National Traders, a Firm of Merchants in Partnership Vs. Hindustan Soap Works, a Firm of Merchant - Court Judgment

Ramachandra Iyer, J.

1. This appeal arises under Clause 35 of the Letters Patent from the judgment of Basheer Ahmed Sayeed J. in C. C. C. A. No. 93 of 1952, at the instance of the plaintiff. That appeal arose out of a suit filed by the appellant for the refund of Rs. 2976-8-0, being the price paid in respect of 5 tons of caustic soda sold to him by the respondent with interest thereon. The appellant is a firm of merchants carrying on business at Madras.

The respondent is carrying on business at Erode, Coimbatore district, under name of 'Hindustan Soap Works.' The respondent had entered into a contract for the supply of '5 tons of caustic soda solid No. 97/98 U. S. A. origin' with Messrs. Alfred Mackenzie and Co., Ltd. Madras. The goods had arrived at the Madras harbour on 7-1-1949 and were stocked in the godovm of Messrs. Alfred Mackenzie and Co.

On 11-1-1949 the appellant entered into a contract with the respondent for the purchase of the aforesaid goods at Rs. 28-12-0 per cwt. On 21-1-1949 the appellant paid the price and sought delivery of the goods but Messrs. Alfred Mackenzie and Co., however refused to give delivery as some moneys were due to them from the respondent. The respondent paid those moneys immediately and enabled the appellant to take delivery of the goods.

The appellant however became inactive and on 12-2-1949 they wrote to the respondent saying that when they went to take delivery of the goods they found that the goods 'were not fit for usage or resale as the drums in which they were packed were old and extremely damaged.' They insisted that they should be given new stock or a refund of the price paid. The respondent promptly repudiated the claim stating that the contract was entered into by the appellant after an inspection of the goods.

Further correspondence only led to the suit. In the meanwhile Messrs. Alfred Mackenzie and Co. who were having custody of the goods sent notices to the parties and failing to get any respondent sold the goods on 26-9-1949 and realised a sum of Rs. 1157-2-3. Out of that sum they adjusted a sum of Rs. 362-12-0 towards their dues for rent of the godown and the expenses of resale. Subsequently Messrs. Alfred Mackenzie and and Co. Ltd., appears to have gone into liquidation and the sum realised from the sale was taken over by the Official Liquidator.

A few days before the sale the appellant filed the suit out of which this appeal arises for a refund of the price paid by them on the ground that the goods did not answer the description under which they were sold and were not of merchantable quality. The respondent contested the claim and stated that the appellant had inspection of the goods before they entered into the contract andthat he did not make any representation regarding the quality of the goods or the nature of the packing and that the sale of the goods was not a sale by description and that the default in not taking delivery of the goods was with the appellant.

The learned City Civil Judge framed substantially two issues, namely, (1) as to which of the parties committed a breach of the contract and (2) whether the appellant was entitled to the return of the price. Evidence both oral and documentary was let in and the learned Judge came to the conclusion that the appellant did not have inspection of the goods before they entered into the contract of sale and that the sale was by description and that the appellant having rejected the goods in time was entitled to the return of the price paid. He also held that the respondent was guilty of the breach of contract. In that view he passed a decree for the amount claimed with subsequent interest and costs.

2. On appeal by the respondent, Basheer Ahmed Sayeed J. accepted the finding that the appellant did not have inspection of the goods before entering into the bargain but held that inspection was made before the price was paid. The learned Judge also held that the appellant failed to make out that the goods were of a different quality than that contracted for and that as the sale was of specific goods, the appellant was not entitled to reject the goods on the ground of their not satisfying the description.

For the same reason and for the further reason that the respondent was not a person dealing in such goods the learned Judge rejected the case based on absence on merchantable quality in the goods tendered. In the result the appeal was allowed and the suit dismissed with costs throughout.

3. The appellant aggrieved by the judgment of the learned Judge has filed this appeal. Before proceeding with the substantial questions involved in the appeal are three questions of fact which have to be disposed of. The learned Judge held that the appellant had failed to prove the defective nature of the goods that were offered for delivery. We are unable to find from the records whether this matter was ever the subject of serious dispute between the parties.

The appellant claimed in their plaint that the goods were not of a merchantable quality. There was but a vague denial of averment in the written statement. In Ex. A. 5, a letter written by the appellant to the respondents on 12-2-1949, it was specifically stated that 5 tons of caustic soda shown to them were 'not fit for usage or for resale and the drums were deteriorated and damaged.' There was no denial of this statement as to the condition of the goods in the reply of the respondents under Ex. A. 6 dated 14-2-1949.

The case of the respondents during the correspondence that ensued and also during the trial of the suit was that the appellant bargained for sale of specific goods after inspection. P. W. 1, one of the partners of the appellant firm stated in his examination-in-chief that the drums were damaged, the containers were not sound, and the caustic soda having been exposed to air became watery.

There was no cross-examination of this evidence and there was no attempt on the part of D. W. 1 the proprietor of the respondent firm, to deny that statement in his evidence. If really the goods were of the description contracted for we fail to see why the appellant having paid the price in full should desist from taking delivery particularly when there is no evidence that the market had gone down. We hold that the appellant has proved that the goods that were tendered or delivery did not answer the description contracted for and were not of a merchantable quality.

4. The learned Judge also held that the respondent was not a person who deals in goods of the description sold. Here again we must point out that this was not the subject of controversy at any stage of the proceedings. The respondent was stated to be merchants manufacturing soaps. It is well known that for the manufacture of soaps caustic soda is essential. It is not stated in the evidence that the respondent was not dealing in caustic soda which soap manufacturers generally purchase in bulk and that the suit transaction was a solitary one by him.

Reliance is placed by the learned advocate for the respondent on a passage at page 636 of Benjamin on Sale citing a case in Burnby v. Bol-lett, (1847) 16 M and W 644. There a buyer bought a pig from a butcher who himself had bought it just then. The meat of the pig turned out to be diseased and in action against the butcher it was held that the defendant was not a dealer in meat and that he did not know that it was unfit for food. This case proceeded upon the distinction between the defendant being a dealer of meat and a dealer of the pig.

The defendant was held not to be a dealer in meat though he might have sold the pig. On that ground and also for the reason that the buyer relied on his own judgment in purchasing the pig the claim was rejected. That case in our opinion cannot be relied on as an authority on a matter which is essentially a question of fact namely whether the seller is a dealer within the terms of Section 16(2) of the Sale of Goods Act in a particular case. We hold that in the present case the respondent was a dealer in caustic soda.

5. The next question is whether the goods that were sold to the appellant were specific goods and whether the buyer had inspection before he entered into the contract for the purchase of the same. Ex. A. 2 which refers to the contract between, the parties states that it was for the supply of 'our 5 tons of caustic soda hought from Messrs. Alfred Mackenzie and Co., Ltd., Madras.' This evidently refers to the contract under Ex. A. 1 which the respondent made with Messrs. Alfred Mackenzie and Go.

That was for the purchase of '5 tons of caustic soda solid No. 97/98 U. S. A. origin.' Goods answering the description in this contract in Ex. A. 1. had admittedly been received by Messrs. Alfred Mackenzhie and Co. on 7-1-1957 and were kept in their godown at the Madras Harbour. When therefore the appellant entered into an agreement to purchase those 5 tons of caustic soda the agreement was for the purchase of specific goods.

Although the plea of the respondent was that the buyer had inspection before the contract he was not able to let in any evidence regarding the same. The learned Judge has found that the contract was for the sale of specific goods and that the appellant had no inspection of the same prior to the contract though he had such inspection before he paid the price. We entirely agree with him.

6. The question then for consideration is whether the goods were sold by description. The expression description usually means a particular class of goods. It also includes the statement which may be essential to the identity of the goodsas contracted for e. g., as to quality or fitness, place of origin, or of shipment, time of despatch or delivery, mode of packing etc. (Vide 25 Hals-bury 154); In the present case the sale of 5 tons of 'caustic soda solid No. 97/98 U. S. A. origin' is descriptive of the article and would be essential for the identification of the goods.

It is no doubt true that, the caustic soda was packed in certain drums and they were specific goods within the meaning of Section 2(4) of the Indian Sale of Goods Act. But what was agreed to be sold and paid for was not the drums nor any caustic soda contained in the drums as such, but the caustic soda of the specifications stated to be contained in the drums. Therefore for a proper identity of the goods it was essential to have the description. The learned Judge has held that the sale being of specific goods could not be held to be a sale by description and in support of that statement of the law he has relied on a passage in 29 Halsbury p. 19 note (n) which states as follows:

'Specific goods must be distinguished from unascertained or generic goods, that is,, goods defined only by description. It follows from the definition that under a contract for the sale of specific goods, the seller does not fulfil his contract by delivering any goods other than those agreed upon under a contract for generic goods, the seller may deliver any goods which answer to the description. In borderline cases it is not always easy to distinguish between specific and unascertained or generic goods.'

The distinction sought to be made in the particular passage cited is as between specific goods and unascertained goods and riot between specific goods and goods sold by description. One attribute or perhaps the main attribute in the sale of unascertained or future goods is that they are contracted for by description. But that does not lead to the inference that specific goods cannot be sold by description. In 29 Halsbury page 62 it is stated,

'goods are sold by description where the buyer enters into the contract of sale in reliance on the description of the goods given by or on behalf of the seller. There may be a sale by description although the goods are specific.' In Benjamin on Sale (8th Edn.) page 609 referring to Section 13 of the English Sale of Goods Act corresponding to Section 15 of the Indian Sale of Goods Act it is stated, 'The rule applies to a contract for the sale by description either of a specific chattel or unascertained goods.'

Again at page 646 the law is stated with reference to Section 14(2) of the English Act corresponding to Section 16(2) of the Indian Act thus:

'It will be observed that there are no words in Section 14(2) to confine its operation to unascertained or future goods. Indeed the fact that the sub-section contemplates the possibility of the goods having been actually examined shows that the specific goods are not excluded.' In Mulla's Commentary on the Indian Sale of Goods Act it is stated at page 62, 'Specific goods may, however, be sold by description, and it is conceived that, when this is the case, such stipulations will, as in the case of the sale of unascertained goods, amount to conditions though the goods are specific, and the provision relating to the sale of specific goods, whatever its precise effect will only apply to those cases in which the buyer does not rely upon the description.'

Again at page 70 it is stated under the heading 'Sale of specific goods by description' as follows:

'This usually applies to a contract for the sale of unascertained or future goods, but it may apply to the sale of specific goods, also, if the buyer contracts in reliance on that description.' In Richard Thorold Grant v. Australian Knitting Mills Ltd., , the Privy Council observed as follows: 'It may also be pointed out that there is a sale by description even though a buyer is buying something displayed before him at a counter; a tiling is sold by description, though it is specific, so long as it is sold not merely as a specific thing but as a thing corresponding to a description.'

The decision in Varley v. Whipp, 1900 1 QB 513, related to a case of sale of a specific article. There the plaintiff agreed to sell to the defendant a reaping machine which the latter had never seen and which the plaintiff stated to have been new, to have been used to cut only about 50 or 60 acres. The machine was then delivered in pursuance of the contract of sale and the defendant rejected the article complaining that it did not correspond with the description. It was held that the sale was one by description. At page 516 Justice Channel observed :

'The term 'sale of goods by description' must apply to all cases where the purchaser has not seen the goods, but is relying on the description alone ..... The most usual applicationof that section (referring to Section 13 of the English Act) no doubt is to the case of unascertained goods, but I think it must also be applied to cases such as this where there is no identification Otherwise than by description ..... The earliest date therefore at which the property could be said to pass would be when the machine was accepted by the purchaser.'

In regard to unascertained or future goods it is invariably the case that the sales are by description. That does not however mean that in regard to specific goods the sale is not by description. Section 15 and Section 16 of the Indian Sale of Goods Act are not restricted to sales of unascertained goods. The proviso to Section 16(2) implies that a sale of specific goods was within the terms of the section. But there may be cases in which specific goods may be agreed to be bought as such without any description or with a description to which the parties attached no significance.

It is therefore a question of the construction of a contract of sale in any particular case to find out whether it is a sale by description. We cannot therefore agree with the learned. Judge that the sale in the present case being one of specific goods cannot for that reason be deemed to be a sale by description. In our opinion the description in the contract about the goods being 'solid 97/98 U. S. A. origin' is a description regarding its quality, fitness and place of origin and is necessary for the identification of what the appellant agreed to buy, and the sale though of specific goods was one by description as well.

7. The sale being thus of specific goods by description which the buyer had no inspection before he entered into the contract of sale, the point as to the respective rights of the parties then arises for consideration. In Jones v. Just, 1868 3 QB 197, it was held that in every contract to supply goods of a specified description, which the buyer had no opportunity to inspect, the goods must not only answer the description but must be saleable or merchantable under that description. Those two conditions namely (1) answering the description in the contract, and (2) merchantablequality are embodied in Sections 15 and 16 of the In-dian Sale of Goods Act. Section 15 runs as follows:

'Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description .....'

Section 16 with reference to sub-clause (2) runs as follows:

'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 goods supplied under a contract of sale, except as follows:.....

(2) where goods arc 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; provided that, it the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.' These sections were based upon the English Act of 1893. The basis of the rule that the goods should answer the description is really that the buyer should get what he contracted for, and that it would not be a proper performance of the contract to give the article not answering the description in the contract. Both the Indian and English enactment restate the law contained in 1868 LR 3 QB 197, in regard to the merchantable quality except that under the statute actual inspection and not a mere opportunity to inspect is necessary before the buyer can lose the benefit of the condition as to the merchantable quality.

There are therefore two conditions to the contract of a sale by description even though of specific goods. First the goods tendered should answer the description and (2) unless there was previous inspection they should he of merchantable quality. In Wallis, Son and Wells v. Pratt and Haynes, 1911 AC 394, the oil seeds known as 'common English Sainfoin' were sold with a condition that the sellers gave no warranty expressed or implied as to growth, description or any other matters. The seed that was actually delivered to the buyer was not 'Common English Sainfoin' but 'giant sainfoin' a different and inferior seed.

The buyer accepted the goods and sued for damages for breach of warranty. The House of Lords held that they were entitled to the damages as the description was a condition going to root of the contract and not a mere warranty. The remedy for the breach of the condition in the circumstances that ensued in that case was on the basis of a breach of warranty. Lord Loreburn, Lord Chancellor stated the law thus at page 393, 'if a man agrees to sell something of a particular description he cannot require the buyer to take something which is of a different description and a sale of goods by description implies a condition that the goods shall correspond to it. But if a thing of a different description is accepted in the belief that it is according to the contract, then the buyer cannot return it after having accepted it; but he may treat the breach of the condition as if it was a breach of warranty, that is to say, he may have the remedies applicable to a breach of warranty. That does not mean that it was really a breach of warranty or that what was a condition in reality had come to bo degraded or converted into a warranty. It does not become degraded into a warranty ab initio but the injuredparty may treat it as if it had become so, and he becomes entitled to the remedies which attach to a breach of warranty.'

8. Section 12 of the Indian Sale of Goods Act defines a condition and warranty Section 12 (2) and (3) state:

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

(3) 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.'

As already stated, under Section 15 if there is a contract for the sale of goods by description there is an implied condition that the goods shall correspond with the description. Under Section 16(2) there is a further implied condition where there had been no previous inspection by the buyer, that the goods arc of merchantable quality. The effect of these two definitions 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 merchantable quality,The passing of property in the goods is not the test as to the applicability of this right. If the goods do not conform to the description there is no performance of the contract at all. If the goods are not of the merchantable quality the thing for which the buyer bargained for was not given. In either case the default of the seller goes to the root of the transaction and therefore the occasion would arise to the buyer to reject the goods and sue for the price if he had paid the price. It was also open to the buyer to accept the goods and sue on the basis of a warranty. Section 59 of the Indian Sale of Goods Act states thus:

'Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may .....(b) sue the seller for damages for breach of warranty.'

The remedy of a buyer where he has accepted the goods is only to sue for damages. As to when a buyer is deemed to have accepted the goods is provided for by Section 42 which runs thus:

'The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been deli-vered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.'

It therefore remains to consider whether the appellant is entitled to reject the goods and sue for the prices as he has done, or whether he has precluded himself from so doing by accepting the goods. We have already held that although the apnellant did not have inspection of the goods before the contract was entered into they did have such inspection before the price was paid.

The fact that the appellant paid the price to the respondent after such inspection and the unexplained delay thereafter in complaining about the defect in the goods would clearly show that they had accepted the goods. The apnellant having accepted the goods regardless of the breach of the conditions as to the description and qualityprecluded themselves from rejecting the goods and suing for a refund of the price.

They can however treat the breach as one of warranty and sue for damages. The law on the subject has been considered in a recent judgment in Sha Trilockchand v. Crystal and Co., : AIR1955Mad481 , where it was held that where goods not answering the description contracted for are delivered to a buyer he has a right to one of two alternative remedies: (a) that of rejecting the goods and obtaining a refund of price and also suing for damages for non-delivery (b) waiving the condition and accepting the goods and suing for damages for breach of warranty.

In the case where he accepts the goods he has to pay the contract price minus any claim for the breach of warranty. The measure of damages in such a case is the difference between the value of the goods as delivered and their value if it answered to contract description. The appellant in the present case having accepted the goods would be entitled only to a remedy by way of damages namely the difference between the price of the goods contracted for and the price of the goods actually delivered. The suit was however laid for the return of the purchase money and not on the basis of a breach of warranty.

It is in evidence however that at no time after 11-2-1949 was caustic soda selling below Rs. 23-12-0 per cwt. (vide evidence of P. W. 2). That being so, the market rate of that quality of goods contracted for on the material date would not have been less than that amount.

The price fetched by the sale by Messrs. Alfred Mackenzie and Co., on 26-9-1949 was Rs. 1157-2-3. It is not stated that there was any reduction in the market rate from 11-1-1949 to 26-9-1949 or that the price fetched in the resale was low. The sum of Rs. 1157-2-3 would therefore represent the price of that quality which was tendered to the appellant.

The difference therefore between the contract price of Rs. 2875 and the resale price of Rs. 1157-2-3 would represent the damages sustained by the appellant by reason of the breach of warranty. We consider that in the circumstances of the case it is not necessary to relegate the plaintiff to separate suit or to have the suit remanded for fresh trial after making appropriate amendments to the pleadings, on the question as to the quantum of damages. We hold that the appellant would be entitled to recover this sum from the respondent.

As stated already out of this sum of Rs. 1157-2-3 realised by the sale, a sum of Rs. 362-15-0 was deducted by Messrs. Alfred Mackenzie and Co., as godown rent and expenses for resale. These charges were occasioned by the default of the appellant and should therefore be borne by them. The balance of the amount is said to be with the official liquidator in the winding up proceedings of Alfred E. Mackenzie and Co. Ltd. The learned Judge has directed that the appellant may rake from the Official Liquidator the amount which re-presents the sale of the goods purchased by the plaintiff.

As the property in the goods belonged to the appellant we agree with the learned Judge that the appellant would be entitled to that money. In addition they will be entitled to the damages of Rs. 1717-13-9 together with interest thereon at 6 per cent., per annum from 24-12-1951 the date of the decree of the trial court till payment and we decree that the respondent shall pay the sameto the appellant. The appeal is allowed to the extent mentioned above. As the appellant has succeeded on the basis of a claim which he did not put forward in the lower court, there will be no order as to costs in any of the courts.