Case Study on Business Law

Case Study Topic on Business Law

Rahim went to Karim’s snow room where he saw a TOYOTA COROLLA-G for taka 8,50,000 on display. Rahim took the car for a test drive and being satisfied asked Karim to deliver a same car like the one he drove. Before buying the car he expressly asked Karim that he would like to use the car on muddy road. Advise Rahim on the following:

1. Rahim after a week of driving the car the automatic gearbox collapsed as the car was not suitable for muddy road.

2. The broken car was confiscated by police because of some ownership problem.

3. Further more Rahim realized that the car that has been delivered to him is not the same car he drove on the test drive.

Following points are important to understand for analyzing the fact:

As mentioned in Section 4 of “The Sale of Goods Act, 1930” contract of sale of goods that the sale and agreement to sell; whereas section 4(1) says that a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyers for a price. There may by a contract of sale between one part owner and another.

Section 4(2): a contract of sale may be absolute or conditional.

Section 4(4): An agreement to sell becomes a sale when the time elapsed or the conditions are fulfilled subject to which the property in the goods is to be transferred. (The transaction of sale is a composite transaction of agreement of sale, passing of title, delivery of goods and payment of price and costs and charges of the transportation. R.C. Jal V Union of India – 1972/ 3 SCC 46).

Following factors should be considered before reaching the final decision:

Whether the condition of the contract has been fulfilled or violated:

As section 12(2)(3) says that a condition is a major term, which is vital to the main purpose of the contract. A breach of condition will entitle the injured party to repudiate the contract and claim damages. The injured party may also choose to go on with the contract, despite the breach, and recover damages instead. We can apply this matter with a case law i.e. Baldry V Marshall (1925) 1 KB 260; (1924) ALL ER Rep 155, CA; fact is that before buying the plaintiff consulted to the defendants, motor car dealers, for a car “suitable for touring purposes”. The defendants suggested that a “Bugatti” car would be appropriate and the plaintiff accordingly brought one. The car turned out to be unfit for touring purposes and the plaintiff sought to reject it. It was held that the suitability of the car for touring purposes was not a guarantee or warranty, but a condition of a contract. The term was so vital that its non-fulfillment defeated the very purpose for which the plaintiff bought the car. He was, therefore, entitled to reject and have refund of the price.

So, from the light of the law we can say also according to the decision of the court that, Karim has violated the contract as he assured Rahim that the car, which he is going to sell to him, could be used in a “muddy road”. But after a week of driving the car, the automatic gearbox collapsed as the car was not suitable for muddy road. It can be noted here that it is one of the vital conditions to buy a car from Karim and he assured it to Rahim. So, the condition is not fulfilled.

Whether the implied condition violated or not:

Section 14(a) says an implied condition on the part of the seller that in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass.

Section 14(b) says an implied warranty that buyer shall have and enjoy quiet possession of the goods.

Section 14(c) an implied warranty the good shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

According to the section 14(a) we can give a case law regarding this fact in a case Rowland V Divall (1923) 2 KB 500 CA; where a second hand car is purchased from a dealer and within few months seized by the police as a stolen one. Buyer has the right to recover the whole price despite some month’s use of the car- followed in Butterworth V Kingsway Motors Ltd (1954) 1 WLR 1286.

So, from the above mentioned decision we can say that it was one of the duties of Karim to ensure that he has the right to sell what he purports to sell. That is why the law reads into every sale the implied condition that the seller has the right to sell. But here Karim has no right to sell the car to Rahim. He has violated the implied condition. (Lord Atkin said, “ there can be no sale at all of goods which the seller has no right to sell ”)

Whether the delivery of the car was sale by description or not:

Section 15 says about sale by description, 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; and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods don’t also correspond with the description.

Two things are necessary to enable a buyer to invoke the protection of this section-

Firstly, there should be a sale by description (Joseph Travers & Sons Ltd V Longel Ltd 1947 64 TLR 150)

Secondly, the goods shouldn’t correspond with the description.

If we see the case of Arcos V Ronaason & Son (1933) AC 470; the contract was for the sale of timber to be ½ inch thick. The timber supplied varied in thickness from ½ inch to 2/3 inch. Even though the timbers fit for purposes for which they were bought. It was held that the buyers could reject the goods, as they didn’t correspond with the description.

The House of Lords held that the buyers could reject the goods, as they didn’t correspond with the description in the contract. Lord Buckmas said that if the article they have purchased is not in fact the article that has been delivered, they are entitled to reject it, even though it is the commercial equivalent of that which they have bought. Here, Rahim realized that the car that has been delivered to him is not the same car he drove on the test drive. It proves that Karim has failed to supply the same car and violated the sale by description principles i.e. sample violation.

Whether the car was fit for the buyer’s purpose or not:

Section 16(1) says that where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacture or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose. (Provided that, in the case of a contact for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.)

Here Section 16(1) says about the seller in certain circumstances to supply goods, which shall be fit for the buyer’s purpose. If we see the case of Grant V Australian Knitting Mills (1936) AC 85; AIR 1936 PC 34; the fact is that the plaintiff, a doctor, purchased from a retailer two woolen under pants manufactured by the defendants. next day after wearing one of them he became ill. His illness was diagnosed as dermatitis caused by removed in the process of manufacture. It was held that the sale was within the exception and the implied condition of fitness for the buyer’s purpose was broken.

In the given scenario, before going to purchase the car Rahim relied Karim’s assurance that the car may be used in muddy road but while the car was driving in the muddy road at that time the automatic gear box collapsed as the car was not suitable for muddy road. So, the buyer’s purpose was broken.

Whether the car was merchantable quality or not:

Section 16(2) says where goods are brought by description from a seller who deals in goods of that description (whether he is the manufacture or producer or not), there is an implied condition that the goods shall be of merchantable quality. (Provided that, if the buyers has examined the goods, there shall be no implied condition as regard defects which such examination ought to have revealed.)

If we see the case of Rogers V Parish Scarborough Ltd, The Times, November 8, 1986; (1987) 2 ALL ER 232; it was held that where goods as delivered are defective, they are not of merchantable quality and don’t become so simply because they are capable of being used in some way. When a new car is brought the purchaser is entitled to get it to give the pleasure, pride and performance he expected. Defects, which might be acceptable in a secondhand vehicle, would not be acceptable in a new car. The car was not as fit for its purpose as P expected and he was entitled to reject it. Under the decision of this case we can say, though Rahim examined the car through test-driving and was convinced to purchase the same one, which he had driven. But after delivering the car its gearbox was collapsed, as the same car, which he has chosen, was not supplied by the Karim. It proves that the implied condition of merchantable quality was breached and the car was not merchantable quality.

Whether the sale sample maintained when the car was delivered or not:

Section 17(1) says that a contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect.

Section 17(2) says in a case of contract for sale by sample there is an implied condition-

a. that the bulk shall correspond with the sample in quality;

b. that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;

c. that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.

Here section 17(1) deals with a term to that effect is readily implied when a sample is shown and it is the common intention of parties that the goods should be of the kind and quality as the sample is. If we see the comments of “J.R Murdech, sale by sample— A Distinction without a Difference, (1981) 44 Mod LR 388 – the vast majority of cases in which sample are exhibited are sale by sample as well as by description.” So, from the given scenario we can refer that the sample which had been shown Rahim by Karim and when the car was delivered that same type of sample was not given. The sample was duly mechanized and the same sample wasn’t maintained.

Advice:
Mr. Rahim can sue against Karim for reverting back his total paid amount to Karim and also sue for damage and compensation. Lord Wright’s saying is relevant with this fact “it is no doubt essential that the buyer must rely upon the seller’s skill or judgment. But the reliance will seldom be express, it will usually arise by implication from the circumstances. Where the seller deals in certain goods, the buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment, 1936 AC 85, 99”.