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CMA Foundation · Fundamentals of Business Laws and Business Communication · Sale of Goods Act, 1930

Mehta Ltd bought a consignment of machinery from Patel Engineering under a contract with a condition about quality. The goods are accepted, the contract is not severable and has no term to the contrary, and later a breach of that condition by the seller is discovered. Which is correct under the Sale of Goods Act, 1930?

Mehta Ltd can treat the breach only as a breach of warranty. Since the contract is not severable and the goods were accepted, rejection is barred. The buyer may reduce or extinguish the price or sue for damages for the breach.

  1. AMehta Ltd may reject the goods and treat the contract as repudiated
  2. BMehta Ltd may treat the breach only as a breach of warranty, and may set it up in diminution of price or sue for damagesCorrect
  3. CMehta Ltd has no remedy because the goods were accepted
  4. DMehta Ltd may claim damages only after returning the goods

Explanation

Under Section 13(2), where the contract is not severable and the buyer has accepted the goods or part of them, breach of a condition can only be treated as breach of warranty, unless the contract says otherwise. Under Section 59(1), the buyer may then set up the breach in diminution or extinction of price, or sue for damages. Rejecting the goods is therefore not available, and having no remedy at all is also wrong.

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