Goods and Doctrine of Caveat Emptor under Sale of Goods Act, 1930


Definition of goods

According to Section 2(7) of the Sales of Goods Act, 1930,: ““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.”

Classification of goods

  1. Existing goods

Existing goods are the goods, which are already owned and are in the possession of the seller at the time of sale. The seller and the buyer enter into a contract on the basis of these goods at the time of making the contract of sale. They are further divided into three types of goods:

  • Specific Goods: These are goods which are identified and agreed specifically upon by the parties at the time of contract of sale.
  • Unascertained Goods:  These are goods that are agreed upon at the point of making the contract of sale but are not specifically identified in the contract. These goods are merely indicated or described by the parties at the time of contract of sale.
  • Ascertained goods: When the unascertained goods are identified and agreed upon by the parties, the goods are known as ascertained goods. When part of the goods lying in bulk are identified and set aside for sale, such goods are termed as ascertained goods.
  1. Future goods

Section 2(6) of the Act deals with “future goods”. Usually, the seller either manufactures or produces these goods after making the contract of sale. These goods do not exist at the time of the contract of sale. . Future goods cannot be sold, but there can only be an agreement to sell.

  1. Contingent goods

It is a kind of future goods. The acquisition of these goods is contingent upon the happening or non –happening of an uncertain event.

Effect of destruction of goods

  1. Goods perishing before making of the contract

Where there is a contract of sale of specific goods, there is an implied condition that the goods bargained are in existence. According to Section 7 of the Act, if the specific good perishes or becomes so damaged that they are no longer what has been mentioned in the Contract, the Contract will be deemed as void. This provision is not applicable for unascertained goods.

  1. Goods perishing before sale but after agreement to sell

According to Section 8 of the Act, when there is an agreement to sell specific good but the goods perish or damage, without it being the fault of the buyer or the seller, the agreement is then avoided. This Section deals with a contract which is valid but become void when the goods perish.


The doctrine of Caveat Emptor is applicable in the case of purchase of goods, which means ‘Buyer Beware’. The maxim means that the buyer should take care of the quality of the goods before purchasing them but, section 16 of the Sale of Goods Act 1930 provides a few exceptions:

Implied Condition as to Quality or Fitness (First exception to the rule of Caveat Emptor–Section 16(1))

If the buyer tells the seller the purpose for which he is buying the goods and trust is placed on the skill and judgment of the seller, the rule of caveat emptor does not apply and it becomes the seller’s duty to supply the goods suitable for the purpose mentioned by the seller.

In the Raghava Menon v. Kuttappan Nair[1] case, the plaintiff purchased a wrist watch from the defendant. The watch did not function properly despite the numerous attempts to fix it. The buyer sued the seller for the same. It was held that the seller was liable and the Court held that the “plaintiff is a layman and he approaches a fairly reputed firm like the defendant dealing in watches and purchases a watch from them, not for any special purpose, but for the common purpose of knowing the correct time. In such a case, Section 16(1) of the Sale of Goods Act must apply, because the buyer makes known to the seller, by implication, the purpose for which he purchases the watch and also relies on the seller’s skill or judgement”.

When the buyer buys an article by specifying its patent or other trade name, there is no implied condition of the fitness of the goods for any particular purpose. Since the buyer defines the goods by mentioning the trade name, the seller’s sole duty is that the goods should be of the brand as asked by the buyer. If the buyer mentions the trade name but still relies on the skill and judgement of the seller as regards the suitability of the goods for any particular purpose, the implied condition of fitness is applicable in such a situation.

Implied Condition of Merchantable Quality (Second exception to the rule of Caveat Emptor–Section 16(2))

According to this Section, when the goods are bought by description from a seller who deals in the goods of that description, there is an implied condition that the goods shall be of merchantable quality. The term ‘merchantable quality’ has not been defined in the Act. However it has come to mean that the article is of such quality and in such condition that a reasonable man acting reasonably would after a full examination accept it.

In Shivallingappa Shankarappa Mendse v. Balakrishna and son[2], the buyer ordered for the best quality ‘toor dhal’. The dhal was loaded in train and by the time it reached the destination, it became damaged by moisture. It was held that since the damaged good could not be sold as that of best quality as it was no longer of merchantable quality, the buyer was entitled to claim damages from the seller.

According to Section 16(2), the implied condition of merchantability will be excluded when the buyer has examined the goods and the defect in the goods was a patent one. In case of latent defects, the buyer is still protected even if he has examined the goods. Patent defects are those which can be found on examination by a person of ordinary prudence with the exercise of due care and attention. If a merchant possessed of ordinary skill, using due care and diligence, would not have thought of the existence of the particular defect which gives rise to action, such a defect would be latent defect.

[1] A.I.R. 1962 Kerala 318

[2] A.I.R. 1962 Mad. 426




Author: Aditi Shanmugam,
Chettinad School of Law, 2nd year/ Student

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