Business Law 3

UNIT -III
SALE OF GOODS ACT 1930: Sale and Agreement to
sell – Conditions and warranties – Performance of
contract of sale – Rights of an unpaid seller.
CONSUMER PROTECTION ACT 1986: Rights of the
Consumer – Defects and deficiencies of goods -District
Forums – State Commissions – National Commission.

The Sale of Goods Act, 1930
Formation of contract of sale/formalities of contract
Scope: chapter –II (Ss.4-17) of the sale of goods Act 1930 lays
down the provision about formation of the contract of sale of
goods
Section 4 to 17 are divided into five parts which are.
1) Contract of sale (agreement to sell & sale) (S-4)
2) formalities of the contract (S-5)
3) Subject matter of contract (Ss 6-8)
4) The price (Ss 9& 10)
5) Conditions and warranties Ss 11-17

Contract of sale (agreement to sell and sale) S-4
Definition of sale :Section 4 of the sale of goods act 1930 defines
sale and also agreement to sell.
Sec.4 sale and agreement to sell-
1 A contract of sale of goods is a contract where by the seller
transfers or agrees to transfer the property in goods to the buyer
for a price . There may be a contract of sale between one part
owner and another.
2 A contract of sale may be absolute or conditional.
3 where under a contract of sale the property in the goods is
transferred from the seller to the buyer the contract is called a
sale.

4 Where the transfer of the property in the goods is to take place
at a future time or subject to some condition thereafter to be
fulfilled the contract is called an agreement to sell.
5 An agreement to sell becomes a sale when the time elapses or
the conditions are fulfilled subject to which property in the goods
is to be transferred.
Essential ingredients of A SALE (S-4)
1 Bilateral contract
2 Money
3 Sale of Contract of Work and Material
4 Goods the Subject matter of contract
5 Agreement to Sell and Sale

BILATERAL CONTRACT
A person cannot buy his own goods . Therefore there must be two
parties i.e., buyer and seller between them there must be a bilateral
contract . There may be a contract of sale between one part owner and
another purchaser .
There must be sufficient consideration i.e., price of the goods to be
transferred . However inadequacy of consideration does not make the
contract invalid , if the transferor satisfies with consideration offered
by the transferee.
A contract of sale may be absolute or conditional.
The parties may conclude the terms and conditions between
them. The contract must be concluded with free consent of the both
parties.

Money
The consideration for a sale of goods must be money it is called price,
rate etc.
paying money by way of cheque ,credit card ,demand draft, pay
order etc. are treated as money.
where goods are exchanged for goods that is not a sale.
The value of the goods is determined by way of pricing. The price of the
goods includes the costs of production, raw material , labour charges
,capital and its interest , packing distribution , wholesaler’s profit ,
retailers profit transport, taxes .

Difference between sale and agreement to sell
S.No Sale Agreement to sell
1 The property in the goods passes to the
buyer and along therewith the risk
Since property in the goods does not
pass to the buyer , the risk also does not
pass to him.
2 It is an executed contract.i.e.contract
for which consideration has been paid.
It is an Executory contract,i,.e contract for
which consideration to be paid at a
future date.
3 The seller can sue the buyer for the
price of the gods because of the
passage of the property therein buyer.
The aggrieved party can sue for damages
only and not for the price , unless price
was payable at a stated date.
4 A subsequent loss or destruction of the
goods is the liability of the buyer
Such loss or destruction is the liability of
the seller.
5 Breach on the part of the seller gives
buyer double remedy, a suit for the
damages against seller and a
proprietary remedy of recovering the
goods from third parties who bought
them
The seller being still the owner of the
goods may dispose of them as he likes
and the buyers remedy would be to file a
suit for damages only.

Contract of sale
Contract of sale of goods is a contract between buyer and seller intending
to exchange property in goods for a price.
S.No Sale Hire purchase
1 Property in the goods is transferred
to the buyer immediately at the
time of contract.
1. The goods passes to the hirer
upon payment of the last
installment.
2 The position of the buyer is that of
the owner of the goods
The position of the hirer is that of
bailee till he pays the last
installment.
3 The buyer cannot terminate the
contract and is bound to pay the
price of the goods.
The hirer may if he so likes
terminate the contract by returning
the goods to its owner with out any
liability to pay the remaining
installments.
4 The seller takes risk of any loss
resulting from insolvency of the
buyer
The owner takes no such risk for if
the hirer fails to pay an installment
the owner has right to take back the
goods

5 The buyer can pass a good title
to a bonafide( authenticate)
purchaser from him
The hirer cannot pass any title even to a
bona fide purchaser.
6 Tax is levied at the time of the
contract.
Tax is not leviable until it eventually ripen
(mature, develop) into sale
Difference between sale and bailment
S.NO. Sale Bailment
1 The property in goods is
transferred from the seller to
the buyer
There is only transfer of
possession of goods from the
bailor to the bailee for any the
reasons like safe custody,
carriage.
2 the return of goods in
contract of sale is not
possible
The bailee must return the goods
to the accomplishments of the
purpose for which the bailment
was made
3 The consideration is the The consideration may be

Sale and contract of work and material
Goods
Sec 2(7) of the sale of goods act 1930 defines goods : goods means every
kind of movable property other than actionable claims and money and
includes stock and shares, growing crops , grass and things attached to or
forming part of the land which are agreed to be severed before sale or
under the contract of sale.
Distinction between sale and agreement to sell-
1 A contract of sale of goods is a contract where by the seller transfers or
agrees to transfer the property in goods to the buyer for a price .
2.There may be a contract of sale between one part owner and another.
3 where under a contract of sale the property in the goods is transferred
from the seller to the buyer the contract is called a sale.

4 Where the transfer of the property in the goods is to take place at a
future time or subject to some condition thereafter to be fulfilled the
contract is called an agreement to sell.
5 An agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which property in the goods is to be
transferred.
Formalities of the contract (S.5)
Section 5 .contract of sale how made :
1 A contract of sale is made by an offer to buy or sell goods for a price
and the acceptance of such offer. The contract may provided for the
immediate delivery of the goods or immediate payment of the price or
both ,or for the delivery or payment by installments or that the
delivery or payment or both shall be postponed.

2 Subject to the provisions of any law for the time being in force , a
contract of sale may be made in writing or by word of mouth , or
partly in writing and partly by word of mouth or may be implied from
the conduct of the parties.
There may be immediate delivery of the goods.
There may be immediate payment of price , but it may be agreed
that the delivery is to be made at some future date.
There may be immediate delivery of the goods and an immediate
payment of price.
It may be agreed that the delivery or payment or both are to be made
in installments.
It may be agreed that the delivery or payment or both are to be made
at some future date.

SUBJECT MATTER OF CONTRACT (Ss.6-8)
Section 6 narrates the provisions about Existing or future goods
Section 7 narrates about goods perishing before making of contract
Section 8 narrates about goods perishing before sale but after
agreement to sell.
Important points:
Existing or future goods Section 6
1.The goods which from subject of a contract of sale may be either
existing goods , owned or possessed by the seller, or future goods

2 There may be a contract for the sale of goods the acquisition of which
by the seller depends upon a contingency which may or may not
happen.
3 Where by a contract of sale the seller purports to effect a present sale
of future goods the contract operates as an agreement to sell the goods.
Goods perishing before making of contract Section 7
Where there is a contract for the sale of specific goods , the contract is
void if the goods without the knowledge of the seller have , at the time
when the contract was made , perished or become so damaged as no
longer to answer to their description contract

Goods perishing before sale but after agreement to sell.
Section 8
Where there is an agreement to sell specific goods , and subsequently
the goods without any fault on the part of the seller or buyer perish or
become damaged as no longer to answer to their description in the
agreement before the risk passes to the buyer the agreement is there by
avoided.
Section 2(11) defines PROPERTY means the general property in goods
and not merely a SPECIAL PROPERTY.
Section 2(12) defines Quality of goods includes their state or condition.
Section 2(14) defines SPECIFIC GOODS means goods identified and
agreed upon at the time a contract of sale is made.

Section 2(6) defines future goods means goods to be manufactured or
produced or acquires by the seller after the making of the contract of
sale
Examples
A intends to establish a flour mill in his village . B is the manufacture of
flour mills at Chandigarh. A may place an order to B for the supply of a
machinery for flour mill to be supplied to him within a specified period.
On receiving the order from A,B starts to manufacture and assemble
the machinery , and after completing it , he can deliver it . For it there
must be an agreement between them, regarding the specification of
machinery , price , quality.

2 A is the wholesale dealer in rice . B is the retailer. B may place an
order for 100 bags of masoori rice to be delivered on or before of 31st
of December . B agrees to supply it . The price is concluded to Rs
1200/- per 100 kg . B pays an advance . A agrees to receive the
remaining amount after supply. This is a valid agreement.
Goods
Sec 2(7) of the sale of goods act 1930 defines goods : goods means
every kind of movable property other than actionable claims and
money and includes stock and shares, growing crops , grass and things
attached to or forming part of the land which are agreed to be severed
before sale or under the contract of sale.

Movable and immovable property
Immovable property has been defined in section 3 of the Transfer of
property act 1882. The movable property can easily be transferred from
one place to another , with out changing its shape , capacity , quality
and quantity . The sale of movable property is covered under the sale of
goods act 1930. and such sales liable to be levied sales tax and central
sales tax whenever transfers take place.
In case of transfer of immovable property such transfers shall be liable
to be registered under the Registration act 1908 and the Indian Stamp
act 1899

PRICING (Ss.9 &10 )
The consideration for a sale of goods must be money it is called price,
rate etc.
paying money by way of cheque ,credit card ,demand draft, pay
order etc. are treated as money.
where goods are exchanged for goods that is not a sale.
The value of the goods is determined by way of pricing. The price of the
goods includes the costs of production, raw material , labour charges
,capital and its interest , packing distribution , wholesaler’s profit ,
retailers profit transport, taxes .

Ascertainment of price: section 9
Section 9 lays down that price in a contract of sale may be fixed by the
contract or may left to be fixed in manner there by agreed may be
determined by the course dealing between the parties.
Where the price is not determined in accordance with the foregoing
provisions the buyer shall pay the seller a reasonable price .
Agreement to sell at valuation : section 10 lays down that where there is
an agreement to sell the goods on the terms that price is to be fixed by
the valuation of a third party and such third party cannot or does not
make such valuation the agreement is there by avoided.

Government control : for certain goods i.e., petrol , medicines , certain
agriculture produce etc., the central and state governments fix the
prices. These fixed prices include transport , taxes , dealers
commissions, etc
The central and state government can also control the prices of
certain goods under the provision of the Monopolies and Restrictive
Trade Practices Act 1969 regarding under the government control the
consumers cannot bargain.
Competition due to Globalization and Privatization: to-day we are in
the era of globalization and privatization . International trading as
become very common . There is a heavy competition in entire world,
including India.

Taxes : The pricing of goods includes taxes which may be levied by
the central and state governments from time to time . Section 64-A of
the sale of goods Act 1930.which was inserted the Act 41 0f 1940 and
substituted by Act 33 of 1963 w.e.f. 22-9-1963
Price fixing : price fixing is a traditional one the latest laws are also
based on the traditions , customs and usages. Between manufacture
and the consumers there are several stages.
However the buyer bargains. The seller may reduce the price
depending upon the competition and lessening his profit margin .
In certain accessions the seller may sell the goods at lower price than
his purchase price , depending upon the circumstances which are

1.Credit: A wholesaler gives the goods on credit i.e., 1 month to 1 year
to retailers . Depending upon the period of credit the seller calculates
the interest on the goods in his hand and lessens the price of the
goods .
2.Discount sales: To increase the sales , several businessmen offer
discount.
3.Closer : If a seller is put in loss, and wants to close down the business
he may sell the goods at lower price than his purchase price.
4.Competition : Due to heavy competition the seller may reduce his
margin ,and sell the goods at any price as he pleases even at a loss.
5.Different goods: It is the general technique of the retailers . He may
reduce the price on one good and enhance the price on another

Problem: A agrees to supply 120 barrels of groundnut oil to B . A
dispatches 140 barrels . B refuses to receive on the ground that it is
excess. Decide
Distinction between agreement to sell and sale (Ss 2(7) &4)
1A contract of sale of goods is a contract where by the seller transfers
or agrees to transfer the property in goods to the buyer for a price .
There may be a contract of sale between one part owner and another.
3 where under a contract of sale the property in the goods is
transferred from the seller to the buyer the contract is called a sale.
4Where the transfer of the property in the goods is to take place at a future
time or subject to some condition thereafter to be fulfilled the contract is
called an agreement to sell.

An agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which property in the goods is to be
transferred.
Conditions and warranties
Conditions and warranties are also part and parcel in the formation of
contract of sale . There are two types of conditions and warranties
1 Express conditions and warranties
2 Implied conditions and warranties. These are essential formalities of
the contract of sale of goods.
Conditions
Example: Buyer wanted a horse which could run at a speed of 45
m.p.h.

Chapter II SECTIONS 11 to 17 of the sale of goods act 1930 explains
about conditions and warranties there are two kinds of conditions and
warranties.
1 Express conditions and warranties
2 Implied conditions and warranties
Section 11 to 13 explain about express conditions and warranties
Section 14 to 17 explain about implied conditions and warranties
Section 11 explains about stipulation as to time
Section 12 defines conditions and warranty
Section 13 provides that when conditions to be treated as warranty.
Meaning : condition = A condition in a contract for the sale of goods is a
vital stipulation( specification, demand) the breach of which may give
rise to a right to treat the contract as repudiate (reject, not to accept)

Warranty : It is a form of guaranty that the item in question is of the
standard required.
An assurance that a thing is as represented or described .
A clause in an agreement for the sale of goods the breach of which will
gives rise to a claim for damages.
SECTION 11: Stipulation (specification ,requirement ) as to time: as regard
time for the payment of price ,unless a different intention appears from
the terms of the contract , stipulation as regard this is not deemed
(reason , estimate ) to be the essence of a contract of sale .
But delivery of goods must be made without delay. Whether or
not such a stipulation is of the essence of contract depends on the terms
agreed upon. Stipulation as to time of delivery are usually the essence of
the contract.

Conditions and warranty section 12
Section 12 : condition and warranty-
1.A stipulation in a contract of sale with reference to goods which are the
subject there of may be a condition or warranty.
2.A condition is a stipulated essential to the main purpose of the contract
the breach of which gives rise to a right to treat the contract as
repudiated.
3.A warranty is a stipulation collateral to the main purpose of the
contract the breach of which gives rise to a claim for damages but not to a
right to reject the goods and treat the contract as repudiated.
4.Whether a stipulation in a contract of sale is a condition or a warranty
depends in each case on the construction of the contract .
A stipulation may be a condition though called a warranty in the contract.

Example: 2
A man buys a particular horse which is warranted quiet to ride
and drive. If the horse turns out to be vicious (nasty, brutal) , the buyer’s
only remedy is to claim damages. But if instead of buying a particular
horse, a man asks a dealer to supply him with a quiet horse and the
dealer supplies him with a vicious one, the stipulation is a condition, and
the buyer can return the horse and can also claim damages for breach of
contract (Hartley vs Hyman)
The illustrations are a clear proof of the fact that an exactly similar term
may be a condition in one contract and a warranty in another depending
upon the construction of the contract as a whole

Example: 1
Kaushal asks a dealer to supply him a shirt which would not
shrink after use and wash. The dealer supplies a shirt which shrinks
after use and wash. Kaushal can reject the shirt or keep the shirt and
claim damages. Here the stipulation to supply a shirt which would not
shrink after use and wash is a condition.
Now if Kaushal buys a particular shirt which is warranted by
the dealer to be one which would not shrink after use and wash and
the shirt does shrink after use and wash, Kaushal’s only remedy is to
claim damages

When condition to be treated as warranty section 13
Section 13 When condition to be treated as warranty :- 1) where a
contract of sale is subject to any condition to be fulfilled by the seller the
buyer may waive the condition or elect to treat the breach of the
condition as a breach of warranty and not as aground for treating the
contract as repudiated.
2) Where a contract of sale is not severable and the buyer has accepted
the goods or part thereof , the breach of any condition to be fulfilled by
the seller can only be treated as a breach of warranty and not only be
treated as a breach of warranty and not as a ground for rejecting the
goods and treating the contract as repudiated unless there is a term of
the contract , express or implied to that effect.

3) Nothing in this section shall affect the case of any condition or
warranty fulfillment of which is excused by law by reason of
impossibility or otherwise. collateral
Difference between conditions and warranties
S.NO CONDITIONS WARRANTIES
1 A Condition is essential to the
main of the contract.
It is only collateral ( security ,
guarantee )to the main purpose
of the contract
2 The aggrieved party can
repudiated the contract or
claim damages or both in the
case of breach of condition
The aggrieved party can claim
only damages in case of breach
of warranty.
3 A breach of condition may be
treated as a breach of
warranty.
A breach of warranty cannot be
treated as a breach of
condition.

Cases
Brief facts: The plaintiff approached the defendant to purchase two small
ships. The defendant the ship dealer showed the ships and gave the
particulars that each ship had the capacity to carry over 460 tons. The
plaintiff required the small ships which can carry a load of 300 to 400 tons.
He purchased two ships . Later he found that the two ships had the
capacity of 360 tons only . He sued the defendant for the return of the
ships , alleging that it was a breach of condition.
Brief facts : the plaintiff ordered the defendant for the timber sizes cut in
½ . The defendant supplied the sizes varying from ½ to 2/3 . The plaintiff
sued for the repudiation of contract , contending that it was a breach of
condition.

Time as a condition: section 11 provides that unless a different intention
appears from the terms of contract , stipulation as to time of payment are
not deemed to be of the essence of a contract of sale whether any other
stipulation as to time is of the essence of the contract or not depends on
the terms of the contract.

Important points
Election in the hands of the buyer: where a seller failed to fulfill a
condition in a contract of sale , the buyer has the right to waive such
condition or to elect to treat the breach of the condition as a breach of
warranty. It depends upon the consent of the buyer not of seller .
Waiver: waiver by the buyer may be-
a)Express b) implied
Once the buyer elects to waive his right and to treat the breach of
the condition as a breach of warranty he cannot regain such
right, and cannot sue the seller for breach of condition.
Part of performance:
Impossibility of performance: if the seller is unable to perform his
contract due to impossibility then also a condition may be treated as
warranty

Problems:
1)A purchased a hot water bottle from a retail chemist. The bottle
could stand hot water but not boiling water . When A’s wife was
filling it with boiling water, it burst and she sustained injuries . A
sues seller for damages . decide
2) A and B executed a contract of sale of goods fixing a time limit
for the performance of the contract . Both of them have agreed to
extend the period. Later A raised objection. B contends that the
stipulation extending the time is binding on them. decide
3 A breach of warranty was done by the defendant seller . The
plaintiff purchaser wants to reject the goods. decide

Sections from 14 to 17 explain about implied conditions and warranties
The implied conditions and warranties
Section 14 implied undertaking as to title
Section 15 sale by description
Section 16 caveat emptor
Section 17 sale by sample
Meaning for Implied= indicated not in express words but by logical
inference or association or necessary consequences.
Implied condition= one not expressed out indicated by law
Implied warranty = a warranty which is presumed (perform) by law . An
implied warranty is simple a warranty that the articles sold when there is
no express warranty , is merchantable and fit for the purpose for which it
is intended

From section 14 to 17 which the law presumes certain implied conditions
and warranties. They are very much helpful to the buyer.
Section 14 explains about implied conditions and warranties pertaining
to the title of the goods.
Section 14 :implied undertaking as to title : in a contract of sale, unless
the circumstances of the contract are such as to show a different
intention there is.
In every contract of sale , unless there is an agreement to the
contrary(different) the first implied condition on the part of the seller is
that
a)In case of sale , he has a right to sell the goods and
b)In the case of an agreement to sell, he will have right to sell the goods
at the time when the property is to pass. In simple words the
condition implied is that the seller has the right to sell the goods at the
time when the property is to pass.

If the sellers title turns out to be defective the buyer must return the
goods to the true owner and recover the price from the seller.
Ingredients :
Condition as to title : In a contract of sale it is an implied condition that
the seller must possess a good title over the goods which he proposes to
sell, and he must have a right to sell them. It is a condition precedent
(standard , guide) . Failing which the contract can be repudiated.
Quiet possession: In a contract of sale , it is an implied warranty that the
buyer must enjoy the property which he purchased with peaceful and
quiet possession and enjoyment.
Free from any charge or encumbrance: It is also an implied warranty that
the goods sold should be free from any charge or encumbrance in favour
of any third party.

BRIEF FACTS: the plaintiff purchased a car from the defendant and used it for
some months. Some months after it was detected by the police that the car ,
belonging to a third party , was stolen and happened to come into the hands
of the defendant. On the complaint of the true owner of the car , poloce
seized the car from the plaintiff and handed over it to the owner as per the
court orders . Later the plaintiff sued the defendant for the breach of implied
conditions and warranties under section 14.
The plaintiff ,doing business in England ,ordered for 3,000 tins of condensed
milk to the defendant company of newyork , who supplied 1,000 tins of
condensed milk with brand name of Nissley brand and 2000tins of condensed
milk with his own trade name . Another manufacture of condensed milk
having trade mark nestle brand sued the plaintiff for the infringement of his
trade mark . Thus the plaintiff was compelled to change the mark on the tins
by incurring expenditure and sold those 1000tins at a reduced rate in the

SALE OF DESCRIPTION SECTION 15
Where there is a contract of sale of goods by description , there is an
implied condition that the goods correspond with the description . This
rule is based on the principle that if you contract to sell coffee powder ,
you cannot compel the buyer to take tea . The buyer is not bound to
accept and pay for the goods which are not in accordance with the
description of goods.
Brief facts : The seller offered to sell his used reaping machine to the
buyer . The seller assured the buyer that the reaping machine was
purchased only in the previous year, and it had the capacity to cut fifty
acres per day . Believing his words ,the buyer purchased it .when it was
put in use , it could not work properly and on examination it was cleared
that the machine was older more than three years.

CASE 2: The buyer in London ordered for 3,000 tins of canned fruit from
Australia , to be packed in cases each case containing 30 tins . The seller
sent the tins of canned fruit packed in cases each case containing 24 tins.
Caveat Emptor section 16
Meaning : caveat emptor Latin expression = let the buyer beware
When sellers displays their goods in the open market , it is for the buyers
to make a proper selection or choice of the goods .
If the goods turn out to be defective he cannot hold the seller liable .
The seller is in no way responsible for the bad selection of the buyer.
The seller is not bound to disclose the defects in the goods which he is
selling . It is the duty of the buyer to satisfy himself before buying the
goods that the goods will serve the purpose for which they are being
bought.

If the goods turn out to be defective or do not serve his purpose or if he
depends on his own skill or judgment, the buyer cannot hold the seller
responsible.
Brief facts: The defendant was a ship manufacturer. The plaintiff gave an order to
build a ship intending to use it in the sea for fish hunting . The plaintiff gave
specification for the ship . According to those specifications, the defendant built a
ship . When the plaintiff put it in use , it turned unfit to be fishing in the seas. He
sued the manufacturer.
Brief facts: The plaintiff indigo cloth with an intention to make liveries. He did not
tell his purpose to the seller/defendant. Due to the latent defect in indigo cloth
,liveries could not be made , and the plaintiff was put in loss. On examination it
was found that indigo cloth was not suitable for making liveries , but can be used
for usual purposes.

SECTION 16 itself has provided exceptions to the Principle of Caveat
Emptor . These exceptions make the seller liable and Caveat Venditor
(Beware the seller)
Fitness for the buyers purpose section 16(1)
Section 16(1) lays down that where the buyer has no skill or judgment ,
and depends upon the sellers skill or judgment , it is the duty of the
seller to supply the goods actually the buyer needed , and not his choice
or profit . There is an implied condition that the goods supplied in such
circumstances must have merchantable quality, and shall be reasonably
fit for the purpose of buyer.

To avail this exception , the buyer must fulfill the following points.
1.The buyer should make known to the seller the particular purpose for
which goods are required.
2.The buyer must rely on the seller’s skill or judgment.
3.The goods are of a description
4.The goods must be in the course of the seller’s business to supply.
Brief facts: The customer approached the dentist for a set of false teeth.
The dentist took the money and gave a set to the customer . It was not
fitted to his mouth . The customer sued for the refund of the price of the
set . The dentist sought CAVEAT EMPTOR . The court rejected his
argument, and observed that the customer was a layman and he was
depended upon the skill ness of the dentist , who should provide a set of
false teeth suitable to the mouth of the customer.

Brief facts: The plaintiff was a manufacturer of foodstuffs. The defendant
was a dealer in packing material .the plaintiff approached and asked
hessian cloth . When he took his factory and began to pack the foodstuffs
,the smell from hessian cloth caused entire packages with bad smell. for
The dealers of the plaintiff rejected the foodstuffs. The plaintiff sued the
defendant for damages as his particular purpose was not served by
hessian cloth supplied by the defendant . The defendant argued that
hessian cloth was regularly used for general packages , and the plaintiff
did not inform him his particular purpose.

Merchantable quality section 16(2)
It is the second exception provided in section 16(2) . According to it , a
seller is bound to deliver goods of merchantable quality if he sells by
description.
Meaning: The seller must supply the goods having merchantable quality .
Merchantable quality means goods of any kind are of merchantable
quality if they are as fit for the purpose or purposes for which goods of
that kind are commonly bought as it is reasonable to expect having regard
to any description applied to them ,the price and all the other relevant
circumstances.
ESSENTIALS OF MERCHANTABILITY QUALITY
1.Marketability, 2.Reasonable fitness for general purposes
3.Without any defects

SALE BY SAMPLE SECTION 17:
A contract of sale is a contract for sale by sample where there is a term in
the contract , express or implied , to that affect.
Ingredients:
The bulk shall correspond with the sample in quality.
The buyer shall have a reasonable opportunity of comparing the bulk
with the sample
The goods supplied should possess merchantable quality , and free from
any defect
The defects should not be apparent on reasonable examination of the
sample
If the seller supplies the bulk which does not correspond with the sample
in quality , it is a clear breach of condition

Brief facts: A contract for sale by sample of two parcels of wheat . The
buyer approached the seller’s warehouse for inspection of wheat. The
seller showed one parcel of wheat , and refused to show another . The
buyer cancelled the contract.
Judgment: court held that the buyer’s action was right

Transfer of property as between seller and buyer
Chapter III Section 18 to 30 of the sale of goods act 1930 explains of
transfer of property as between seller and buyer and transfer of title.
Transfer of property as between seller and buyer /passing of property
section 18 to 26 are involved in passing of property from seller to buyer
Important points:
Goods must be ascertained section 18
Property passes when intended to pass section 19
Specific goods in a deliverable state section 20
Specific goods to be put into a deliverable state section 21
Specific goods in a deliverable state , when the seller has to do anything
thereto in order to ascertain price section 22

Sale of unascertained goods and appropriation section 23
Goods sent on approval or on sale or return section 24
Brief facts : Britannia biscuit co.ltd is a manufacture of biscuits and
famous throughout India. It is their regular practice that they supply the
biscuits to the dealers packed in tins. They take the cost of the biscuits
and deposit for tins. If the tins are returned to the company the company
refunds their deposit. state govt of Maharashtra treated the deposit as
the cost of the tins which may or may not be returned to the company by
the dealers treating such deposits as the sale on approval.

Transfer of title / sale by a non –owner /nemo dot quod non habet section
27 to30
Chapter III SALE OF GOODS ACT 1930 SECTION 27 TO 30 explains the
provision of title.
Section 27 narrates an important and basic rule of transfer of property in
goods.
According to it sale by a person, who is not the owner of the goods , is not
valid. It is expressed in legal maxim as NEMO DOT QUOD NON HABET---
NO PERSON CAN PASS A BETTER TITLE THAN WHAT HE HAS. “The principle
“no person can pass a better title than what he has” has been dealt within
first part of section 27. in the same section the exception are also
explained

Case : the defendant obtained certain goods from the plaintiff on hire
purchase agreement . He paid only one installment . He sold the goods to
third party.
Problem : A buys a car from B , and uses it for six months , and then found
that it was stolen property and had to return it to its owner . A wants to
sue B for the price . Advice A.
Problem : A the owner of a car, leaves the certificate of registration in the
car which is equivalent to a document of title . B the driver of A’s car by
forgery , procures its alteration to his own name and sells to C , bonafide
purchaser for value . Decide its validity.

Exceptions to NEMO DOT QUOD NON HABET SECTION 27 TO 30
A person who purchases a property in good faith and for value for without
notice should get a good title .
Such exceptions are enunciated in section 27 itself , and also from section
28 to 30
1.Estopple by owner section 27
2.Sale by mercantile agent section 27 provision
3.Sale by joint owner section 28
4.Sale by person in possession under voidable contract section 29
5.Sellers possession after sale section 30(1)
6.Buyer in possession before sale section 30(2)

Estoppel by owner section 27 this is the first exception
Example: A son sells his mother’s jewellery in the presence of his mother ,
who does not object the sale. The buyer gets a good title due to estoppel
by mother.
Sale by mercantile agent section 27 provision: provides that where a sale
by a mercantile agent on behalf of the owner is valid such sale is an
exception to the maxim NEMO DOT .this is the second exception.
Essential conditions:
Sale must be made by mercantile agent.
Consent.
Documents of title to the goods.
Ordinary course of business
Good faith and without notice.

Example: A car owner intends to sell his car. He approaches the car
dealer . If the car owners has trust on the car dealer , he may give his
documents pertaining to car , and may also handover certain transfer
papers duly signed to him and fix a rate to sell . If a buyer comes and
agrees that rate and the car dealer hands over the papers and car to him
. In such circumstance the buyer gets a good title.
SALE BY ONE OF JOINT OWNERS SECTION 28 this is the third
exception
Section 28 lays down that if one of several joint owners of goods has the
sole possession of them by permission of the co-owners ,the property in
the goods is transferred to any person who buys them of such joint
owner in good faith and has not at the time of the contract of sale notice
that the seller has no authority to sell.

Essential conditions:
Where it is a property owned by several joint owners.
Such property is in the possession of one of several joint owners.
The other joint owners have consented.
A person who buys such popery in good faith and without notice at the
time of the contract of sale that the seller has no authority to sell.
Problem: A,B and C are joint owners of a horse . A who is having sole
possession of it sells it to X, who purchases it in good faith . B and C want
to claim the horse back. Decide.
Sale by person in possession under voidable contract section 29

Seller in possession after sale section 30(1): A-seller sells the goods to a
buyer-z. The buyer –Z keeps the stock with the seller for some time due
to his personal reason such as there is no time, or warehouse facility , or
conveyance etc. if the seller sells the same goods to another buyer –X ,
the buyer-X gets a good title . The buyer-Z has the legal remedy against
the seller –A for the recovery of the price paid and damages if any.
Buyer in possession before sale section 30(2)
Under a contract of sale of goods ,the buyer is allowed to take the
possession of the goods , even though he has to pay the price of it .
Example: A purchases certain goods from B by issuing a cheque , and tales
the delivery of the goods from B. A thereafter sells the goods to C. B has a
right to claim for the price of the goods and damages from A . However ,
C gets a bona fide title on the goods.

Performance of the contract –rules of delivery section 31-44
Chapter IV containing sections 31 to 44 explains the provisions
about Performance of the contract under sale of goods act
Important points:
Duties of seller and buyer Section 31 :lays down that it is the duty of the seller
to deliver the goods and of the buyer to accept and pay for them , in accordance
with the terms of the contract of sale.
Section 32 payment and delivery are concurrent conditions:
This provides that unless otherwise agreed to delivery of the goods and payment
of the price are concurrent conditions, that is to say seller shall be ready and
willing to give possession of the goods to the buyer in exchange for the price
and the buyer shall be ready and willing to pay the price in exchange for
possession of the goods.

Delivery section 33:Lays down that delivery of goods sold may be made
by doing anything which the parties agree shall be treated as deliver as
which has affect of putting the goods in the possession of the buyer or
any person authorized to hold them on his behalf.
Effect of part delivery s 34:explians that a delivery of part of goods, the
progress of the delivery of the whole , has the same effect, for the
purpose of passing the property in such goods as delivery of the whole ,
but a delivery of part of the goods with an intention of serving it from
the whole does not operate as a delivery of the remainder.
Buyer to apply for delivery s-35: explains that apart from any express
contract , the seller of goods is not bound to deliver them until the
buyer applies for delivery.

Rules as to delivery section 36
Place :
time of delivery:
Where there is no time is fixed for delivery:
Where the goods are in the possession of a third person:
Reasonable hour:

Delivery of wrong quantity s-37: explains that where the seller delivers to
the buyer a quantity of goods less than he contracted to sell the buyer
may reject them , but if the buyer accepts the goods so delivered he shall
pay for them at the contract rate.
Where the seller delivers to the buyer a quantity of goods larger than he
contracted to sell, the buyer may accepts the goods included in the
contract and reject the rest , or he may reject the whole . If e buyer
accepts the whole of the goods so delivered , he shall pay for them at the
contract rate.
Where the seller delivers to the buyer the goods he contracted to sell
mixed with goods of a different description not included in the contract ,
the buyer may accept the goods which are in accordance with the contract
and reject the rest or may reject the whole.

Installment delivery section 38 lays down that unless otherwise agreed ,
the buyer of goods is not bound to accept delivery therefore by
installments.
Delivery to carrier or wharfinger section-39: explains that where , in
pursuance of a contract of sale , the seller is authorized or required to
send the goods to the buyer , delivery of the goods to a carrier , whether
named by the buyer, or not for the purpose of transmission to the buyer.
Unless otherwise agreed , where goods are sent by the seller to
the buyer by a route involving sea transit in circumstances in which it is
usual to insure, the seller shall give notice to the buyer as may enables
him to insure them during their sea transit , and if the seller fails to do,
the goods shall be deemed to be at his risk during such sea transit.

Risk where goods delivered at distant places s-40: lays down that where
the seller of goods agrees to deliver them at his own risk at a place other
that where they are when sold , the buyer shall, nevertheless , unless
otherwise agreed , takes any risk of deterioration in the goods necessarily
incident of the course of transit.
Buyers right of examining the goods s-41: lays down that where
goods are delivered to the buyer which he has not previously
examined, he is not deemed to have accepted them unless and
until he has had a reasonable opportunity of examining them for
the purpose of ascertaining whether they are in conformity with
the contract.

Acceptance section 42: means that buyer is deemed to have accepted the
goods when he intimates to the seller that he has accepted them, or
when the goods have been delivered to him and he does any act in
relation to them which is inconsistent with the ownership of the seller, or
when , after the lapse of a reasonable time, he retains the goods without
intimating to the seller that he has rejected them.
Problem : X sells to y 20 bags of rice lying in z’s godown. X gives an order
to Z asking him to transfer the goods to Y. Z assents to such order and
transfers the goods in his books to Y. Is there a delivery taken place from x
to y.
Problem : D promises to procure the necessary material and make a set of
false teeth for P , and P promises to pay for them when ready. Decide
whether it is a sale?

Buyer not bound to return rejected goods section 43: says that unless
otherwise agreed , where goods delivered to the buyer and he refuses to
accept them ,having the right so to do, he is not bound to return them to
seller, but it is sufficient if he intimates to the seller that he refuses to
accept them.
Liability of buyer for neglecting or refusing delivery of goods
section 44: explains that when the seller is ready and willing to
deliver the goods and requests the buyer to take delivery , and the
buyer does not , within a reasonable time, after such request , take
delivery of the goods , he is liable to the seller for any loss
occasioned by his neglect or refusal to take delivery and also for a
reasonable charge for the care and custody of goods.

Rights of Unpaid seller against the goods Ss 45 to 54
Chapter V ( Ss 45 to 54 ) of the sale of goods act 1930 explains about “
RIGHTS OF UNPAID SELLER AGAINST THE GOODS “
Section 45 defines unpaid seller
Section 46 explains unpaid seller’s rights
Section 47 to 49 explain unpaid seller’s Lien
Section 50 to 54 explain unpaid sellers right of stoppage in transit
Definition : section 45 of the sale of goods act 1930 defines an un paid
seller: the seller is deemed to be an un paid seller within the meaning of
this act:
1.When the whole of the price has not been paid or tendered.

2. When a bill of exchange or other negotiable instrument has been
received as conditional payment and the condition on which it was
received has not been fulfilled by reason of the dishonor of the instrument
or otherwise.
The term seller includes any person who is in the position of a seller as ,for
instance an agent of the seller to whom the bill of lading has been
endorsed (authorized), or a consignor or agent who has himself paid ,or is
directly responsible for the price.
Important points:
A person becomes an unpaid seller
1.When the whole of the price has not been paid
2.When the whole of the price has not been tendered
3.When a negotiable instrument or a bill of exchange has been received
as a conditional payment , and the condition on which it was received has
not been fulfilled by reason of the dishonor of the instrument .

A rights of an unpaid seller against the goods: the unpaid seller has the
following rights against the goods whether the property in the goods has
passed to the buyer or not.
Unpaid seller’s rights against goods: chapter V section 45 to 54 deals and
explains RIGHTS OF UNPAID SELLER AGAINST THE GOODS.
SECTION 46 GIVES four kinds of rights against the goods.
1.A lien on the goods for the price , while he is in possession of them.
2.In case of the insolvency of the buyer, a right of stopping the goods in
transit after he has parted with the possession of them.
3.He can exercise a right of resale as limited by this act.
4.He can exercise a right of withholding delivery , if he possession the
goods.

Unpaid seller’s rights against buyer: these four rights are against the
goods. If the goods are delivered to the buyer the unpaid seller has a right
to sue the buyer for the recovery of price , including costs of the suit,
customary interest and damages if any.
If a buyer takes the delivery of the goods from seller by issuing a cheque,
and later the cheque is bounced , the unpaid seller can sue the buyer
under section 138 of the negotiable instrument act 1881. such buyer is
liable for the punishment with imprisonment for a term which may extend
to one year or with fine which may extend to twice the amount of the
cheque or with both.

Unpaid seller’s Rights of lien section 47 he has a right of lien on the goods
for the price while he is in possession , until the payment or tender of the
price of such goods .the rights of lien can be exercised by him in the
following cases only.
1.Where the goods have been sold without any stipulation as to credit.
2.Where the goods have been sold on credit , but term of credit has
expired.
3.Where the buyer becomes insolvent.
Part delivery: section 48 provides that where an unpaid seller has made
part delivery of the goods, he may exercise his right of lien on the
remainder , unless such part delivery has been made under such
circumstances as to show an agreement to waive the lien

Rights of stoppage in transit: when the unpaid seller has parted with the
goods to a carrier and the buyer has become insolvent , he can exercise
this right of asking the carrier to return the goods back, or not to deliver
the goods to the buyer.
Following conditions
1.The seller must be unpaid
2.He must have parted with possession of goods
3. The goods are in transit
4.The buyer has become insolvent
5.The right is subject to provision of the act.

Right of resale: section 54 explains the seller can exercise his right of lien
or right of stoppage in transit over the goods , he cannot resale them as he
likes .
Because the original contract between the buyer and seller is still in force.
The buyer has the right to pay the price for the goods and to have them.
If the seller resells without notice of the buyer , he has to give the profit
accrued on the release to the buyer.
There fore the seller has limited right to resell those goods.

S.NO SELLER’S LIEN SELLER’S RIGHT OF STOPPAGE IN
TRANSIT
1 Seller can enjoy his lien
when the buyer is in default
whether he be solvent or
insolvent.
The seller’s right of stoppage in
transit arises only when the
buyer becomes insolvent.
2 Lien ends where the right of
stoppage commences.
When the seller hands over the
goods to the carrier, his lien ends
the right of stoppage arises.
3 Seller can exercise his lien as
long as the goods and
delivered to the buyer.
Seller can use his right of
stoppage in transit as long as the
goods are in transit and until the
goods are delivered to the buyer

BAILMENT derived from French word ‘bailler
Definition : Sec.148
“Bailment is the delivery of goods by one person to another for
some purpose, upon a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed (liable , ready) of
according to the directions of the person delivering them”
The person delivering the goods is called the bailor, the person to
whom they are delivered is called the bailee and the transaction is
called the bailment.
Eg: A delivers a piece of cloth to B ,a tailor ,to be stitched in to a suit.
there is a contract of bailment between A and B.

Examples:
1. Hiring a bicycle
2. Giving cloth to a tailor
3. Delivering watch for repair
Bailor: who gives
Bailee : who takes
Bailment: transaction (deal , business , contract)
Essential features of Bailment
•Delivery of goods
•Contract
•Return of goods in specie

Essentials of Bailment
It is a delivery of movable goods by one person to another (not being
his servant). According to Section 149 the delivery of goods may be
actual or constructive.(useful , productive)
The goods are delivered for some purpose. When they are delivered
without any purpose there is no bailment as defined under Sec 148
The goods are delivered subject to the condition that when the
purpose is accomplished the goods are to be returned in specie or
disposed (willing , liable) of according to the directions of the bailor,
either in original form or in altered form.

Bailment on the basis of benefits
•Bailment for the benefit of Bailor only
•Bailment for the benefit of Bailee only
•Bailment for the mutual benefit of both Bailor & Bailee
Based on benefit:
Bailment for the exclusive benefit of :
1] bailor: leaving goods in safe custody without paying
2] bailee :a loan of some article like a pen
3] mutual benefit: contracts for hiring, repair ,etc

Bailment may also be classified into two types
Non – Gratuitous bailment or bailment for reward: where either of
the two parties is entitled to remuneration.
Gratuitous bailment : where no remuneration is payable either to
the bailor or the bailee.
Difference between sale & bailment
•Ownership transferred?
•Buyer under no obligation to return goods?
•Ownership not transferred?

Duties of Bailee
•Take reasonable care of goods[S.151]
•Not to make unauthorized use of goods [S.154]
•Not to mix goods with his own goods{S.155 mixes with consent ,
without consent S.156, without consent impossible to
separateS.157}
•Duty to return goods {A hires a horse for 4 days, fails to return,
horse dies, has to pay price of horse} section 160 and 161
•Duty to return any accretion( addition ,increase) to goods {cow +
calf} section 163

Duties of bailor
•Disclose faults in goods
•Repay necessary expenses in case of gratuitous bailment.. feeding
expenses for the horse kept in safe custody
•Repay extraordinary expenses in case of non-gratuitous bailment..
If horse falls ill during bailment period then giving expenses
•Duty to indemnify bailee.. If A gives his neighbor's scooter to B
•Duty to receive back the goods

RIGHTS OF BAILOR:
➢Right of Termination: bailor has right to terminate the contract
of bailment, if the bailee does any inconsistent act with regards to
goods.
➢Right to Demand Return of Goods: Any time in case of
gratuitous bailment. The bailor can demand back goods bailed at
any time even if he had lend it for a specific goods.
➢Right to file a suit against a wrong doer.
➢Enforcement of Rights: The duties of bailee are the rights of
bailor & bailor can enforce those rights by filing a suit against
bailee.

RIGHTS OF BAILEE:
➢Right to Interplead: If the person other than bailor claims the goods, bailee may
apply to court to stop the delivery.
➢Right Against third Party: If a third person wrongfully deprive bailee to use the
goods or cause any injury, then bailee is entitled to such remedies which are
available to real owner.
➢Right of Particular Lien: When the bailee has rendered some services or skills
on the good he had right of particular lien unless he is paid.
➢Right of General Lien: Banker, factors, attorney of High Court, policy broker will
be entitled to retain as a security for a general balance of account any goods
bailed to then.
➢Right to Claim Compensation in Case of faulty Goods.
➢Right to claim necessary expenses.
➢Right to return the goods to any of the joint bailor.

PLEDGE OR PRAWN (SEC.172)
Bailment of goods as security for payment of debt or performance
of a promise :PLEDGE
The bailor is called Pledger or Pawnor and the bailee is called
Pawnee.
Bailor: PAWNER
Bailee: PAWNEE
Example:
A borrows Rs.100 from B & keeps his watch as security : pledge

Pledge Bailment
Pledge is the bailment for a
specific purpose i.e. to
provide security for a debt or
for fulfillment of object.
Bailment is for a purpose
other than two under pledge
i.e. for repairs, safe custody
etc.
The pledgee has right to sale
on default after giving notice
thereof to the Pledger.
No right to sale. The bailee
may either retain the goods
or the bailor for non-payment
of his dues
Distinction between Pledge & Bailment

•Right of retainer{S.173}: right to retain goods until dues paid
•Right of transfer for subsequent advances:{S.174}: on lending
money to same debtor without further security ;right to retain
earlier goods extends
•Right to extraordinary expenses {S.175}
•Right to sue the pawner or sell the goods on default.
Rights of Pawnee
Rights of Pawnor
•Enforcement of pawnee’s duties
•Defaulting pawnor’s right to redeem

Rights and duties of seller and buyer before and after sale
section 55 to 61
Chapter VI SECTION 55 TO 61 Contains remedies for the breach of the
contract (sale of goods)
Important points
Suit for price: section 55 lays down that where under a contract of sale the
property in the goods has passed to the buyer and the buyer wrongfully
neglects or refuses to pay for the goods according to the terms of the
contract the seller may sue him for the price of the goods
Damages for non acceptance section 56: states that where the buyer
wrongfully neglects or refuses to accept and pay the goods the seller may
sue him for damages for non acceptance.

Specific performance section 58: lays down that subject to the provision
of chapter II of the specific relief act 1877 ( 1 of 1877) in any suit for
breach of contract to deliver specific or ascertained goods the court may ,
if it thinks fit, on the application of the plaintiff, by its decree that the
contract shall be performed specifically without giving the defendant the
option of retaining the goods on payment of damages
Damages for non delivery section 57: provides that where the seller
wrongfully neglects or refuses to deliver the goods to the buyer, the buyer
may sue the seller for damages for non-delivery.

Remedy for breach of warranty: section 59 lays down that there is a
breach of warranty by the seller , or where the buyer elects or is
compelled to treat any breach of a condition on the part of the seller as a
breach of warranty , the buyer is not by reason only of such breach of
warranty entitled to reject the goods but he may:
Set up against the seller the breach of warranty in diminution or extinction
of the price
Sue the seller for damages for the breach of warranty.
Repudiation of contract before due date section 60: provides that where
either party to a contract of sale repudiates the contract before the date
of delivery , the other may either treat the contract as subsisting and wait
till the date of delivery , or he may treat the contract as rescinded and sue
for the damages for the breach.
Interest by way of damages and special damages section 61:

Auction sale : section 64 of the slae of goods act 1930 explains the rules
about auction sale:
An auction sale is a sale at which the auctioneer, as agent for the seller
invites person present to bid for goods to be sold. The goods are
ultimately sold and delivered to the highest bidder . The auctioneer acts in
a dual capacity.
1.He acts as an agent of the seller till the articles is knockesd down to the
bidder.
2.He acts as an agent of the buyer . He has a lien on the goods to the
extent of his charges while they are in his possession .
3. He holds the goods as a bailee.

Implied warranties in an auction sale by auctioneer.
1.An auctioneer has an authority to sell
2.He is not aware of any defect in the title of the principal
3. He undertakes to hand over the possession of the goods as soon as the
price is paid to the buyer
4. He undertakes to give a quiet possession of the goods
Brief facts: the plaintiff was an auctioneer . The defendant handed over
cattle and instructed the plaintiff to sell them in auction . The plaintiff did
the same in good faith . In fact e defendant was not the owner of the
cattle . The owner of the cattle sued the plaintiff , and succeeded in
getting damages. The plaintiff sued the defendant for the indemnity for
the loss he had suffered.

Today the customer is given highest priority pertaining to quality or
utility of goods or services .
GANDHIJI said customers is GOD . Unfair practices ,substandard
measures are highly criticized and discarded from business , and the
business of sales is heavily regulated for the welfare of the consuming
public. The new legal philosophy asserts that the consumer must get
what he is told he is getting

consumer” means any person who-
(i) buys any goods for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes
any user of such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly promised, or under any
system of deferred payment when such use is made with the approval of such
person, but does not include a person who obtains such goods for resale or for
any commercial purpose; or
(ii) 1[hires or avails of] any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred
payment and includes any beneficiary of such services other than the person who
1[hires or avails of] the services for consideration paid or promised, or partly paid
and partly promised, or under any system of deferred payments, when such
services are availed of with the approval of the first-mentioned person;

The sole object of this ACT is to afford the consumer protection ,
consumer education and consumer awareness.
The consumer Protection Act , 1986 bearing Act no 68 was
enacted by indian parliament enforceable in entire India .
It was passed on 9-12-1986 by Lok Sabha and on 10-12-1986 by
Rajya Sabha. The president of india gave his assent on 24-12-1986 ,
published in the gazette of india, extra part –II, section -1 dated 26-12-
1986.
The Salient features of the consumer protection act, 1986
1.The statement of objects and reasons: At the time of the submitting the
bill of this act before the parliament , the statement of objects and
reasons for introducing the bill are explained as follows.

1.The consumer protection bill, 1986 seeks to provide for better
protection of the interests of consumers and for that purpose.
2.To make provision for the establishment of consumer councils and other
authorities for the settlement of consumer disputes and for matters
connected therewith.
3.It seeks , inter alia , to promote and protect the rights of consumers
such as.
a)The right to be protected against marketing of goods which are
hazardous to life and property.
b)The right to be informed about the quality , quantity , potency, purity,
standard and price of goods to protect the consumer against unfair trade
practices.

c)The right to be assured, wherever possible, access to variety of goods
at competitive prices.
d)The right to be heard and to be assured that consumers interest will
receive due consideration at appropriate forums.
e)The right to seek redressal against unfair trade practices.
f)Right to consumer education.
4.These objects are sought to be promoted and protected by the
consumer protection councils to be established at central and state
levels
5.To provide speedy and simple redressal to consumer disputes , a
quasi-judicial machinery is sought to be set up at the district, state and
central levels.

Consumer rights
Defect in consumer goods and defective services:
section 2 (1) (f) defines Defect
Section 2(1)(g) defines deficiency
Section 2 (1) (o) defines services
Section 2 (1) (e) defines consumer disputes.
When the defect goods are supplied by a manufacturer or when the
deficient services are rendered by a service provider, a consumer
disputes arises.
The aggrieved consumer is entitled to sue such manufacturer or service
provider in a consumer forum under this act

Restrictive trade practice and unfair trade practice: if a manufacturer or
service provider adopts any of the restrictive (warning , preventive )trade
practices , as defined in section 2 (1) (nnn), the aggrieved consumer is
entitled to sue manufacturer or service provider in a consumer forum
under this act.
unfair trade practice: if a manufacturer or service provider adopts any of
the unfair trade practices as defined in section 2 (1) ( r) , the aggrieved
consumer is entitled to sue such manufacturer or service provider in a
consumer forum under this act
Consumer : section 2 (1) (d) defines consumer
Duty to take care and liability for negligence – product liability : the
manufacturers of the consumer goods and the service providers
providing the consumer services are strictly imposed the duty take
care , and they are held liable for the negligence and product

Consumer protection councils: for implementing the consumer rights , the
central consumer protection council, the state consumer protection
councils and the district consumer protection councils are established
under this act.
Consumer disputes redressal agencies: clause (d) of the statement of
objects and reasons states: the right to be heard and to be assured that
consumers interests will receive due consideration at appropriate forums.
Clause (e) reads: the right to seek redressal against unfair trade practices
of consumers
1.The consumer disputes redressal forum to be known as the District
forum for every district having jurisdiction to entertain complaints where
the value of the goods or services and the compensation , if any , claimed
does not exceed RS 20,00,000.

2.The state commission for every state , having jurisdiction to entertain
complaints where the value of the goods or services and the
compensation , if any , claimed exceeds Rs twenty lakhs but not exceeds
Rs. One core.
3.The National Commission for entire country , having jurisdiction to
entertain complaints where the value of the goods or services and the
compensation , if any ,claimed exceeds Rs one core and appeals against
the orders of any state commission.
Easy , inexpensive and speedy consumer disputes: the object of the
act is to provide easy , inexpensive and speedy consumer disputes .
There is no necessary to appoint advocates . Each trial should be
completed within 90 days from the date of receipt of notice to the
defendant.

Rule -9-A prescribes the fee for making complaints before
the district forum.
These fees are very meager to little up to one lakh rupees, there is no fee.
Upon one lakh rupees , the fees is Rs. 100.
Above one lakh to five lakh rupees the fee is Rs 400.
Comparing with court fees of the civil courts the fees payable in the
district forum is very meager and negligible.

RIGHTS OF THE CONSUMER UNDER THE CONSUMER
PROTECTION ACT 1986
The consumer protection act ,1986 came into force with effect from 1st
July , 1987 . It is praised as MAGNA CARTA in this field of the consumer
protection for checking the unfair trade practices and deficiency in goods
and services .
Section 6 of the act enumerates the rights of the consumers while
explaining the objects of the central council

Rights of the consumers: the consumer protection act
1986 helps the consumer in two very important respects:
1)A cheap, expeditious, quick and swift remedy
2)It brings justice to the door steps of the consumer.
To achieve these objects , this act provides certain important rights to the
consumers for the purpose of protecting him from economic exploitation
and from hazardous goods.
The act gives six important rights to the consumers as explianed in section
6. these are
1.Right to safety
2.Right to information
3.Right to be heard 4.right to choose 5.right to seek redressal
6.Right to consumer education

Right to safety :article 21 of the constitution gives an important right to
the Indians i.e., protection of life personal liberty . It lays down that no
person shall be deprived of his life or personal liberty except according to
procedure established by law.
Exception the courts , no person or government can do injury to any
person. When the government is also not competent to cause harm or
injury to any person, shall a seller or buyer be allowed
Right to safety means the consumer has the right to be protected against
the marketing of goods and services which are hazardous to life and
property . Due to the defective design , poor workmanship, negligence ,
defective ingredients, etc.
The consumers right to safety turns as duty to take care for the
manufacturers and service providers.

For example if a toy manufacturer releases certain pistols for playing below
10years children .the toy should not hurt the using child and also other
persons surrounding him.
In case the manufacturers or distributors released the goods to the public ,
and after releasing , it is found that the released goods are defective and
are dangerous and hazardous to the public and this is come to the notice of
the manufacturers , then what should they do
Duties of the seller:
They have duty to care to the consumers
They should advertise and bring to the notice of the public delay
They should recall all the defective goods from the market and the buyers
They should replace with new goods which shall be defect free.
If it is not possible to replace with new defect free goods they should pay

Examples : incidence of ford cars 1994
Incidence of nokia cell phones batteries 2008
Right to information: right to information means the consumer has the
right to be informed about the quality ,quantity ,potency ,purity ,
standard , model ,price of goods or services so as to protect himself
against the restrictive and unfair trade practices.
Caveat emptor let the buyer beware was an old philosophy of law
Caveat venditor let the seller beware has occupied the place of the old
principle of the let the buyer beware
The seller should not sell goods what he has , but the consumer should
get goods what he needs.

3.To return to the complaint the price or as the case may be the changes
paid by the complaint
4.To remove the defects or deficiencies in the services in question
5. Not to offer the hazardous goods for sale
6.To with draw the hazardous goods from being offered for sale
7.To provide for adequate costs to parties.

Right to consumer education : the right to consumer education is
recognized by the act . The object of inclusion of this right is to first
educate the consumers . The act acts as a catalyst (channel, medium) . It
promotes consumer education . The functions and objects of these
councils are to protect the consumer and to promote the consumer
awareness
For example pan masalas , gutkas ,cigarettes, etc damage the public
health.
Hence the govt of india and state govt screen certain advertisements
and release in all theaters explaining the injury and harm that would be
caused by consuming gutaks and cigarettes.
They urge to use the two wheeler drivers to wear helmets for the
consumers safety

The consumers education serves as a protective measurement . It
enables the consumers to make wise buying decision.
Consumer education covers the following programmes:
1.To educate the consumers about the product liability
2.To educate the consumers about the hazardous and dangerous product
3.To inform about the safety and health
4.To explain about the product labeling
5.To propagate about the consumer disputes redressal agencies
6.To explain about the pollution and environment
7.To educate the consumers about the laws of consumption , marketing
sales
8 to educate about quality , standard , quantity , variety ,choice of
production

9. To bring consumer awareness
Incentives : to create the consumer awareness the state should afford
certain incentives to the active advocates , associations, person who help
the consumer movement .
Tax deduction for charitable contribution , awards and rewards to the
pioneer of the movement
The consumer welfare fund: consumer welfare fund rules , 1992 with a
corpus fund Rs 19 cores.
Right to Choice:
According to this right every consumer has the right to choose the goods or
services of his or her likings. The right to choose means an assurance of
availability, ability and access to a variety of products and services at competitive
price and competitive price means just or fair price.
The producer or supplier or retailer should not force the customer to buy a
particular brand only. Consumer should be free to choose the most suitable
product from his point of view.

:
Right to be Heard or Right to Representation: According to this right the
consumer has the right to represent him or to be heard or right to advocate his
interest. In case a consumer has been exploited or has any complaint against the
product or service then he has the right to be heard and be assured that his/her
interest would receive due consideration.
This right includes the right to representation in the government and in other policy
making bodies. Under this right the companies must have complaint cells to attend
the complaints of customers.
Right to Seek Redressal:
According to this right the consumer has the right to get compensation or seek
redressal against unfair trade practices or any other exploitation. This right assures
justice to consumer against exploitation.
The right to redressal includes compensation in the form of money or replacement
of goods or repair of defect in the goods as per the satisfaction of consumer.
Various redressal forums are set up by the government at national level and state
level.

Defect in goods and deficiency in services
Section 2(1) (f) of consumer protection act, 1986 defines Defect.
Meaning: Defect means any fault , imperfection or shortcoming in the
quality , quantity , potency ( strength , energy) , purity or standard.
Important points:
1.A consumer good is said to have defect when there is
a. Any fault in the quality , quantity, potency, purity, standard
b. Any imperfection in the quality , quantity, potency, purity, standard
It is the duty of the seller to supply the best quality and high standard
goods. He must sell the goods which he describes in the advertisements ,
pamphlets etc. he should not supply the defective goods , contrary to his
promises. He should print the weight , rate , date of manufacturing etc.

2.The manufacturers should follow all the provisions of all the
concerned acts.
3.Now the trader cannot escape from the liability under the veil of the
doctrine of caveat emptor
4.Now the trader has social, economic and legal liability towards the
consumers and thus he should supply the defect free goods at
reasonable prices
Problem: A purchased a Videocon washing machine from B , a dealer in
Hyderabad . From the date of purchase , the washing machine did not
work , and was giving shock. A complained to B neither. B nor Videocon
sent the engineer to attend the problem. Advise A

DEFECT IN CONSUMER GOODS
Brief facts : due to leakage of gas after re fixing regulator , the deceased ,
a qualified engineer, lighted gas, and cylinder burnt all around in
periphery of the bottom lip of regulator , and as a result of the burst the
deceased died on the spot. The dependants filed compliant praying the
forum to grant the damages.
Brief fact :the appellant customer purchased a maruti car . He took the
delivery . At the time of registration , the road transport authority found
that the identification and numbers embossed on the chassis and engine
of the car differed from the invoice . They refused to register the vehicle .
The customer complained in the consumer forum . The forum dismissed
his complaint.

Deficiency in services
Section 2(1) (g) of the consumer protection act 1986 DEFICIENCY in
service
Section 2 (1) (o) of the act defines service
Meaning : deficiency means incomplete , defective , wanting in specified
quality or insufficient in quantity, force.
Service means service of any description which is made available to
potential users an includes , but not limited to the provision of facilities in
connection with
. 1.Banking 2.Financing 3.Insurance 4.Transport
5.Processing 6. Supply of electrical 7.Loding 8.Housing construction
9.Entertainment 10.Amusement
They started giving new dimension towards the services. services means
quality service , But not deficient services

Deficient in medical services:
Brief fact: smt. Uma nair got operated laparoscopic operation in the
respondent hospital on 21-9-1992 . She had heart ache. At the time of the
operation the doctors gave excess dose of chloroform . Begin she was
suffering with heart trouble , she went into coma and died on 27 th
september , 1992 . Her husband filed a compliant before the mumabi
district consumer forum
Telephone service
Telephone services are under the monopoly of the central govt uptonow.
Since 1991 , after the P.V.NARASIMHA RAO ,MANMOHAN SINGH govt’s
introduced LPG, the telephone department has reduced its rigidity and
monopoly to little extent.

Before this there are several problems raised in the telephone
department .some of them are narrated here
1.Excess billing of telephones
2.Waiting for telephone connection for years together
3.Disconnection without notice
4.Telephone is dead for several days and unattended by the department
5.Wrongful shifting
6.Negligent behavior of the staff
7.Telephone lines are not properly arranged

Insurance services
Delay in settlement of claims is one of major deficiencies of insurance
business. At the time of entering into insurance contract the company
accepts the payments from the insured on spot . But at the time of claim ,
the company harasses in setting the claim , showing one or another
pretext.
Transport services
Today , the goods are transported from one corner to another corner of
country . The people use the servcie of transport compaines .deficeincy in
transport services is actionable under this act. Thus railways, air-lines,
state road transport corporations, private transport ,lorries

Brief fact : the complainant , a physically handicapped person was
travelling in one of the buses of the APSRTC . At one of the bus
stations, he went for natural call informing driver, leaving his
luggage in the bus itself. When he came back , he found that the
bus left the bus station . He approached the district consumer
forum.
Postal and courier services
Banking services
Gas cylinder companies
Educational institution

central consumer protection council
Chapter –II of the consumer protection act, 1986 contains section 4 to 8.
Sections from 4 to 6 explain about the constitution , functions and objects
of the central consumer protection council.
Sections from 7 to 8 explain about the state consumer protection council
and its objects, constitution and functions.
Objects: The object of central consumer protection council and the state
consumer protection councils are to protect the rights of the consumers,
to promote consumer movement , to formulate the policies which shall
be incorporated in legal and administrative fields, to point out he defects
in goods and services.
•How ever, these councils are not judicial or quasi-judicial authorities.
•They only recommend their opinions to the govts.

The central council shall consists of the following members namely.
1.The minister in charge of the consumer affairs in the central govt who
shall be its chairman
2.Such number of other official or non official members representing such
interest as may be prescribed.
PURPOSE: 1.the central council is an important and potential body for the
development of consumer movement and also helpful for the protection
of consumers.
2.It plays a catalyst role in the consumer movement and educates the
consumers.
3.It searches the ways and means for the protection of consumers.
4.It points out various defects in the laws in force from time to time and
tries to amend them for the welfare of the consumers.

The constitution of the central consumer protection council and the
working groups: the central govt shall, by notification in the official
gazette, constitution the central consumer protection council which shall
consist of the following 150 members namely.
1.The minister in charge of consumer affairs in central govt who shall be
the chairman
2.The minister of state or deputy minister in consumer affairs in the
central govt who shall be the vice chairman of the central council.
3.The minister of food & civil supplies in state
4.Eight members of parliament five from the lok sabha and three from
the rajya sabha
5.The commissioner for ST and SC
6.Representative of the central govt departments and autonomous
organizations concerned with consumer interest not exceeding twenty

Term: the term of the council shall be three years
Resignation, vacancy and fill-up: any member may by writing under his
hand to the chairman of the central council resign from the council.
The vacancies so caused or otherwise shall be filled from the same
category by the central govt and such person shall hold office so long as
members whose place he fills would have been entitled to hold office if
the vacancy had not occurred.
The first central council consisting 116 members was established on june
1,1987.

S.N
O
CENTRAL COUNCIL NATIONAL COMMISSION
1 The central consumer protection
council is also known as central
council
National consumer disputes
redressal commission is also
known as national
commission
2 Section 4 to 6 of chapter –II of the
act explain the provision about the
constitution , procedure and objects
of the central council
Section 20 t0 23 of the
consumer protection act
1986 explains provision
about national commission
3 The objects of the central council
are to promote consumer
movement and to safe guard the
consumer rights in the country. It is
only recommendatory both
The objects of the national
commission are to render
legal remedies to the
aggrieved consumers and to
protect from exploitation
and dangers
Difference between central council and national
commission

4 The decision of the central council
are only recommendatory in nature
The decision of the national
commission have binding
force through out the
country. They have the
power of precedent and
binding force on the lower
courts , except supreme
court.
5 It is only purely administrative
authority, filled up by the non-
official and official members it
functions as a govt department
It is a quasi judicial authority
filled by the judicial and non-
official members . it
functions as a court.
6 No working days and working hours
are provided for central council in
the act . how ever it shall conduct at
least one meeting in a year
The national commission
shall have to work on all the
working hours and working
days as a central govt
department works

Distinction between state council and state commission
S.NO STATE COUNCIL STATE COMMISSION
1 The state consumer
protection council is known
as the state council
Consumer disputes redressal
commission is known as the state
commission
Section 7 to 8 of chapter –II
explain the provisions
explain about the
constitution and objects of
the state council.
Sections 16 to 19 of chapter-III of
the act explain the provision
about the composition
,jurisdiction , procedure, vacancies
, appeals
The objects of state council
are to promote consumer
movement and to safe guard
the consumer rights in a
state. It is only
recommendatory body
The objects of state commission
are to protect the consumers
rights by redressing . It is a
redressal agency.
The decision of the state
council are recommendatory
The decisions of the state
commission are just like the

5 It is purely administrative
authority, filled up by the non-
official and official members
It is a quasi judicial authority ,
filled up by judicial and non-
official members
6 Working hours and working
days are not prescribed by the
act . The state council shall
have to conduct its meeting
not less than two meetings in
every year
The state commission shall have
the working hours and working
days just like as a state govt
department and a court

1. Consumer redressal agencies:
2. Consumer redressal agencies , similar to the courts in functioning
have been established very recently
3. The objects of consumer redressal agencies are to provide the speedy
and inexpensive remedies to the aggrieved consumers
4. The consumer redressal agencies are not required to follow these
rigid legal procedures
5. The aggrieved parties are not required to pay court fee. This is an
advantage of the consumers
6. The parties need not appoint advoactes .
7. They present their cases, arguments , witnesses, documents etc. in an
ordinary manner, just like before the village panchayath

8. There are only three tier consumer disputes redressal agencies, district
level, state level, national level
9. The consumer disputes redressal agencies enquire into the minute
cases , involving the amounts of rs. 10/- to more than one core.
10. In this consumer disputes redressal agencies too much time is not
taken .
11. Maximum time for any cases is specified in the act itself.
12.They solve the consumer disputes basing upon the facts and law ,
most particularly basing upon the facts
13.These are quasi judicial bodies . Its members are appointed from
judicial and non official
14. These agencies concentrate only on consumer grievances

District consumer forum
Sections from 9 to 15 of the chapter –III of the consumer protection act
1986 explain the provisions about the District consumer forum.
Section 9 of the act provides there shall be three tier consumer disputes
redressal agencies .
It lays down that a consumer disputes redressal forum to be known as the
District forum established by the state govt in each district of the state by
notification.
If the state govt may if it deems fit , establish more than one district form
in a district.
It also lays down that a consumer disputes redressal commission to be
known as the state commission established by the state govt in the state
by notification.

It says that a national consumer disputes redressal commission
established by the central govt by notification.
Composition of the district forum
Qualifications: section 10(1) lays down that each district forum shall
consists of :
1.A person who is , or has been or is qualified to be a district judge, who
shall be its president.
2.Two other members one of whom shall be a woman , who shall have the
following qualifications
i)Be not less than 35 years of age
ii) Possess a bachelor’s degree from recognized university

iii) Be persons of ability , integrity and standing , and have adequate
knowledge and experience of at least 10 years in dealing with problems
relating to economics , law , commerce, accountancy , industry, public
affairs or administration.
Disqualifications: a person is said to be disqualified for appointment as a
member, if he
1.Has been convicted and sentenced to imprisonment for an offence
which , in the opinion of the state govt, involves moral turpitude
2.Is an un discharged insolvent
3.Is of unsound mind and stands so declared by a competent court
4.Has been removed or dismissed from the service of the govt or a body
corporate owned or controlled by the govt

Select committee : every appointment under sub section (1) shall be
made by the state govt on the recommendation of a selection
committee consisting of the following:
1.The president of the state commission –Chairman
2.The secretary , law department of the state –member
3.The secretary , in charge of the department dealing with consumer
affairs in the state.
Term: every member of the district forum shall hold office for a term of
five years or up to the age of 65 years whichever is earlier
Salary or honorarium: the salary or honorarium and other allowances
payable to and the other terms and conditions of service of the
members of the district forum shall be such as may be prescribed by the
state govt

Important points
Jurisdiction: the jurisdiction of the district forum extends not only to the
subject matter but also to the territorial and pecuniary (financial) limits.
According to the law the district forum is allotted the jurisdiction
pertaining to subject matter , territorial and pecuniary matters of the
suit.
Pecuniary jurisdiction : the district forum can decide the complaints
involving the claims not exceeding Rs.20 lakhs.

Territorial jurisdiction: the territorial jurisdiction arises for a complaint
before district forum in the following circumstances as are explained in
subsection (2) of section 11
The opposite party or each of the opposite parties at the time of the
institution of the compliant
i)Actually and voluntarily resides
ii) Carries on business
iii) Has a branch office
iv) Personally works for gain
Cause of action: generally in consumer cases, the cause of action arises
where the goods are brought or services are hired or where the goods
are delivered or supplied or services are rendered

Example: the complainant purchased train ticket in new Delhi for
travelling from new Delhi to Bombay . He field a complaint in Bombay .
The Delhi state commission held that the cause of action arose in new
Delhi , where the ticket was purchased.

Remedies available to consumers section 14:
The following are the redressal which can be given by a district forum to
the aggrieved consumer.
1.To remove the defect pointed out by the appropriate laboratory
2.To replace the goods with new goods of similar descriotion which shall
be free from any defects.
3.To return the consumer the price
4.To award compensation for any loss or injury suffered by the consumer
due to the negligence of the opposite party.
5.To remove the defects or deficiencies in the services complained
6.To discontinue the unfair trade practice or the restrictive trade practice
or not to repeat it
7.Not to offer the hazardous goods for sale
8.To withdraw the hazardous goods from sale

Appeal from the district forum
Section 15 of the consumer protection act 1986 provides that any person
aggrieved by an order made by the district forum may prefer an appeal
against such order to the state commission within a period of thirty days
from the date of the order, in such form and manner as may be
prescribed .

State commission :
1.A consumer disputes redressal forum to be known as the district
forum established by the state govt in each district of the state by
notification.
2.A consumer disputes redressal commission to be known as the state
commission established by the state govt in the state by notification.
3.A national consumer disputes redressal commission known as the
national commission established by the central govt by notification
Composition of the state commission:
Section 16 of the consumer protection act 1986 lays down the
procedure about the composition of the state commission

Qualifications:
Each state commission shall consists of –
1.A person who is or has been judge of a high court , appointed by the
state govt, who shall be its president.
2.Two other members one of whom shall be a woman , who shall have
the following qualifications
i)Be not less than 35 years of age
ii) Possess a bachelor’s degree from recognized university
iii) Be persons of ability , integrity and standing , and have adequate
knowledge and experience of at least 10 years in dealing with problems
relating to economics , law , commerce, accountancy , industry, public
affairs or administration.

Jurisdiction of the state commission
Section 17 of the consumer protection act, 1986 lays down the provisions
about jurisdiction of the state commission . It lays down that subject to
the other provisions of this act the state commission shall have
jurisdiction-
1.Complaints where the value of the goods or services and compensation
, if any claimed exceeds rupees 20 lakhs but does not exceeds rupees one
core
2.Appeals against the orders of any district forum within state
Important points:
The state commission entertains three jurisdictions
1.Original jurisdiction
2.Appellate jurisdiction
3.Revisional jurisdiction

Original jurisdiction : the state commission entertain its original
jurisdiction in two ways
1.Territorial
2.Pecuniary
Territorial jurisdiction: there are no clear provisions in the act regarding
the territorial jurisdiction of a state commission . But it can be
understood by the constitution of the state commission itself
Pecuniary jurisdiction: the state commission is competent to enquire the
complaints valuing above rupees five lakhs but not exceeding 20 lakhs
Appellate jurisdiction: section 15 of the act says that aggrieved party
from the decision of the district forum can appeal to the state
commission within 30 days from the date of the order.

Revisional jurisdiction clause (b) of section 17 of the act empowers the
state commission to have revisional jurisdiction
1.Where the district forum has exercised a jurisdiction not vested in it by
law
2.Where the district forum has failed to exercise a jurisdiction so vested
3.Where the district forum has acted in exercise of its jurisdiction
illegally
4.Where the district forum has acted with material irregularly

The national commission
Sections from 20 to 23 of the chapter-III of the consumer protection act
1986
Composition of the national commission
Section 20 of the consumer protection act 1986 lays down the provision
for the composition of the national commission
Section 20(1) lays down that the national commission shall consists
A person who is or has been a judge of the supreme court to be
appointed by the central govt, who shall be its president.
Important points:
Establishment and constitution of the national commission
The appointment of president
Appointment of members
Principles of equality
Terms and conditions

The national commission entertains three jurisdictions
1.Original jurisdiction
2.Appellate jurisdiction
3.Revisional jurisdiction
Revisional jurisdiction clause (b) of section 21 of the act empowers the
state commission to have revisional jurisdiction
1. has exercised a jurisdiction not vested in it by law
2.has failed to exercise a jurisdiction so vested
3.has acted in exercise of its jurisdiction illegally
4.has acted with material irregularly

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