TaxTMI 
TaxTMI 
1959 (11) TMI 74
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....sheep skins from East Africa had arrived in Madras and was lying in the Madras harbour. The second plaintiff looked into the import invoices with the defendants showing their stock at Madras of East African raw dried sheep skins, in three lots, two of 6 bales each and one of 5 bales, bearing particular numbers and in all 17 bales lying in the Madras harbour. It was agreed that on payment of the price by the plaintiff in Bombay, the plaintiffs should get delivery orders and clear the goods in the Madras harbour through M/s. Maswood and Co., Madras. The lots purchased are described as sheep skins, shade dried, U. K. quality, comprising of Choice I and Choice II. This transaction was completed on 18-11-1947 and delivery orders to Madras Maswood and Co., for these 17 bales were handed over to the second plaintiff as against cash payment of Rs. 3900 plus 3600 plus 2750 totalling Rs. 10,250. The second plaintiff says that he went to the Madras harbour to take delivery of the goods through M/s. Maswood and Co., and found that some of the bales appeared on the face of them to have been water-damaged. One Mr. Marfatia is said to have been sent for according to the second plaintiff and....
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....eaten and were for all practical purposes as good as worthless. The lawyer's notice requests the defendants to send an agent to be present at the opening of the other 14 bales at Vaniyambadi and arrive at an amicable settlement. Then after some correspondence on 11-2-1948 the Solicitors of the defendants in Bombay intimated the non-liability of the defendants and saying that the purchase was made by the plaintiffs in their own risk and that the matter became entirely closed on the delivery orders being ordered to M/s. Maswood and Co., and that Marfatia was not the representative of the defendant company but only their salesman: vide Ex. B-8. Then steps had been taken by the plaintiffs to notify the defendant company that they were going to have a survey made at Vaniyambadi. The defendant firm without prejudice to their contentions were prepared to send their representative to Vaniyambadi to watch the survey. Subsequently a survey had been made on 20-3-48 by one Obaidulla Sahib of M/s. Kothawal Mohamad Obaidulla Sahib and Sons, Tanners, Vaniyambadi, who seems to have been singularly unfitted for doing this survey. It is enough to extract the following admissions in his evi....
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....ay. The learned trial Judge came to the conclusion that the plaintiffs had not made out their case for damages against the defendant company and therefore dismissed the plaintiffs' suit. On appeal our learned brother came to an opposite conclusion and decreed the plaintiff's claim covering all the 17 bales. Hence, this Letters Patent Appeal by the defeated defendant company. 5. On a review of the entire circumstances of the case, we have come to the same conclusion as the learned trial Judge and I shall deal with the claim of the plaintiffs from the point of view that the plaintiffs would be entitled to no damages on the ground that it has not been shown that the goods bought by description were not of merchantable quality as described in the sold-notes; and secondly on the facts of this case. The buyer by description had the opportunity to inspect goods and reject them and did not avail himself of the opportunity and reject them within reasonable time and therefore the seller was absolved from responsibility in regard to defects which such examination might have revealed with the result that this claim for damages will not lie. 6. The law covering both these point....
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....v. Neccormack (1930) 230 N. Y. App. Div Rep. 303. An implied warranty is not one of the contractual elements of an agreement. It is not one of the essential elements to be stated in the contract nor does its application or effective existence rest or depend upon the affirmative intention of the parties. It is a child of the law. Because of the acts of the parties, it is imposed by the law. It arises independently and outside of the contract. The law annexes it to the contract. It writes it, by implication, into contract which the parties have made. Its origin and use are to promote high standards in business and to discourage sharp dealings. It rests upon the principle that honesty is the best policy and it contemplates business transactions in which both parties may profit. The doctrine of implied warranty should be extended rather than restricted": Bekkevold v. Potts, 1927 173 Minn. 87 (SC), Chhedilal Harinivas v. Brit-over Ltd., 52 Cal WN 45. 10. In early, times when the economic conditions were as primitive as society itself, most transactions of sale took place in an open market where the buyer and seller came face to face, the buyer inspected the goods, selected them, p....
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....l, L. J., in Bristol Tramway Co. v. Fiat Motors Ltd. (1910) 2 KB 831. It is relative term, the test being, are the goods merchantable under the particular description in the contract? Aga Mirza Nasarali Khoyee and Co. v. Gordon Woodroffe and Co. (Mad), Ltd. AIR 1937 Mad 40 : 1936 Mad WN 970 : 44 Mad LW 676 : 1937 2 Mal LJ 131; Malli and Co. v. V. A. R. Firm AIR 1923 Mad 252 : 16 Mad LW 145 : 43 Mad LJ 208 : 1922 Mad WN 468. In re Baldeo Prasad, (S) AIR 1955 Mad 271 : Hasanbhoy Jetha v. New India Corporation Ltd., (S) AIR 1955 Mad 435 (Sale of skins stipulated to be fair average quality). The condition is not that the goods shall be merchantable, but that they shall be of merchantable quality and it is more restricted than it would have been, if it had required that the goods should be merchantable. 15. Goods cease to be merchantable because of defects rendering them unfit for the purpose for which they are usually sold or merchantability is fulfilled when the goods do not differ from the normal quality of the described goods including under the term quality the state or condition as required by the contract. The goods should be immediately saleable under the description by wh....
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....ed that it was not of merchantable quality. It was held that the defendants had examined the goods and consequently there was no implied condition that the ghee was to be of merchantable quality. 17. A mere receipt of goods does not amount to acceptance and before the buyer can be called upon to accept the goods, he can claim a reasonable opportunity of examining the goods. That opportunity is to be given by the seller on request by the buyer. Whether the opportunity offered by the seller for the examination of the goods was reasonable would, like any other question of fact, depend on the circumstances of each case. It would also depend on the terms of the contract. 18. The seller's duty is to afford the buyer a reasonable opportunity; it is up to the buyer to avail of that opportunity and if he fails to avail of it or if he avails of it in an incomplete or perfunctory manner the seller cannot be held liable: (1919) 1 KB 486; Bragg v. Villa Nova (1923) 40 ITR 154. Peer Mohammad Rowther v. Dalooram Jayanarayan AIR 1919 Mad 728; Muthukrishna Reddiar and Sons v. Madhavji Devichand and Co. Ltd., AIR 1953 Mad 777. The opportunity is to be afforded only on request from the buye....
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....he right of rejection is lost: S. 13(2). The right to reject is also lost where the buyer has accepted the goods and that acceptance may take place before or after the examination of the goods. The right of examination is, therefore, closely connected with the acceptance of the goods and the passing of property. The parties may intend whether a right of examination is to be treated as a condition precedent qualifying the buyer's obligation either to take title or to pay the price or a condition subsequent authorising the return of the goods and the recovery of the price, if title to the goods has passed, or the price has been paid: see 3 Williston and Sales, S. 471. 21. If it is a condition precedent, the goods must be merchantable on arrival at destination in order to conform to the contract and the risk of deterioration and the loss would be wholly upon the seller. Where it is treated as a condition subsequent, the risk of deterioration would rest upon the buyer. His right of examination would be there, but it would be only for the purpose of determining whether at the time the title passed, that is to say, at the time the sale was made or at the time the delivery was m....
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....may not force the goods upon buyer unwilling to receive them. The buyer, when delivery is tendered, may refuse to assent to it at all (taking of course the risk of liability for damages), or may assent subject to the condition that he be allowed to see the goods before delivery or appropriation shall be deemed to be complete. 24. There is difference in other words, between inspection following delivery, and inspection to determine whether delivery shall be permitted. Until that determination is made, the transaction is in fieri. Delivery remains inchoate while the buyer refuses to treat it as perfected. Even taking the goods in, may be so qualified by notice or agreement that possession will not operate as an expression of assent. The buyer is entitled examine the goods to decide whether he will become owner, and until the examination is completed or waived he is under no obligation to accept the goods: 3 Williston on Sales, S. 472. The examination is waived, however, in so far as it is a condition precedent to the transfer of the property, when there is an assent to delivery without reservation or condition accompanying the receipt and qualifying or postponing or neutralizin....
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.... Sayeed, J., and restore the decree and judgment of the trial Judge. This Letters Patent Appeal is allowed with costs. M. Ananthanarayanan, J. 31. I agree that, upon the merits of the evidence and the findings of fact in this case, we are constrained to differ, with great respect, from the conclusions of the learned Judge (Basheer Ahmed Sayeed, J.), who has reversed the judgment and decree of the learned City Civil Judge, and held that the suit of the plaintiffs ought to have been decreed to damages. Much of the contest before the learned Appellate Judge appears to have centered itself around the issue whether these sales of sheep skins were really sales of specific goods by description. The learned Appellate Judge has found that these were sales of 'specific goods' by description. The definition of 'specific goods' embodied in S. 2(14), namely, goods identified and agreed upon at the time a contract of sale is made would appear to apply to facts like the present, where a party ordering the goods did not order them as goods of a certain description or quality, but placed the order by rounding off in red ink individual items in the indent Ex. A-5. However....
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.... proceeds upon the basis of acceptance of the goods delivered, and not a rejection thereof. In other words, the right of rejection of goods, and the right to sue for damages for breach of warranty, are alternative remedies. They are not cumulative. A buyer can (where goods not answering to the description contracted for are delivered) waive the condition and accept the goods, and sue for damages for breach of warranty, and this is the effect of S. 13(1) of the Sale of Goods Act. The basis on which a buyer would be entitled to such damages, would be the difference between what the goods were worth when they arrived, and what the sale of the goods would have realised, had they been in the state contracted for. In this context, reference has to be made to the English case in (1868) 3 QB 197. 35. The same aspect of law was again discussed in AIR 1959 Mad 112 by the learned Chief Justice and Ramachandra Iyer, J. The learned Judges refer to Sections 15 and 16(2), and observe that the effect of the two conditions is to give a right or an occasion to the buyer to reject the goods, in case what was tendered did not answer the description, or was not of a merchantable quality. But wher....
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....But the disappointments of a buyer with rosy expectations, is not the test. Clear and objective tests must be applied, and it must be established that the goods failed to fulfil the term as to description of quality. That is certainly not the case here. 37. With regard to merchantable quality, which is also an implied condition, the facts are even more heavily against the plaintiffs. For the proviso to S. 16(2) would certainly apply, in the sense that the buyers certainly had an opportunity to inspect the goods, and did make some kind of superficial inspection, as the evidence shows. If the buyers were not satisfied, they should have immediately proceeded to make a thorough inspection, and to intimate the defects to the sellers. At the least, the goods should have been inspected by the buyers immediately after transport to Vaniyambadi, and the defects revealed by such inspection should have been intimated to the sellers. The attempt to prove that Mr. Marfatia, who was then acting on behalf of the sellers, was intimated at the warehouse itself of the defects in these skins, totally failed, and the plaintiffs failed to examine Mr. Marfatia as a witness. The actual inspection by....
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....hase differed from what they ought to have been in the state contracted for. It is this which has totally failed in the present case. There is no evidence to establish that the goods were not shade-dried, of 'U. K. quality', first and second choice, as described. In fact, the evidence is quite insufficient to show that these descriptions implied certain qualities or objective tests, which could not be applied to the sheep-skins in the present case. There were, undoubtedly, defects, such as holes, worm-eaten condition, hairs falling off etc. Had they been ascertained, immediately, or at least within a reasonable period, it could be urged that these defects infringed the implied term as to merchantable quality. But we are quite unable to hold that those defects necessarily existed at the time of delivery of the goods. Since the inspection was unjustifiably prolonged, and the goods, in the meantime, were stored in some godown under conditions of which we cannot be certain, these defects might well have developed in the supervening period. 40. There are only two English decisions which might at all be construed as supporting the contentions of learned counsel for responde....