DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW.

FINAL DRAFT

TOPIC – Ranbirsingh Shankarsingh Thakur Vs.

Hindusthan General Electric
Corporation Ltd. and Ors

SUBMITTED TO: SUBMITTED BY:

Mrs. VISALAKSHI VIPUL GAUTAM & VISHAL ARYA

ASSISTANT PROFESSOR ENROLLMENT NO-

DR.RMLNLU 170101162,170101163

SECTION-B

ROLL NO-162&163

Page 1
 ACKNOWLEDGEMENT

First of all, I would like to thank my teacher of the subject “LAW OF CONTRACT”,Ms.
Visalakshi ,for providing every bit of help and also showing the way in which to proceed and
how to go about the project. I would also like to thank my parents, friends and others who
helped me immensely at every step and gave every possible bit of help that I needed
in preparing the project and making it look presentable in a good way. I would also like to
thank the library staff of RMLNLU who provided me with books that I needed in
making and preparing the project and other pieces of information and help that was required.
At last I would like to sincerely thank God who gave me the much needed strength and power
to go ahead with the project and make it in a presentable way.

THANK YOU!
 TABLE OF CONTENTS

 Introduction

 Facts of the Case

 Legal issues involved

 Relevant Sections

 Decision

 Critical Analysis

 Cases

 Conclusion

 Bibliography
 INTRODUCTION

This is an application by the original plaintiff Ranbirsingh Shankarsingh Thakur whose suit was
dismissed by the learned Small Court Judge, Nagpur. The suit was to recover a sum of Rs. 674/-
from the two defendants as refund of the price of a radio-set which he purchased from the
defendants and which was not in working order at all. The judgment of the case is delivered by
R.R. Bhole,J.

This case deals with section 16 of Indian Sale of Goods Act,1930.This is a case of hire-purchase
agreement.

Sale of Goods Act (III of 1930), Section 16 1 -"By implication", words in Section 16(1) whether
indicate that communication of purpose to seller by buyer must be expressed in words --
Whether under Section 16(2) seller responsible for latent defects in goods sold of a particular
description in absence of agreement to the contrary.

The words "by implication" in Section 16(1) of the Sale of Goods Act, 1930, indicate that the
communication of the purpose to the seller need not be expressed in words. It may be inferred
from the description of the goods given by the buyer to the seller or from the circumstances of
the case. The buyer however must rely on the seller's skill and judgment.

Under Sub-section (2) of Section 16 of the Act in the case of goods sold of a particular
description by a seller who deals in such goods, he is always, in the absence of agreement to the
contrary, responsible for the latent defects in the goods which render them unmerchantable,
whether the buyer examined them or not, and for all such defects, whether latent or discoverable,
on examination in cases where the buyer has not in fact examined the goods. Where the buyer
however gets opportunity of inspection but examines the goods superficially, he cannot
complain of defects which a reasonable and more thorough examination ought to have revealed.

1
Section 16 of the Indian Sale of Goods Act,1930
CASE DETAILS-

Case name: Ranbirsingh Shankarsingh Thakur Vs. Hindusthan General Electric

Corporation Ltd. and Ors.

Appellant: Ranbirsingh Shankarsingh Thakur

Respondent: Hindusthan General Electric Corporation Ltd. and Ors.

Equivalent citations: AIR 1971 Bom 97, (1972) 74 BOMLR 789, ILR 1972 Bom 427

Bench: Bhole J.

FACTS OF THE CASE-

This is an application by the plaintiff, Ranbirsingh Shankarsingh Thakur whose suit was rejected
by the Small Cause Court Judge, Nagpur. The suit was to recoup a total of Rs. 674/ - from the
two defendants as refund of the cost of a radio-set which he obtained from the defendants and
which was not in working condition by any stretch of the imagination.

The defendant No. 1 is the manufacturing Corporation of radio-sets and other electrical goods.
Defendant No. 2 is the distributor of defendant No. 1's products. The plaintiff purchased radio-
set of a particular model by name HGEC (Saba) from the defendant No. 2 on 20-2-1962 on a
hire-purchase basis. He had paid in advance Rupees 270/- on that date (20-2-1962) and agreed to
pay the rest of the sum in six instalments at the rate of Rs. 60 per mensem. Along with the radio
which he got on 20-2-1962, under this hire-purchase agreement, he also got a guarantee under
which the defendants undertook to repair or exchange free of cost any components except valves
which may become defective due to faulty workmanship or material within one year from the
date of purchase. It appears that the radio-set started giving him trouble in May or June 1962. It
was giving jarring sound. Therefore, the plaintiff handed over this radio-set to the defendant No.
in June 1962. The radio was thereafter lying with defendant No. 2 and it was given back to the
plaintiff only on 16-7-1963. The case of the plaintiff now is that although he had paid all the
arrears by 16-7-1963, the radio still is not in working order and is with the defendants. According
to him, the defendants have committed a breach of warranty and therefore he is entitled to reject
the radio and claim the refund of its price with interest.

The defendants contest the claim of the plaintiff and say that he cannot claim refund of the price
because according to them the original set was immediately repaired after June 1962 and that it
was lying with them till July 1963 because the plaintiff did not turn up to take the radio. They
further plead that the set was again repaired on 21-10-1963 and returned to the plaintiff after
recovering some repairing costs but the plaintiff again brought it back in November 1963 and,
therefore, they sent the radio-set to the manufacturing Corporation for repairs. The
manufacturing corporation repaired the set and sent it back to Nagpur in April 1964 but the
plaintiff declined to pay the repairing costs and the insurance costs and declined to accept the
radio. According to them, therefore, the plaintiff under these circumstances has no right to reject
the set and claim refund of its price.

The learned Small Cause Court Judge, although there was a hire purchase agreement and
although that agreement was admitted by the defendants, found that there was no hire-purchase
agreement between the parties. According to him, the plaintiff is neither entitled to reject the
radio nor claim refund of its price. Therefore, he dismissed the plaintiff's suit. He also ordered
that the plaintiff is free to take back his radio from the defendants on a payment of the repairing
cost of Rs. 40-72. This decree of the trial Court is challenged here by the plaintiff
STATUTE INVOLVED:

 Section 16 of Indian Sale of Goods Act, 1930.

LEGAL ISSUE INVOLVED:

 The decree of the trial Court which was challenged here by the plaintiff, Ranbirsingh
Shankarsingh Thakur.
This decree of the trial court rejected the plaintiff’s suit claiming that there was no hire-
purchase agreement between the parties and the plaintiff is neither entitled to reject the
radio nor claim refund of its price. The point therefore that arises here for consideration is
to see whether this order is according to law.

RELEVANT SECTION:

Caveat emptor is a Latin term that means "let the buyer beware." Similar to the phrase "sold as
is," this term means that the buyer assumes the risk that a product may fail to meet expectations
or have defects. In other words, the principle of caveat emptor serves as a warning that buyers
have no recourse with the seller if the product does not meet their expectations.

The term is actually part of a longer statement: Caveat emptor, quia ignorare non debuit quod jus
alienum emit ("Let a purchaser beware, for he ought not to be ignorant of the nature of the
property which he is buying from another party.") The assumption is that buyers will inspect and
otherwise ensure that they are confident with the integrity of the product (or land, to which it
often refers) before completing a transaction. This does not, however, give sellers the green light
to actively engage in fraudulent transactions.
Under the principle of caveat emptor, for example, a consumer who purchases a coffee mug and
later discovers that it has a leak is stuck with the defective product. Had they inspected the mug
prior to the sale, they may have changed their mind.A more common example is a used car
transaction between two private parties (as opposed to a dealership, in which the sale is subject
to an implied warranty). The buyer must take on the responsibility of thoroughly researching and
inspecting the car—perhaps taking it to a mechanic for a closer look—before finalizing the sale.
If something comes up after the sale, maybe a transmission failure, it is not the seller's
responsibility. Garage sales offer another example of caveat emptor, in which all sales are final
and nothing is guaranteed.

 Section 16 of the Indian Sale of Goods Act,1930 is an exception to the rule of caveat
emptor under the Act. Sub-sections (1) and (2) of Section 16 are as follows:--

"16. Subject to the provisions of this Act and of any other law for the time being in force, there is
no implied warranty or condition as to the quality or fitness for any particular purpose of Roods
supplied under a contract of sale, except as follows:--

(1) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are required, so as to show that the buyer relies on the seller's skill
or judgment, and the goods are of a description which it is in the course of the seller's business to
supply (whether he is the manufacturer or producer or not), there is an implied condition that the
goods shall be reasonably fit for such purpose2;

Provided that, in the case of a contract for the sale of a specified article under its patent or other
trade name, there is no implied condition as to its fitness for any particular purpose.

(2) Where the goods are bought by description from a seller who deals in goods of that
description (whether he is the manufacturer or producer or not), there is an implied condition that
the goods shall be of merchantable quality:

2 Section 16 of the Indian Sale of Goods

Act,1930
Page 8
Provided that, if the buyer has examined the goods, there shall be no implied condition as regards
defects which such examination ought to have revealed3."

DECISION:

The learned Small Cause Court Judge, although there was a hire purchase agreement and
although that agreement was admitted by the defendants, found that there was no hire-purchase
agreement between the parties.According to him, the plaintiff is neither entitled to reject the
radio nor claim refund of its price. Therefore, he dismissed the plaintiff's suit.

It was found that it was difficult to accept the finding of the trial Court. It appears that the order
of dismissal of the plaintiff's suit by the trial Court is not according to law. The decree passed by
the trial Court was set aside and hereby order that both the defendants jointly and severally shall
pay to the plaintiff Rs. 630.43 with interest at 6% per annum from 21-10-1963 till the date of
payment. This application was allowed with costs of this Court only.

CRITICAL ANALYSIS:
The impugned radio set was purchased under a hire-purchase agreement by the plaintiff on
20.2.1962 and had ultimately paid the balance of Rs.180/- after certain defaults on 16.7.1963.
The defendants had also waived their right to forfeit under the forfeiture clause under the
agreement. Therefore, the radio was sold by the defendants to the plaintiff on 16.7.1963. The
claim of the plaintiff, therefore, can be considered under the Indian Sale of Goods Act, 1930.

The history of the radio shows that after the radio was handed over to the plaintiff by the
defendant No. 2 on 20.2.1962, it started giving him trouble and was not working satisfactorily
and was giving a jarring sound in May or June 1962. The plaintiff therefore, had no other
alternative but to return the radio to the defendants in June 1962. The radio was repaired and he
took it back in July 1963. It appears that the radio started again giving him trouble and, therefore,
according to the plaintiff, he handed it back again in the same month of July 1963. According to

3 Section 16 of the Indian Sale of Goods

Act,1930
Page 9
the defendants, however, he returned the radio set and it was again repaired on 21.10.1963. He
did not take back the radio but it appears that there was also another bill of repairs dated
16.4.1963. This history therefore, clearly shows that after the purchase of the radio by the
plaintiff on 20.2.1962, the radio was not working satisfactorily. The plaintiff had, therefore, to
return the radio to the defendants within about four months. He says in his evidence that the
radio gave good performance for two months and then became defective. He also has admitted in
his evidence that on 16.7.1963 when he paid the last installment and when the radio was sold, he
found the radio giving good performance, but thereafter it again became bad.

The correspondence between the parties also shows that the radio was not working satisfactorily
soon after the hire purchase agreement and after its sale. We have a letter by the plaintiff to the
defendant No. 1 dated 7 November,1963 in which he has complained about the defects in the
radio-set which he purchased from defendant No. 2. The defendant No. 1 has also written a letter
to the plaintiff in November,1963 stating that they referred his complaint to their dealer
defendant No. 2, with a request to attend to the plaintiff's radio. The defendant No. 1 has also
mentioned that in case defendant No. 2 found any difficulty to repair the set, they were advised
to send the same to their works for thorough repairs. We have then another letter from defendant
No. 2 dated 9 December,1963 in which they have stated that they had repaired the set to their
satisfaction and requested the plaintiff to take delivery. They have also mentioned that since the
plaintiff was not satisfied with the repairs and had not taken the delivery, they are, in these
circumstances, sending the radio-set to their Calcutta firm. All this correspondence, therefore,
clearly shows that the radio-set was not working properly and, therefore, not only defendant
No.2 had to repair the same but they had also to send the same for thorough repairs to their
manufacturing company defendant No. 1. There is similar correspondence by defendant No. 1
and by the plaintiffs that the radio-set was bad and had to be repaired by not only defendant No.1
but also by defendant No. 2. All these circumstances, therefore, clearly show that the radio-set
which was purchased by the plaintiff was defective from the very beginning and it did not serve
the purpose of the plaintiff for which he had purchased it from the defendants.

Section 16 of the Indian Sale of Goods Act,1930 deals with the implied conditions as to quality
or fitness of goods for a particular purpose. No distinction appears to have been drawn in the
section between contracts for the sale of specific, as distinguished from those for the sale of

Page 10
unascertained goods. Exception 1 applies where the buyer requires the goods for a particular
purpose, where the buyer expressly or by implication makes known to the seller that particular
purpose, where it is shown that the buyer relies on the seller's skill or judgment and where the
seller's usual course of business is to sell such goods, whether he is the actual producer or not.
Where all these essential facts exist, there is an implied condition that the goods shall be
reasonably fit for such purpose. The buyer in our case did rely on the skill or judgment of the
seller. This is not a case where he had inspected the goods and bought them on his own
judgment. In this case, the buyer purchased the radio-set with some specified purpose. It could
easily be said that the vendor sold this radio-set for that specified purpose. It has, therefore, to be
of a certain quality. If it is not of that quality and if it is not fit for such purpose, then the law
implies a promise from the vendor that he will supply to the purchaser an article of that quality
and reasonably fit for the purpose for which it is required. The seller's liability in such cases to
supply goods that are reasonably fit Is an absolute one.

It is not necessary that the buyer should expressly or by implication make known to the seller a
particular purpose. The words "by implication" in Section 16(1) clearly indicate that the
communication of the purpose to the seller need not be expressed in words. It may be inferred
from the description of the goods given by the buyer to the seller or from the circumstances of
the case. The buyer however, must rely on the seller's skill or judgment. In this particular case, it
does appear that the plaintiff naturally had relied on the radio-set which he had purchased from
the defendants. In the instant case defendant No. 2 was a firm which was supplying radios in the
ordinary course of their business. In fact they were supplying the goods manufactured by
defendant No. 1. Therefore, the buyer naturally should expect goods which were fit enough for
the purpose for which he was buying. We have seen that the radio-set started giving the plaintiff
trouble almost about two months after he purchased it. In this view of the matter, therefore, it
appears to that the case of the plaintiff could even come within the purview of Sub-section (1) of
Section 16.

It could also come within the purview of Sub-section (2) of Section 16. This, sub-section
embodies also an exception recognized at common law to the maxim "caveat emptor". If a dealer
deals in goods of a particular description and if the buyer purchases the same, then there is an
implied condition that the goods shall be of the merchantable quality. If however the buyer had
examined the goods, then there shall be no implied condition as regards defects which such
examination ought to have revealed. In other words, in the case of goods sold of a particular
description by a seller who deals in such goods, he is always, in the absence of agreement to the
contrary, responsible for the latent defects in the goods which render them unmerchantable,
whether the buyer examined them or not, and for all such defects, whether latent or discoverable,
on examination in cases where the buyer has not in fact examined the goods. Where the buyer
however gets opportunity of inspection but examines the goods superficially, he cannot complain
of defects which a reasonable and more thorough examination ought to have revealed. This
proposition is also laid down in Thornett and Fehr v. Beers and Sons 4.This is not a case in
which the plaintiff had either inspected the goods or even superficially examined the goods.
Therefore, it appears to me that even if the goods are sold under a patent or a trade name or
otherwise, but if they are of a particular description and if they are sold by a seller who deals in
goods of that description, then there is an implied condition as to merchantableness of the Goods.

It would, therefore, be difficult to accept the finding of the trial Court. It appears that the order of
dismissal of the plaintiff's suit by the trial Court is not according to law. The learned advocate for
the opponents requests that the order as regards costs in this application should at least be that
each party to bear its costs. It is also difficult to agree with this plea. In the ordinary course of
their business, the defendants ought to have served the plaintiff like good businessmen and not to
have given any opportunity to complain. But the plaintiff had to take recourse to law. In these
circumstances, therefore, this application should be allowed with costs.

4
Thornett and Fehr v. Beers and Sons, AIR 1919 1 KB 486
 LEADING CASE

 Grant v. Australian Knitting Mills5 (1935)

Grant v. Australian Knitting Mills, is a landmark case in consumer and negligence law from
1935, holding that where a manufacturer knows that a consumer may be injured if the
manufacturer does not take reasonable care, the manufacturer owes a duty to the consumer to
take that reasonable care.

FACTS:

In June 1931 Dr Grant purchased two pairs of woollen underwear and two singlets from John
Martin & Co. There was nothing to say the underwear should be washed before wearing and Dr
Grant did not do so. He suffered a skin irritation within nine hours of first wearing them. Dr
Grant applied calamine lotion, but continued to wear the underwear for the rest of the week. He
then wore the second pair for the next week and washed the first pair. This was in an era when
changing his underwear only once a week was "the ordinary custom of ordinary people".The skin
irritation got worse and developed into a severe case of dermatitis. Dr Grant blamed the
underwear and sued John Martin & Co. for breach of contract, being the statutory warranties that
the goods were fit for the purpose and were of merchantable quality Dr Grant also sued the
manufacturer, Australian Knitting Mills,alleging that they had been negligent in failing to take
reasonable care in the preparation of the garments. The garments in question were alleged to
contain an excess of sulphur compounds, variously described as sulphur dioxide and sulphites

ISSUE:

Whether the manufacturer owes a duty of care to the customer.

JUDGEMENT:

It was held by the Judicial Committee that company were liable in contract; their liability was
made out under exceptions (1) and (2) to Section 14 which are equivalent to exceptions (1) and
(2) to Section 16 of our Indian Sale of Goods Act.

5
(1933). 50 C.L.R. 387
In their Lordships’ judgement the retailers are liable in contract of sale. The facts set out show
negligence in manufacture. If excess sulphites were left in garment, that could only be because
someone was at fault and the appellant is not required to lay his finger on the exact person who
was responsible, or to specify what he did wrong. 2) The decision treats negligence, where there
is a duty to take care. In Donoghue’s case the duty was deduced simply from the facts relied
upon: article issued to the world, used by the party in the state in which it was prepared and
issued without it being changed in any way and without there being any warning of, or means of,
detecting, the hidden danger. There was no personal intercourse between the maker and the user;
but the duty is personal, because it is inter partes (between parties), it needs no interchange of
words, spoken or written, or signs of offer or assent. The want of care and the injury are in
essence directly and intimately connected. The word ‘control’ in D. case is used to emphasise the
essential factor that the consumer must use the article exactly as it left the maker, and used it as it
was intended to be used (control, of the maker, until it is used – artificial, because they parted
with all the control when they sold the article).

RECENT CASE

 Hasenbhoy Jetha, Bombay Vs. New India Corporation Ltd6(2009)

FACTS:

This appeal is brought by the defendants Hasanbhoy Jetha, a firm carrying on business as
stockists and suppliers of hardware goods and second-hand machinery in Bombay. The suit was
instituted in March 1946 by the respondents herein for recovery of damages of a sum of Rs.
8187-8-0 oil the ground that the appellants firm was guilty of "breach of contract, breach of
condition and breach of warranty and fake representations and assurances .By a subsequent
amendment in 1948, the respondents claimed that, they were entitled to the return of the sale
consideration of Rs. 11,500 plus the amounts expended by them by way of repairs, or in the
alternative to recover damages already claimed by them in the original plaint plus a sum of Its.
858-8-0 spent for repairs on 30-6-1947 making in all Rs. 9046. The appellants herein contended

6
AIR 1955 Mad 435
that they were not liable to return the saie consideration, or pay any amount by way of damages,
as the second-hand stone-crusher was purchased by the plaintiff company after inspection and
that no assurances, express or implied, were given by them.

ISSUE:

Whether the appellants were guilty of breach of warranty at the time they sold the crusher to the
respondent.

JUDGEMENT:

The Sale of Goods Act of 1893 codified the English law relating to the Sale of goods. Section
14(2), English Act corresponds to Section 16(2), Indian Sale of Goods Act Having regard to the
codification of the law, it is unnecessary for us to deal with the several cases cited at the liar and
which are based on the common law principles. Pollock and Mulla in his commentary on the
Indian Sale of Goods Act, 2nd End. at p. 81 has clearly set out the differences between the
common law rule and Section 16(2) in the following terms :

"Sub-section (2) embodies the second exception recognised at common law to the maxim 'caveat
emptor' but again introduces important modifications in favour of the buyer; for whereas at
common law the implication of a condition that the goods were of merchantable quality did not
arise if the buyer had 'an opportunity to examine' the goods, under this Section, it will only be
negatived if the buyer has 'actually examined' the goods.

Further, while it was at least doubtful whether the seller was, at common law, liable for latent
defects which rendered the goods unmerchantable in those cases where the buyer had the
opportunity of examining the goods under the Act the seller is so liable, even if the goods are
examined by the buyer. The rule therefore now is, in the case of goods sold by description by a
seller who deals in such goods, that he is always, in the absence of agreement to the contrary,
responsible for latent defects in the goods which render them unmerchantable whether the buyer
has examined them or not, and for all such defects whether latent or discoverable on examination
in cases where the buyer has not in fact examined the goods .It is to be observed, also, that the
implied condition applies to all goods bought from a seller who deals in goods of that
description, whether they are sold under a patent or trade name or Otherwise."

The appellants will be entitled to a refund of the court-fee paid on the memorandum of appeal.

CONCLUSION

The effect of the maxim caveat emptor is that a person has no duty to disclose problems
voluntarily. Thus, if one person is laboring under a misapprehension, there is no duty on the
other person to correct it. However, there are three fundamental exceptions to this rule:

1)The representor must not misleadingly tell only part of the truth.

2)Where a statement was true when made out but due to a change of circumstances has become
false by the time it is acted upon, there is a duty to disclose the truth.

3) Contracts uberrimae fidei (contracts of the utmost good faith) impose a duty of disclosure of
all material facts because one party is in a strong position to know the truth. Material fact is
something which would influence a reasonable person in making the contract. If one party fails
to do this, the contract may be avoided. Where there is a fiduciary relationship between the
parties to a contract, a duty of disclosure will arise, for example, solicitor and client, bank
manager and client, trustee and beneficiary, and inter-family agreements.

The rule of caveat emptor appeared to play an important role in the past when trade was
conducted on local scale and the buyer had every opportunity to examine the goods before
buying. However, in the modern context the rigors of the rule have been mitigated because of
global dimensions of trade, government legislations on consumer protection, profession
management and intense competition and consumer awareness.
 BIBLIOGRAPHY

Primary Sources:

 Books-

 Bangia, R.K. , Sales of Good Act, 9th edition, Allahabad Law Agency, Delhi, 2012.

 Singh, Avtar, Law of Sales of Good, 7th edition, Eastern Book Company,
Lucknow, 2011.

 Padhi, P.K., Legal aspects of business, PHI Learning Pvt. Ltd., 2012

 Saharay,Dr. Madhusudan,Textbook on Sale of Goods and Hire Purchase,Universal

Law Publishing,New Delhi 2010.

 Chakraborty , R., Law of sales of good and partnership, 1st edition, Orient Publishing
Company, New Delhi 2006.

Secondary Sources:

 Websites-

 http://www.citeman.com/7032-caveat-emptor-buyer-beware.html

 http://www.indiankanoon.org/doc/1649627/

 http://www.e-lawresources.co.uk/Statutory-implied-terms.php

 http://www.lawyersclubindia.com/articles/Rule-of-CaveatEmptor-
5399.asp#.UmuC_vlmiSo

 www.lexisnexis.com/academics

 http://document.manupatra.com/MH/1950-2000/mh1971/m710017.htm

 www.legalindia.com