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SDM LAW College and

DEPARTMENT OF POST GRADUATE STUDIEs IN


LAW
MANGALORE
ASSIGNMENT SUBMISSION

BRANCH

: BUSINESS AND TRADE LAW

SUBJECT

: LAW RELATING TO consumer


PROTECTION AND COMPITION

TOPIC

: LAW OF CONTRACT VIZ-A-VIZ


CONSUMER PROTECTION ACT

SUBMITTED TO

: MR. B.K RAVINDRA


CHAIRMAN
SDM LAW COLLEGE AND CENTER FOR
POST GRADUATE STUDIES IN LAW
MANGALORE

SUBMITTED BY

: CHANDRALEKHA.V.
ROLL.NO. 9204
LLM (FINAL).

DATE OF SUBMISSION: 1/4/2011

INDEX
SL NO.

CONTENTS

PAGE NO

Introduction

Sanctity Of Contract

Doctrine Of Caveat Emptor

Exceptions To The Rule Of Caveat Emptor

Implied condition as to the fitness for buyers


purpose

Implied condition of merchantable quality


5

Conditions And Warranties

Implied Conditions

6
Implied condition as to title
Implied condition of sale by description
Implied condition as to sale by sample as well

8
9

as description
Implied condition as to the goods suitable for

the buyers purpose


7
Implied Warranties

Implied warranty of quiet possession


Implied warranty against encumbrances

Fraud And Misrepresentation


2

10
10

11

Fraud,
Misrepresentation
Protection Act-

&

Consumer
12

Remedies

13

10

Exclusion Of Liability

14
15

How far such terms bindings?


11

Conclusion
16

12

Bibliography

17

LAW OF CONTRACT VIZ A VIZ CONSUMER PROTECTION ACT

Introduction
The protection of rights of the consumer has been recognised long back.
For this purpose various general legislations were enacted in India. The Indian
Contract Act 1872 is one of such enactment which aims at protection of
consumer interest. Apart from the general legislations consumer protection act
1986 was enacted and the main object is to provide better protection of the
interest of the consumer and for that purpose, to make provision for the
establishment of consumer councils and other authorities for the settlement of
consumer disputes and matters connected therewith. The provision of the
consumer protection Act 1986 are in addition to and not in derogation of the
provisions of any other law for the time being in force.
Sanctity Of Contract
A Contract is an agreement, which is made by the free consent of the
parties competent to the contract, for a lawful consideration and with lawful
object, and is not expressly declared to be void. Thus, a Consumer is a
competent person who purchases goods and services for consideration. There is
implied form of contract between the trader and consumer. In other words the
status of consumer arises under a contract entered into by him with seller. Thus
it is rightly said by R.N CHAUDARY that, it is the contractual relationship
which gives birth to consumer disputes.1
It is the general law of contract that the minor is not a competent party to
the contract. But when we look into the day today dealings between the buyer
and seller in some cases we will come across minors purchasing products. But
1

R.N Chaudary, Consumer Protection law- provisions and procedure. Deep and deep
publication, p 184

the question is can the minor consumer sue the seller in his own name for the
defect in goods or for deficiency in service? The minor consumer is not left with
any remedy. He can knock the door of the consumer forum through natural or
legal guardian.
Privity of contract- It means that only those persons who are parties to the
contract can enforce the same. A stranger to the contract cannot sue. Under this
rule in order to recover damages arising out of faulty products one must be a
buyer. No member of the family of the buyer or his guest, sustaining injury or
damage there from can claim relief. But there is radical departure from this rule
under C.P. Act, in which consumer does not mean only such person who pay
consideration for purchasing the goods or availing the services for private use
or consumption but it includes all those persons who use these goods or avail
the services with the permission of such persons. The rule of privity of contract
is not applicable in case of consumer disputes.2
Doctrine Of Caveat Emptor
The expression Caveat Emptor literally means Buyer Beware. In other
words, before buying the goods, it is the duty of buyer to ensure that the goods
are of the quality which he wants. Once the goods were bought, the buyer could
not claim that the goods were unsuitable for his purpose. He could not hold the
seller responsible for any defect in the goods.3 In Word v. Hobbs,4 a number of
pigs were sold in an auction in which seller excluded all warranties with respect
to any defect or description. The pigs bought by the buyer in auction were
diseased although the buyer wanted and paid for healthy pigs. Not only most of
the said pigs bought by the buyer died, they also infected some of the pigs of the
2

Dr Rifat Jan, Consumerism and Legal Protection of Consumers, Deep and Deep
Publication Pvt. Ltd, p 48
3
Dr S.K Kapoor, Contract 2nd, 10th edition, Central Law Agency p.165
4
(1878)4 App.Cas. 13

buyer. The action brought about by the buyer was rejected as there was no
breach of any implied condition or warranty. Under the general doctrine of
caveat emptor, he is not generally bound to disclose every defect of which he
may be cognisant although his silence may operate to virtually to cheat the
buyer.
This rule of caveat emptor was a dominant future of the law relating to
sale of goods in the 19th century in England. Since our Sale of Goods Act is
largely based upon the provisions of English Sale of Goods Act we have also
adopted this rule.
Exceptions To The Rule Of Caveat Emptor
Section 16 of the sale of goods act, 1930 incorporates the principles of
caveat emptor and its exceptions, which are as follows1. Implied condition as to the fitness for buyers purpose- 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 sellers skill or judgement and the goods are of a
description which it is in the course of business to supply the goods
suitable for that purpose.5 Thus there is a implied condition that the goods
are of reasonably fit for that purpose.
Where the goods is such that it is used only for one purpose or the
purpose for which goods is generally used is already known to the seller,
it will not be necessary for the buyer to expressly specify the purpose for
which the goods is required. For example, if the buyer purchase a hot
water bottle from the seller the seller knew well in advance that the hot
water bottle is generally used for applying heat to human body. And in the
5

Sec.16(1) of Sale Of Goods Act, 1930

course of use if it burst and causes injury then the seller is liable to pay
compensation6.
In the case of a contract for the sale of specified article under its patent or
other trade name there is no implied condition as to its fitness for any
particular purpose. The reason is that it is quite obvious when the buyer
buys the goods from a seller under a patent or trade name, he relies upon
the patent or of trade name and not upon the skill or judgement of the
seller.
2. Implied condition of merchantable quality-Merchantable quality
means where the goods are bought for self use they must be reasonably fit
for the purpose for which the goods of that commonly bought and
used,
where the goods are bought for resale, they must be reasonable.
Thus the rule of caveat emptor does not apply where the goods purchased
is capable of only one use and the dealer deals in that kind of goods. This
implied condition of merchantable quality does not apply where the buyer
has examined the goods and the defect is discoverable at the time of
examination.
Present position-The rule of caveat emptor originated and prevailed in olden
times when the goods were bought and sold in open markets were the buyer
could examine the goods before buying them. In modern times the condition,
circumstances and trends of trade and commerce have under gone considerable
changes. Under modern circumstances, it is no more possible nor practicable for
the buyer to examine highly sophisticated goods that he buys. Now the rule of
caveat emptor seems to have become the rule of caveat venditor. That is to
6

Priest v.Last, (1903)2 KB 148

say, instead of buyer to be careful buying, it has become the duty of the seller to
be beware and careful before selling the goods.7
The Consumer Protection Act based on the principle of caveat venditor
that is let the seller beware about the quality or fitness of the goods sold. Thus
whatever is sold by a seller must be a standard goods and according to the terms
& conditions of the sale. Where the goods sold by him do not confirm with the
quality etc of the goods, he will be within the jurisdiction of the act.
This principle of caveat venditor is applicable to all service providers
whether govt or public or private. So the service providers must be careful as to
any fault, imperfection shortcoming or inadequacy in the quality, nature &
manner of performance in relation to any service.8
Conditions And Warranties
Under the rule of caveat emptor if the consumer bonafide purchases
goods, there is a chance of fraud by the seller. So the Sale Of Goods Act grants
protection to the buyer who could be the consumer of the goods purchased by
him. For this purpose, Sections 14 to 17 of that Act contains implied conditions
and warranties. A condition refers to stipulations essential to the main purpose
of the contract, and Warranties refers to stipulations collateral to the main
purpose of the contract.9

Implied Conditions
7

Ibid foot note no. 3


Ibid foot note no. 1
9
Dr.R.K Bbangia, Consumer Protection Laws and Procedure, 5th edition, Allahabad Law
Agency, p.62.
8

Some of the implied conditions mentioned under Sale of Goods Act are as
follows1. Implied condition as to title [Sec. 14(a)]
If a seller, who has no right to sell, sells the goods to buyer, the seller will be
bound to pay the price to the buyer. A person may not have the right to sell
because of two reasons he may not be the owner of the goods he sells, for eg the goods are stolen
ones, etc;
he may be the owner yet on account of certain reasons he may not have
the right to sell, for eg the goods are infringing the trade-mark of
someone.
Thus, under this condition a consumer can believe that the seller has the
right to sell the goods. But if consumer purchases goods by knowing that the
seller has no right to sell he will not get protection under law.
2. Implied condition of sale by description[Sec.15]
There is an implied condition that the goods shall correspond to the
description. For eg- if the contract requires sale of Red saree, black one should
not be supplied instead. This rule ordinarily applies to cases where the buyer has
not seen the goods. But this rule also applies to cases where the buyer has seen
the goods yet he relies on description of the goods given by the seller. Thus the
consumer has the right to reject the goods which are not corresponds with the
description.

3. Implied condition as to sale by sample as well as description


When the goods are sold by sample as well as by description, it is not
sufficient that the bulk of the goods correspond with the sample, if the goods do
not also correspond with the description. Sometimes there may be difference
between the sample and the description of goods. In such a case the fact that the
goods supplied conform to the sample but do not agree with the description
entitle the consumer to reject the goods because the fundamental condition in
every contract is that the goods should correspond to the description.10
4. Implied condition as to the goods suitable for the buyers purpose
If the buyer tells the seller the purpose for which the goods are required
by him and reliance is placed on the skill and judgement of the seller and it
becomes the sellers duty to supply the goods suitable for the purpose
mentioned by the buyer.11
Express condition
It is made clear in section 16(4) that an express warranty or condition
does not negative a warranty or condition implied by this Act unless
inconsistent therewith that is to say a mere mention of an express ambition does
not negate a condition implied by the Act. An implied condition can be negated
by an express condition only when it is inconsistent with the implied condition.
Implied Warranties
According to Sale of Goods Act, a contract of sale has following implied
Warranties1. Implied warranty of quiet possession[Sec 4(b)]
10
11

ibid
Supra p 2 and 3

10

In a contract of sale unless the circumstances of the case show a


different intention, there is an implied warranty that the buyer shall have
and enjoy quiet possession of the goods. It means that the buyers
possession of the goods will not be disturbed.
If the seller is selling goods which he does not have a right to sell and a
third person claiming a superior title brings an action against the buyer to
recover those goods, the buyer can sue his seller for the breach of this
warranty.
In Mason v. Burningham,12 the plaintiff purchased a second hand
typewriter, and spent some more money for its repair. Latter it was found
that the typewriter was stolen one and the plaintiff was compelled to
return the same to its true owner. In an action by the plaintiff against the
seller(defendant), it was held that the defendant had made the breach of
implied warranty in a contract of sale of goods and liable to pay not only
the price, but repair charge also.
2. Implied warranty against encumbrances [sec. 14(c)]
There is implied warranty that the goods sold shall be free from any
charge or encumbrance in favour of any third party. If there is a charge or
encumbrance on the goods sold and buyer has to discharge the same, he is
entitled to get compensation for the same from the seller. If the charge or
encumbrance on the goods is known to the buyer at the time of contract
of sale, he becomes bound by the same and do not have any right to claim
compensation for discharging the same.13
Fraud And Misrepresentation

12
13

(1949) 2 K.B. 545


Ibid f n no 7 p 4

11

According to Herschell fraud means a false statement made knowingly,


or without belief in its truth, or recklessly ,careless, whether it be true or false.
Section 17 of the Indian Contract Act, defines fraud asFraud means and includes any of the following acts committed by the
party to the contract, or with the connivance or by his agent, with intent to
deceive another party thereto or his agent, or to induce him to enter in to
the contract(1) The suggestion, as a fact, of that which is not true by one who does
not believe it to true;
(2) The active concealment of a fact by one having knowledge or belief of
the act;
(3) A promise made without any intention of performing it;
(4) Any other act fitted to deceive;
(5) Any such act or omission as the law specially declares to be
fraudulent.
Misrepresentation- In simple words it means misstatement in respect of a
matter which is vital for a contract. Section 18 of the Indian Contract Act,
definesMisrepresentation means and includes
(1) The positive assertion in a matter not warranted by the information of
the person making it, of that of which is not true, though he believes it to
be true;
(2) Any breach of duty which without an intent to deceive, gains an
advantage to the person committing it, or any one claiming under him by
misleading another to his prejudice or to the prejudice of any one
claiming under him;
(3) causing, however innocently, a party to an agreement to make a
mistake as to the substance of the thing which is the subject of the
agreement.

12

When the consent of the parties to the contract is obtained either by fraud
or misrepresentation the contract is voidable at the option of the parties to the
contract or whose consent is so obtained.
Fraud, Misrepresentation & Consumer Protection Act-

Ordinarily

determination of deception fraud and cheating will not be under taken by the
consumer dispute redressal forum and that must be determined before the
commission could reach the consequential issue of alleged deficiency in service,
if any. 14
In K.V Subbanna v. Kusuma, 15it was held that the alleged deficiency in
service was due to fraud, deception and cheating, the complaint was not
entertained because Consumer Forums are not equipped with the means of
determining the issue of fraud, deception and cheating.
Under Section 2(1)(r)(1)(ix) of C. P Act deals with misrepresentation as to
prices. According to the provision of this section misrepresentation with regard
to the prices of goods & services may leads to the unfair trade practice. In
Raghubir Singh Jain v. Ansal Housing & construction Ltd 16 the purchaser of a
flat was asked to pay the price for 25% more area as a price for the super area ,
there being no mention of any such thing in the booking application forms. The
description was a flat of approximately 870sq feet. The additional price was
also being demanded for niches & balconies. The commission said that the word
approximate could not be permitted to be used for adding 25% more area. This
was held to be an unfair trade practices & the builder was ordered to refund the
entire deposit amount with interest at15% within 3 months.
Remedies
14

P.k majumdar, Law Of Consumer Protection in India 2nd edition Orient Publishing
Company, p 370.
15
(1995)3 CPJ 120 Kant.
16
(1995) II CPJ 95 Delhi.

13

A right without remedy is of no avail. A law, therefore, must provide for


the remedies available to persons if their rights are violated. 17 A consumer has
several remedies under contract and tort laws. But in modern time the consumer
find these laws are in adequate and getting justice under these laws through civil
courts is expensive and time consuming. So consumer dispute redressal forums
were established and people prefer this forum over the Civil Court.
Chapter 6 of the Indian Contract Act provides the remedies for breach of
contract in general. These remedies are classified as- Damages, Quantum
meruit, Specific performance and injunction. As there is implied contractual
relationship between the seller and the buyer, a buyer can get damages under
this Act if the seller makes default or breach of contract.
Thus as stated above Indian Law of Contract provides damages for
breach of contract or for violation of terms of contract. In cases of supply or sale
of goods or provision of services, there may be defects or deficiency. Before
passing of C.P Act, aggrieved persons were empowered to bring an action in a
Civil Court for damages under sections 73 or 74 of Indian Contract Act. But
now there is an option for the consumer to bring an action either in Civil Court
or in Consumer Forum for matters coming within the purview of the Consumer
Protection Act.
Section 3 of Consumer Protection Act clearly states that, the provision of
this Act shall be in addition to and not in derogation of the provisions of any
other law for the time being in force. This is because, the Consumer Forums are
empowered to grant relief only in case of deficiency in goods or service. Thus

17

Dr S.K. Kapoor, Contract-1st 10th edition, Central Law Agency, p 282.

14

breach of contract where there is no deficiency cannot be decided by the


consumer forum.
In the case of Jaipur Metals &Electrical v. Laxmi Industries 18 where the
contractor failed to erect and commission the equipment in terms of his
contract, it was held that a breach of contract of this kind was not remediable
under C.P.Act it could hardly be described as a deficiency in service. The matter
should go under the law of contract to an ordinary civil court.
Exclusion Of Liability
Generally when, a person purchases an article there is a guarantee card
accompanying the same. Though a guarantee card appears to protect the buyers
interest but that invariably limits or excludes the manufacturers liability which
an innocent buyer is not able to appreciate. For example the guarantee card
accompanying a gas stove or a pressure cooker may stipulate that the
manufacturer shall be responsible only for repairing the product in case of
manufacturing defect. It implies that if for instance the defective stove bursts
and causes injuries & damages to some person & property, the manufacturer
could not be held liable as per the guarantee card. They are liable only to repair
the stove or pressure cooker.19
Similarly in another instance, on the back of the receipt issued by the
dry-cleaner, may be printed term limiting the dry-cleaners liability up to 8
times the dry-cleaning charges. If the dry-cleaner looses or damages a saree
costing Rs6000/-, if the cleaning charges are Rs 30/- his liability in such case
works out to be Rs240/-.
Under the Contract law, every competent person may agree to any term
which though lawful and valid

may be harmful to the interests of the

consumer. The reason for this can be attributed to the weaker bargaining
18
19

(1991)2nd CPJ 602 NC


Ibid foot note 9

15

capacity of one party i.e purchaser. The specialty of the contract is that the
manufacturer because of his stronger bargaining capacity examples from
liability by inserting certain terms in the contract
How far such terms bindings?Generally a question arises as to how far the pre-drafted terms of the
contract known as Standard Form Contracts are binding? It has been held in
various cases that if the standard form contract contain unreasonable terms the
same may not be binding moreover when one of the parties having a greater
bargaining power has taken as undue advantage of the weaker position of the
other party the contract may be said to have been made under undue influence
as defined under section 16 of the Indian Contract Act and the contract may be
voidable under section 19-A of that act at the option of the weaker party20
In England applying the principle of fundamental breach of contract, the
courts have been protecting weaker parties with unequal bargaining power even
superseding the exclusion clauses. Non-contractual liabilities have also been
given due place by courts.21 In White v. John Warrick and Co. Ltd 22, the plaintiff
hired a cycle from the defendants under an agreement that nothing in this
agreement shall render the owners liable for any personal injury. When the
plaintiff was riding the cycle its saddle tilted forward and he was thrown on the
ground and got injured. In an action by the plaintiff the court held the
defendants liable tortuously for negligence even if the contractual liability was
excluded by the exemption clause.
In England various statutes have been passed to bar exclusion of liability.
These include the Misrepresentation Act, 1967, Unfair Contract Terms Act,
1977, Consumer Safety Act, 1978, etc. There is no such legislation in India
concerning exclusion of contractual liability. However unreasonable terms can
20

ibid
S.K Varma and M.Afzal Wani, A Treatise On Consumer Protection Laws, Indian Law
Institute, New Delhi. P 23
22
(1893) 1 QB 256.
21

16

be struck down by courts. In Lily White v Manuswami 23, the drycleaners lost a
new saree given for dry cleaning by a customer the saree was priced at rupees
220 but the defendant offered to pay 50percent of the price as printed on the
receipt limiting liability to 50 percent of the price was held to be unreasonable
and the dry cleaners were required to pay full compensation of rupees 220 to the
customer.
Conclusion
Though the scope of Indian Contract Act is limited in remedial aspects, it
contains important provisions relevant to the consumer interest. Because of the
rule of privity of contract, except buyer no other person can sue the seller under
I C Act. But there is departure from this rule under C.P Act, i.e third person can
sue against the defective goods & services. The Indian contract act and
consumer protection act go together in protecting the interest of the consumers.

23

AIR1966 Mad13

17

BIBLIOGRAPHY

Avatar SinghPractice], Third

Law Of Consumer Protection [Principles And


Edition, 2000. Eastern Book Company.

R.N Chaudary-

Consumer Protection law- provisions and procedure.


Deep and deep publication.

Dr S.K. Kapoor- Contract-1st 10th edition, Central Law Agency

Dr S.K Kapoor-

Contract 2nd, 10th edition, Central Law Agency.

Dr.R.K Bbangia-

Consumer Protection Laws and Procedure, 5th edition,


Allahabad Law Agency

P.k majumdar-

Law Of Consumer Protection in India 2nd edition Orient


Publishing Company

K Varma and
M.Afzal Wani-

A Treatise On Consumer Protection Laws, Indian Law


Institute, New Delhi

Dr Rifat Jan-

Consumerism and Legal Protection of Consumers, Deep and


Deep Publication Pvt. Ltd

18