpose from the beginning is not
required reliance upon any skill or judgment or-information of the seller.

The dealer warrants his goods to be saleable and fit for ordinary use even when they are sold in
sealed containers. Sometimes the warranty is stated as one of the merchantable quality. Sometimes
it is interpreted as fitness for the purpose. The term 'purpose' is the ordinary one for which goods
are sold and there is often little emphasis on reliance and always the question dwells in the mind
that the term 'merchantable quality' is what the rule meant. Sometimes the loss is placed upon the
seller on the basis of the assumption that the goods must be fit for use for which the seller has
contracted to supply.

The next question arises regarding the liability of restaurant owner who actually runs the restaurant
in a market. One could argue that the food eaten in a restaurant is not covered by the sale but
merely of a service. But this view cannot be accepted and is derived from the early days of inn
keepers when the guest paid a lump sum for lodging, meals and a place for his horse and was
permitted to eat across the table until his stay. But such a theory is not applicable to modern
restaurants with orders of definite quantity and validity of food at a fixed price where a sort of
understanding and contract is there that the restaurant will supply the food fit for human
consumption and the payment which he makes is in consonance to the quality which a seller
promises to sell in the restaurant. A consumer in a restaurant is subjected to a sale implied
warranties will apply under both the Sales Act of India and Great Britain. Implied warranties are
no more limited to contracts for sale of goods. They have their place in bailment, shipment over
carrier, and the leasing of a furnished house or apartment. If there is no sale as is stated above, the
question arises what kind of food the buyer buys from the seller and what is given by a restaurant

19
owner in response to the asking of the buyer. In terms of simple contract in public restaurants food
is sold which is reasonably fit to eat and fit on merchantable quality. It is to be assumed overall
that implied warranty does exist in a sale made bi the dealer in which a description of goods sold
is an essential term of the contract and it is understood properly by the parties. The term 'implied
warranty' is not narrow but broad. It is a standard dealer's warranty under which all the products
are marketed and sold will have to be of merchantable quality unless it is stated that the consumer
is to buy anything supplied to him.

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 INSPECTION

Section 18 of Indian Sale of Goods Act provides that "where there is a contract for the sale of
unascertained goods, no property in the goods is transferred to the buyer unless the goods are
ascertained. The buyer's inspection of the particular goods before the contract may limit the scope
of the implied warranty of merchantable quality. This is very significant.

Where there is an express warranty of quality and on the examination of the goods by the buyer if
the defects are revealed in that situation, he could only avoid the discovery by closing his eyes to
the reality. In that situation, the warranty cannot be ineffective. It can only be ineffective when the
seller is offering any product for sale what his buyer may as it appears to be. Even express language
at least in any other form other than an explicit reference to the defects itself will not entitle him
to expect anything different.

Indian Sale of Goods Act provides in sections 13and 14 that any implied warranty or condition to
quality or fitness for any purpose may be annexed by the usage of trade and an express warranty
or condition does not negative a warranty or condition implied by this Act unless inconsistent
therewith. The two sub-sections of sec. 14 declare that inspection does not negative the warranty
as to defects which it ought to have revealed. The inference is sufficiently evident and the
conclusion will come out that in a dealer's sale of merchantable quality, his inspection until the
inspection or offer of an opportunity to inspect means that whatever is shown to the buyer in
whatever condition is the product at the disposal of the buyer to buy or not. If there are obvious
defects in the product when the buyer inspects it, then he has no right to demand from the seller
that the goods shall be merchantable when he has seen the product himself and sellers do not hold
any responsibility of its merchantability. If there are latent defects in the product and the buyer has
been told by the seller that he must examine the product for himself and buy on his own judgment,
in that situation there cannot be any warranty to be implied. Suppose a buyer sees a sample of the
product which contains a description and term of contract provides that what is to be sold must be
what has been contracted to be sold. The product must correspond with the description and if the
seller is a dealer, the product must be (If merchantable quality according to the description. The

21
seller's responsibility is not merely to deliver goods, but the goods are to be delivered on the basis
and in consonance with the sample sold to the buyer.

The Supreme Court of India in a case decided that contract to sell logs of timber from trees to be
cut is not a contract of sale of ascertained goods. The contract is not a complete sale but promise
to sell.30

30
R. S Mohta v. M.P. state (1970) 2 SCR 445 (454)

22
 CONCLUSION

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.

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 1631 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

31
Section 16, The Sale of Goods Act, 1930

23
the buyer trust the seller in relying on the sellers judgment rather than his own he would now,
have a remedy for any default on the part of the seller.

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