ISLAMIC UNIVERSITY IN UGANDA

COURSE: LLB III EVENING

ACAD YEAR: 2023/2024
YEAR: III
SEMESTER: II
COURSE UNIT: INTERNATIONAL TRADE AND BUSINESS

COURSE CODE: 3203

LECTURER: CSL NANDERA MOUREEN
Question: FORMATION OF THE INTENATIONAL CONTRACT
Group B members

S/ NAME REG No. COMMENT

NO.
1. NAPOKOLI ANDREW 221-053012-21229

2. MUKOLE PHILIP 221-053012-22633

3. NALWEYISO MASIULA 221-053012-21243

4. KOJJO SILVER FELIX 221-053012-22552

5. NAAVA HINDU 221-053012-21515

NDAGIRE
6. AMISI LATIF 221-053012-21798

7. KITAKA UTHMAN 221-053012-21886

NASSER
8. OKELLO EMMANUEL 221-053011-21524

9 SISYE JOEL 221-053012-23015

10. LWANGA ALEX 221-053012-22569

According to International trade and business notes by Counsel Sewaya Mohammad
international trade involves exporting, importing, licensing and joint ventures, direct
investment overseas, barter and counter trade. As such international trade involves the
movement of goods and provision of services across international border between.
International trade activities are guided by Incoterms that were established International
Chamber of Commerce in 1919 purposely to facilitate for international trade.
PREMINARIES
In international trade the first contact between the parties may take the form for an
inquiry or an invitation; such as a catalogue, advertisement or an invitation to submit
tenders for construction or other works. Statements made in the course of negotiations are
not contractual statement, like an offer and acceptance, unless embodied in the contract.
An offer is a proposal while an invitation to offer (treat) is inviting someone to make a
proposal. an invitation to offer is an act which leads to the offer, which is made with an
aim of inducing or negotiating the terms. An advertisement, is known as an “invitation to
treat
Under Article 14 of the UN Convection for International Sale of Goods (CISG), quotation is
an invitation to contract, where parties can agree on all the essential points but leave
details to be settled later, a valid contact is concluded.
Offer
Section 2 of the Contracts Act 2010 defines an “offer” means the willingness to do or to
abstain from doing anything signified by a person to another, with a view to obtaining the
assent of that other person. An offer is a conditional proposal made by a buyer or seller to
buy or sell an asset, which becomes legally binding if accepted.

A contract is a legally binding agreement between two or more parties

offer,
acceptance,
consideration,
intention to create legal relations,
authority and
capacity, and
certainty
The essential elements of the contract must be clearly stated in the communications
exchanged between parties which the seller must be certain of. These are: - The purchase
price and the terms of payment and the goods ordered which should be delivered without
ambiguity. The terms of delivery including instructions for packing and invoicing,
transportation and insurance.
Under Article 15 of the UN Convection for International Sale of Goods (CISG), an offer
becomes effective when it reaches the offeree. An offer is irrevocable though may be
withdrawn before at the same time as the offer.
An irrevocable not able to be changed, reversed, or recovered; final.
The offeror is the party who makes the offer. The offeree is the person who either accepts
or does not accept the offer.
Article 16 of the UN Convection for International Sale of Goods (CISG), Until a contract is
concluded an offer may be revoked if the revocation reaches the offeree before he has
dispatched an acceptance. (2) However, an offer cannot be revoked: (a) if it indicates,
whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it
was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has
acted in reliance on the offer.
acceptance is communicated to the proposer, revocation of the offer
An offer is terminated in the following circumstances:
 Revocation means an offer is withdrawn by the offerer.
 Rejection
 Lapse of time
 Conditional Offer
 Operation of law
 Death of the offeree or offeror
 Acceptance
 Delay in communication of the offer
 Counter offer
 Illegality, Finally, a change in the law which makes a potential contract illegal will
terminate an offer, since courts will not enforce an illegal contract.

6 United Nations Convention on Contracts for the International Sale of Goods Article 17 An
offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.
In the case of Alluminium Industrie Vaassen Bv V Romalpa Aluminum Ltd. (1979) 1WLR
676 Aluminum industry, a Dutch company sold a quantity of aluminum foil to Romalpa, an
English company. The terms of the delivery were ex-works. The contract contained an
extended title clause. A receiver was appointed for Romalpa. The court of appeal held that
Aluminum Industry were entitled to the property in goods supplied by them and still being
in existence. As regards the goods resold by Romalpa had acted as agents and were,
therefore, in a fiduciary relationship to them.
Acceptance
Section 2 of the Contracts Act 2010 defines an “Acceptance” to mean an assent to an
offer made by a person to whom the offer is made. It’s a final unqualified expression of an
assent to all the terms of an offer.
Acceptance is the agreement to the specific conditions of an offer.
Article 18 of the UN Convection for International Sale of Goods (CISG) Acceptance is a
statement made by or other conduct of the offeree indicating assent to an offer. Silence or
inactivity does not in itself amount to acceptance.
The general rule is that acceptance must be communicated to the offeror and silence will
not amount to a valid acceptance.
The acceptance must be unconditional and unqualified. In Nothhern Airlines Ltd. V
Dennis Ferranti Meters Ltd. (1970) 114 SJ 845 the seller, a company in UK negotiated
with the buyer’s a Canadian Company for the sale of an aircraft. The seller sent the
following telegram “Confirming sale to you, Aircraft please remit £5,000. – The buyers
replied: “this is to confirm your cable and purchase xxx aircraft, terms set out your cable-
£5,000 starting forward your laws to be held in trust for your account pending delivery
……..please confirm delivery to be made 30 days within this date” The seller did not reply
but sold the aircraft to a 3rd party at a higher price. The court of Appeal held that there was
no contract. The buyer’s reply introduced new terms, one as to payment and other as to
delivery and the sellers were bound to reply to this contract.
Forms of acceptance
Express Acceptance
Express acceptance occurs when the offeree clearly communicates their agreement to the
terms of the offer. This can be done through spoken or written words, such as saying “I
accept” or signing a document. In the case of Compagnie de Commerce et Commission
S.A.R.L Vs Parkinson Stove Co. Ltd (1953) 1 Llyods Rep 532. It was held that even
though the confirmation slip is not returned there may be a binding contract between the
parties
Implied Acceptance
Implied acceptance occurs when the offeree’s actions indicate their agreement to the terms
of the offer. For example, if someone orders a product online and the seller delivers the
product without any further communication, it is implied that the offer has been accepted.
Conditional Acceptance
Conditional acceptance happens when the offeree agrees to the offer but with certain
conditions attached. In this case, the acceptance is only valid if the conditions are met. If the
conditions are not fulfilled, then there is no valid acceptance.
Article 19 of the United Nations Convention on Contracts for the International Sale of
Goods (CISG) provides for rules for formation of contract with modifications and
conditions
formation of a contract are:
1) offer, where one party proposes the terms of the agreement;
2) acceptance, where the other party agrees to the offered terms;
3) consideration, which involves the exchange of something of value between both parties;
4) intention to create legal relations, ...
Zurich Insurance Co. Ltd v Buba Commercial Bank
In this case, the court considered the issue of conditional acceptance in an international
trade transaction involving insurance coverage for goods being shipped. The buyer had
accepted the seller’s offer for insurance coverage, but with certain conditions related to the
scope and extent of coverage. The court analyzed the validity of the conditional acceptance
and its impact on the contractual relationship between the parties. The case provided
important insights into the enforceability of conditional acceptances in international trade
contracts.

Acceptance by Conduct
Acceptance by conduct occurs when the offeree accepts an offer through their conduct
rather than through explicit words or actions. This form of acceptance is often seen in
business transactions where parties act in a way that indicates their acceptance of an offer.

Tetley v. Chitty (1986): This case involved a dispute over the sale of hops between
Canadian and English parties. The Canadian seller sent a telex offering to sell hops to the
English buyer, who responded with a telex stating “please ship.” The Canadian seller then
shipped the hops but later claimed that there was no concluded contract. The court held
that the conduct of both parties indicated acceptance of the offer and thus established a
binding contract.
Acceptance by Silence Acceptance by silence, also known as passive acceptance, occurs
when the offeree does not explicitly communicate their agreement or disagreement
with the offer. In some jurisdictions, silence may be interpreted as acceptance under
specific circumstances, especially if there is a prior course of dealing between the parties
that indicates silence as a form of acceptance
Article 18 of UN Convention on Contracts for the International Sale of Goods (CISG)
specifically deals with the acceptance of an offer and provides guidelines on when silence
can be considered as acceptance
Performance of a contract
In international trade, the performance of a contract is a critical aspect that governs the
obligations and responsibilities of the parties involved. The parties need to agree on which
that will govern the contract which can help in dispute resolution should it arise. These
includes delivery of goods, passing of property and risks involved. The parties can use
the laws of the importer or exporter for example the sale of goods and supply of services
Act 2017 apply. Parties can apply uniform laws such as the UN Convention on contracts for
the International sale of goods and supply of services Act 2017 which became operational
in 2018.
Elements of performance
Compliance with Contractual Terms: One of the fundamental aspects of contract
performance in international trade is adhering to the terms and conditions outlined in the
agreement.
Delivery of Goods or Services: In international trade, the timely and accurate delivery of
goods or services is crucial for contract performance.
Payment Obligations: The fulfillment of payment obligations is a significant aspect of
contract performance in international trade. Buyer and seller to adhere to terms of
payment.
Resolution of Disputes: Addressing disputes effectively is essential for maintaining
contract performance in international trade.
Delivery
In international trade, delivery refers to the process of transferring goods from the seller to
the buyer. If the parties chose the Ugandan law, the Sale of goods and supply of services
Act 2017 will apply.
Delivery means voluntary transfer of possession.
Goods are delivered to the buyer when he acquires custody of the goods or able to exercise
control over them. Article 30 of the UN Convention on Contracts for the International
Sale of Goods provides that, If the seller must deliver the goods, hand over any documents
relating to them and transfer the property in the goods, as required by the contract and this
Convention.

In the case of Grupo Torras SA v Al-Sabah (No 5) (1995) which involved a dispute over a
contract for the sale of oil products. The House of Lords clarified that under CIF contracts,
delivery takes place when the goods are handed over to the carrier at the port of shipment,
and risk passes to the buyer at that point. The decision reaffirmed the significance of
understanding delivery terms and their implications in international trade transactions.
Article 30, delivery according to a contract.
-34 of CISG
CIF,FOB,FAS
Passing of property
The passing of property refers to the transfer of ownership of goods from the seller to the
buyer. This process determines the rights and obligations of both parties involved in the
transaction.
A sale of goods or property implies a transfer or passing of ownership to the buyer.
The passing of property is an important aspect to help determine the liabilities and rights
of both the buyer and the seller. Once a property is passed to the buyer, then the risk in the
goods sold is that of the buyer and not the seller.
The seller has a duty to deliver and the buyer has a duty to accept and pay for the goods
subject to a contract of sale of goods. Delivery means voluntary transfer of possession. This
may not involve physical delivery of goods, since delivery may be actual or constructive.
Passing of property provides for two rules.
i. Where the property is not ascertained, the property will not pass until ascertained.
ii. Where the contract is for sale of specified goods, the property passes at such a time
that the parties intend.
Passing of Property
There are four primary rules that govern the passing of property:
 Specific or Ascertained Goods
 Passing of Unascertained Goods
 Goods sent on approval or “on sale or return”
 Transfer of property in case of reservation of the right to disposal
Implications of passing property.

The contract is for sale of unascertained goods,the property does not pass to the buyer
unless and until the goods or ascertain.
unascertained goods ,Goods that are not specifically identified at the time a contract of
sale is made. For example, in a contract for the sale of 1000 tonnes of soya bean meal, the
seller may deliver any 1000 tonnes that answer the contract description.
Ascertained goods: The goods which are identified and agreed upon after the formation
of contract of sale of goods are called ascertained goods. 3) Unascertained goods: The
goods which are not identified and agreed upon at the time when the contract of sale is
made are called unascertained goods.
if there is a contract for the sale of unascertained goods, then the passing of the
property of the goods to the buyer cannot happen unless the goods are ascertained.

Transfer of Title and Risk

The transfer of title and risk are closely related to the passing of property. The transfer of
title refers to the transfer of ownership rights from the seller to the buyer, while the
transfer of risk involves the transfer of liability for loss or damage to the goods. These
concepts are essential in determining when ownership and responsibility for goods
pass from the seller to the buyer.
This is provided for under Article 66 of the UN Convection for International Sale of Goods
provides that Loss of or damage to the goods after the risk has passed to the buyer does not
discharge him from his obligation to pay the price, unless the loss or damage is due to an
act or omission of the seller.
Documentation and Compliance

Proper documentation is essential for establishing the passing of property. Commercial

documents such as bills of lading, invoices, packing lists, and certificates of origin play a
crucial role in demonstrating ownership and facilitating customs clearance. Compliance
with import/export regulations and requirements is vital to ensure the passing of property
is legally recognized and enforced.
Documentation and Compliance,It involves gathering and documenting all the relevant
details related to the property transaction.
Dispute Resolution
Passing of property can arise due to disagreements over contractual terms, delivery issues,
or discrepancies in documentation. In such cases, dispute resolution mechanisms outlined
in international trade agreements or incorporated into contracts become crucial for
resolving conflicts related to property transfer.
In the case of Kwei Tek Chao V British Traders & Shippers Ltd (1954) 2 QB it was held
that under CIF or FOB when the seller has taken out the bill of lading, the bill is delivered to
the buyer or agent, the inference that the property which is intended to pass to the buyer is
only conditional that the property in the goods shall revert to the seller if upon
examination they are found not to be in accordance with the contract.
Retention of title clauses. A retention of title (ROT) clause is a contractual provision
that allows the seller to retain legal ownership of commercial goods until they are
paid for in full or other conditions are met.
This clause provides that the seller retains the property in the goods sold until he recovers
the purchase price in cash. The clause makes the passing of property conditional on specific
event that is receipt of price by the seller.
A retention of title (ROT) clause allows the seller of goods to retain ownership of them
until they are fully paid for or other stipulated conditions are met. If the buyer fails to
fulfill the conditions of the clause, then the seller may repossess the goods. clauses
allow the seller to retain the legal ownership over goods or equipment until they are
paid for in full.
A ROT clause is a way to protect suppliers if the buyer becomes insolvent or
declares bankruptcy.
A retention of title (ROT) clause is sometimes included in a sales contract as a form of
financial security for the seller.

The clause is effective and defeats the presumption that property passes when a bill of
lading is transferred to the buyer. The clause may be registered under the Chattel
Securities Act of 2016.
The retention of title clause extends to provide that a buyer if he/she sells goods shall do so
as an agent of the seller and shall act as a trustee of proceeds of sale to the benefit of a
seller.
The clause further gives the buyer the license to sell but also safeguard seller’s position
In the case of Alluminium Industrie Vaassen Bv V Romalpa Aluminum Ltd. (1979) 1WLR
676 Aluminum industry, a Dutch company sold a quantity of aluminum foil to Romalpa, an
English company. The terms of the delivery were ex-works. The contract contained an
extended title clause. A receiver was appointed for Romalpa. The court of appeal held that
Aluminum Industry were entitled to the property in goods supplied by them and still being
in existence. As regards the goods resold by Romalpa had acted as agents and were,
therefore, in a fiduciary relationship to them.

Certificate of quality or inspection

An inspection certificate,It is defined as the documented evidence that the goods in
transit have been inspected to show that they meet the terms stated on the sales
contract. That includes import eligibility, price, tariff classification, quantity, and
quality.
Official Inspection Certificate:It helps in keeping a check on the condition of products
in the shipment on the basis of quality, quantity, import eligibility criteria of the
importing country, product pricing,
Certificate of Quality means the document issued by the Seller in respect of the Goods
confirming the quality of the Goods in accordance with the Contract.
role of a qualified inspector, to issue an inspection certificate after completing the
inspection process.
Buyers to get a report online after it's issued and uploaded. Some of the details in an
inspection certificate include;
the date of issue
contact details of the applicant,
number of packages,
place of issue, port of discharge,
the country of origin, and
the description of the goods.
An inspection certificate is essential to ensure adherence to the sales agreement.
This is document arranged by experts or government to certify that the goods were of good
quality. The Uganda National Bureau of Standards can issue a certificate as well as Uganda
National Chamber of Commerce or Ministries.
A certificate of inspection is issued by an inspection organization, if the contract so
provides. The minimum requirement for that certificate is that that the inspector has
inspected the goods and found to be in good condition.
In Commercial Banking Co. of Sydney Ltd V Jalsard Pls (1973) AC 279 it was held that
if a particular method of inspection shall be adopted or particular information as a result of
inspection shall be recorded, shall as the test results of electronic appliances, the buyer
expressly stipulates this.
The contract between the inspection organization and the client is known as the contract of
goods inspection.

An inspection certificate is often known as a pre-shipment inspection certificate. Below

are the reasons why it is important in import-export trade from China.
 An inspection certificate ensures product quality. All items are extensively tested
to ensure that they fulfill the quality expectations of both the importer and the
customer.
 An inspection certificate ascertains that the amount of items is as specified in the
sales agreement.
 An inspection certificate acts as proof of any potential lawsuits made by a third
party.
 An inspection certificate reduces the risk of fraud linked with imports and exports.
 An inspection certificate restricts any use of false transportation papers such as
bills of lading.

Acceptance & rejection of goods

Acceptance or refusal of goods. If you meet all the conditions of the contract, your buyer
must accept the goods. Refusal to accept them without justification gives you the right to
sue for damages. If you breach a condition of the sale, the buyer can legally reject the goods
If you meet all the conditions of the contract, your buyer must accept the goods. Refusal to
accept them without justification gives you the right to sue for damages. If you breach a
condition of the sale, the buyer can legally reject the goods.
The general rule is that is the buyer has accepted the goods he/she loses the right to reject
them. But he can still claim for damages if the value of the goods delivered were of less
value than the seller promised to supply.
Buyer's remedies after breach such as
Repudiation
damages, and
specific performance
seller's remedies such as
lien rights,
stoppage in transit and
rights of resale.
Condition or warranty
Acondition is a foundation of the entire contract and integral part for performing the
contract. The breach of the conditions gives the right to the aggrieved party to treat
the contract as repudiated. In other words, if the seller fails to fulfil a condition, the
buyer has the option to repudiate the contract or refuse to accept the goods. If the
buyer has already paid, he can recover the prices and also claim the damages for the
breach of the contract.
For example, Sohan wants to purchase a horse from Ravi, which can run at a speed of
50 km per hour. Ravi shows a horse and says that this horse is well suited for you.
Sohan buys the horse. Later on, he finds that the horse can run only at a speed of 30
km/hour. This is the breach of condition as the requirement of the buyer is not
fulfilled. The conditions can be further classified as follows.
Conditions are the set stipulations of the contract, whereas warranties are
considered to be an additional set of rules.
Kinds of conditions
Expressed Condition
The dictionary meaning of the term is defined as a statement in a legal agreement
that says something must be done or exist in the contract. The conditions which are
imperative to the functioning of the contract and are inserted into the contract at the
will of both the parties are said to be expressed conditions.
Implied Condition
There are several implied conditions which are assumed by the parties in different
kinds of contracts of sale. Say for example the assumption during sale by description
or sale by sample. Implied conditions are described in Section 14 to 17 of the Sale of
Goods Act, 1930. Unless otherwise agreed, these implied conditions are assumed by
the parties as if it is incorporated in the contract itself. Let’s study these conditions
briefly:
 Implied condition as to title
In every contract of sale, the basic yet essential implied conditions on the part of the
seller are that-
1. Firstly, he has the title to sell the goods.
2. Secondly, in case of an agreement to sell, he will have the right to sell the
goods at the time of performing the contract.
Consequently, if the seller has no title to sell the given goods, the buyer may refuse or
reject those goods. He is also entitled to recover the full price paid by him.
In Rowland v. Divall (1923), the party bought a second-hand motor car from the
former and paid for the same. After six months, he was deprived of it as the seller
had no title to sell the car. It was held that the aggrieved party is entitled to recover
the money.
 Implied condition as to the description
Moving to Section 15 of the Act, In the contract of sale, there is an implied condition
that the goods should be in conformity with the description. The buyer has the
option to either accept or reject the goods which do not conform with the description
of the good. Say for example: Where Ram buys a new car which he thinks to be new
from “B” and the car is not new. Ram’ can reject the car.
Referring to Section 16(2) of the given Act, goods must be of merchantable quality. In
other words, the goods are of such quality that would be accepted by a reasonable
person. For eg: A purchased sugar sack from B which was damaged by ants. The
condition of merchantability is broken here and it is unfit for use. It must be noted
from this section that the buyer has the right to examine the goods before accepting
it. But a mere opportunity without an actual examination would not suffice to
deprive the buyer of his rights. If however, the examination does not reveal the
defect but within a reasonable time period the goods are found to be defective, He
may repudiate the contract even if he approves the goods.
The implied conditions especially in case of eatables must be wholesome and sound
and reasonably fit for the purpose for which they are purchased. For eg: Amit
purchases milk that contains typhoid germs and because of its consumption he dies.
His wife can claim damages.
  Implied condition as to sale by sample
In the light of Section 17 of the Act, in a contract of sale by sample, there may be
following implied conditions:
1. That the actual products would correspond with the sample with respect to
the quality, size, colour etc.
2. That the buyer gets a reasonable opportunity to compare the goods with the
sample.
3. Further, the goods are free from any defect rendering them unmerchantable.
For example, A company sold certain shoes made of a special kind of sole by sample
sale for the French Army. Later when the bulk was delivered it was found that they
were not made from the same sole. The buyer was entitled to the refund of the price
and damages.
 Implied condition as to Sale by sample as well as a description
Referring to Section 15 of the Sale of Goods Act, 1930, in a sale by sample as well as
description, the goods supplied must be in accordance with both the sample as well
as the description. In Nichol v. Godis(1854), there was a sale of foreign refined rape-
oil. The delivered oil was the same as the sample but it was having a mixture of other
oil too. It was held in this case that the seller was liable to refund the amount paid.
A condition is an essential term in a contract or sale that goes to the root of the
agreement. It is a key element that defines the rights and obligations of the parties
involved. The performance or non-performance of a condition is considered crucial
to the validity and enforceability of the contract
Advantages of Condition
1. Provides clarity and certainty in contractual agreements.
2. Ensures that essential terms and obligations are clearly defined.
3. Allows for termination of the contract in case of a material breach of
condition.
4. Protects the interests of both parties by setting specific requirements.
5. Facilitates fair and equitable resolution of disputes in case of breach.
6. Helps prevent misunderstandings and disputes by clearly outlining
obligations.
7. Forms the foundation for the performance of the contract.
 8. Provides a legal framework for determining liabilities in case of non-
compliance.
9. Helps maintain the integrity and enforceability of the contract.
10.Assists in preserving the rights and interests of the innocent party in case of
breach.

Disadvantages of Condition
1. Non-performance of a condition can lead to termination of the contract.
2. Failure to meet a condition may result in additional costs or penalties.
3. Conditions can be complex and difficult to negotiate or understand.
4. Enforcing conditions may require legal intervention and incur legal costs.
5. Non-compliance with conditions can strain business relationships.
6. The innocent party may face disruptions or delays in case of breach of
condition.
7. Conditions can limit flexibility in contract performance.
8. Disputes may arise regarding the interpretation or fulfillment of conditions.
9. Negotiating conditions may slow down the contracting process.
10.Conditions may vary depending on the industry or specific contract
requirements.

Warranty
Warranty is the additional stipulation and a written guarantee that is collateral to
the main purpose of the contract. The effect of a breach of a warranty is that the
aggrieved party cannot repudiate the whole contract however, can claim for the
damages. Unlike in the case of breach of condition, in the breach of warranty, the
buyer cannot treat the goods as repudiated.
Kinds of Warranty
Expressed Warranty
The warranties which are generally agreed by both the parties and are inserted in
the contract, it is said to be expressed warranties.
Implied Warranty
Implied warranties are those warranties which the parties assumed to have been
incorporated in the contract of sale despite the fact that the parties have not
specifically included them in the contract. Subject to the contract, the following are
the implied warranties in the contract of sale:
 Warranty as to undisturbed possession
Section 14(2) of the given Act provides that there is an implied warranty that the
buyer shall enjoy the uninterrupted possession of goods. As a matter of fact, if the
buyer having got possession of the goods, is later disturbed at any point, he can sue
the seller for the breach of warranty.
For eg: ‘X’ purchased a second-hand bike from ‘Y’. Unknown to the fact that the bike
was a stolen one, he used the bike. Later, he was compelled to return the same. X is
entitled to sue Y for the breach of warranty.
 Warranty as to freedom from Encumbrances
In Section 14(3), there is an implied warranty that the goods shall be free from any
charge or encumbrances that are in favour of any third party not known to the buyer.
But if it is proved that the buyer is known to the fact at the time of entering into the
contract, he will not be entitled to any claim.
For eg: A pledges his goods with C for a loan of Rs. 20000 and promises him to give
the possession. Later on, A sells those goods to B. B is entitled to claim the damages
if he suffers any.
 Implied warranty to disclose Dangerous nature of the goods sold
If the goods sold are inherently dangerous or likely to be dangerous and the buyer is
not aware of the fact, it is the duty of the seller to warn the buyer for the probable
danger. If there would be a breach of this warranty, the seller will be liable.
For eg: A purchases a horse from B if the horse is violent and then It is the duty of the
seller to inform A about the probable danger. While riding the horse, A was inflicted
with serious injuries. A is entitled to claim damages from B.
A warranty is an ancillary term in a contract or sale that provides additional
assurances or guarantees regarding the quality, fitness, or performance of the goods.
It offers protection and compensation to the buyer in case the goods do not meet the
specified standards or requirements.
Advantages of Warranty
1. Provides assurances regarding the quality and performance of the goods.
2. Enhances customer confidence and trust in the product or service.
 3. Offers protection against defects or non-conformities.
4. Allows for repairs, replacements, or refunds in case of non-compliance.
5. Supports marketing and sales efforts by promoting reliability and customer
satisfaction.
6. Helps build long-term customer relationships and loyalty.
7. Differentiates the product or service from competitors.
8. Provides a competitive advantage by assuring customers of the product's
quality.
9. Increases customer satisfaction and reduces the risk of product returns.
10.Allows for legal recourse and compensation in case of breach.

Disadvantages of Warranty
1. Fulfilling warranty obligations may result in additional costs for the seller.
2. Warranty claims may require resources and time to investigate and process.
3. Warranty terms and conditions can be complex and subject to interpretation.
4. Disputes may arise regarding the coverage or exclusions of the warranty.
5. Warranty claims can strain customer relationships and trust.
6. False or fraudulent warranty claims can lead to financial losses for the seller.
7. Extended warranty periods can create financial risks for the seller.
8. Warranty terms may vary across jurisdictions, requiring compliance with different regulations.
9. Inaccurate or misleading warranty information can damage the seller's reputation.
10. Warranty claims can lead to administrative burdens and paperwork for both parties.

The buyer is entitled to reject if a condition relating to them is broken

i.e if not in accordance with their description in a contract
if they are unsuitable for the purpose with the knowledge of the seller
if they don’t correspond with the sample.
-Examination of goods
Article 38 of the UN Convention on Contracts for the International Sale of
Goods (CISG) requires that buyer must examine the goods, or cause them to be
examined, within as short a period as is practicable under the circumstances.
The buyer’s examination of goods is an obligation based on CISG rules that are intended to
protect the interests of both the seller and buyer.
The factors that are considered by the courts include, the nature of goods, applicable trade
usages, mode of delivery, machinery’s complexity, type of defect, circumstances of the
parties and expertise of the buyer’s employees.
Buyer who fails to both examine the goods and give notice of nonconformity to the seller
within a reasonable time loses the right to rely on the lack of conformity provision and,
consequently, loses remedies recognized under Article 45 of the CISG. The study
recommends that a buyer, who wishes to obtain more time to examine the goods and to
give notice of nonconformity, specify the intended period in contract by derogating from
the provisions of Articles 38 and 39 of CISG.