Interview Questions from the sale of Good Act

Ans. A sale has the immediate effect of transferring property. Whereas in an agreement to sell the property is to pass at some future time or subject to some condition.

Q. What is a Hire-Purchase agreement?

Ans. A Hire Purchase agreement entitles the hirer only to possession of the goods. He cannot pass a good title to any buyer from him.

Q. What is the Condition & Warranty?

Ans. Condition and warranty is defined under the Sale of Goods Act.

A condition is a stipulated essential to the main purpose of the contract the breach of which gives rise a right to treat the contract as repudiated.

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.

Q. What is caveat emptor & what are its exceptions?

Ans. The Doctrine of Caveat Emptor

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

It is specifically defined in Section 16 of the act “There is no implied warranty or condition as to the quality or the fitness for any particular purpose of goods supplied under such a contract of sale“

A seller makes his goods available in the open market. The buyer previews all his options and then accordingly makes his choice. Now let’s assume that the product turns out to be defective or of inferior quality.This doctrine says that the seller will not be responsible for this. The buyer himself is responsible for the choice he made.

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

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

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

a. if the buyer shares with the seller his purpose for the purchase

b. the buyer relies on the knowledge and/or technical expertise of the seller

c. and the seller sell such goods

Exceptions to the Doctrine of Caveat Emptor

The doctrine of caveat emptor has certain specific exceptions. Let us take a brief look at these exceptions.

1] Fitness of Product for the Buyer’s Purpose

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

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

2] Goods Purchased under Brand Name

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

3] Goods sold by Description

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

4] Goods of Merchantable Quality

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

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

5] Sale by Sample

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

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

6] Sale by Description and Sample

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

7] Usage of Trade

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

8] Fraud or Misrepresentation by the Seller

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

Q. What is ‘Nemo datnon-quodhabet’?

Ans. It means no one can transfer a better title than he himself has. The principle of this maxim is enshrined infer section 27 of the Sales of goods act.

Nemo dat quod non habet, literally meaning “no one gives what he doesn’t have” is a legal rule, sometimes called the nemo dat rule, which states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title.

The phrase, in a closely related variant, traces back at least as far as the Digest of Justinian (Digest 50.54), which gives credit to the Roman jurist Ulpian (Ad Edictum 46). In other words, if I own something because someone transferred it to me – by sale, gift, bequest, etc. – I normally have only that which the previous owner had and nothing more. This is sometimes called the “derivation” principle: The transferee’s rights derive from those of the transferor.

In this case; Bishopsgate Motor Finance Corpn. Ltd. v. Transport Brakes Ltd[i]., Denning LJ, has defined the position of modern law as follows:

.Q. When lien can be exercised?

Ans. Lien is the right to retain possession of goods until certain charges due in respect of them are paid. The right of lien is linked with pos- session and not with title if the seller has transferred to the buyer the document of title to the goods then his lien is not defeated as long as he remains in possession.

Q. What is a stoppage in transit?

Ans. This means the rights of a seller to prevent the delivery of goods to a buyer after such goods have been delivered.

Section 54 of the Sale of Goods Act 1930 provides the provision of Stoppage in transit.

Q. Do you have any idea of C.I.F, F.O.B. & Ex-ship contract?

Ans. FOB means Free on Board. This means that the goods will be shipped to a specific place without cost.

The contract dealing with goods to be shipped often includes FOB clause.

Ex Ship Contract- In this contract the seller has to deliver the goods to the buyer at the part destination. In such a contract, the property in the goods does not pass until actual delivery. The goods are at the seller’s risk during the voyage.

CIF contract means cost insurance and freight means that the seller delivers when goods pass the ship’s rail in the Port of Shipment.

The main advantage of this contract is the buyer has the advantage of knowing from the date of the contract the exact price he must pay to obtain the goods.