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CA Foundation · Business Laws · The Sale of Goods Act, 1930

Vikram, a wholesale rice dealer, received an order from a restaurant chain for 2,000 kilograms of rice to be 'selected and sent as per usual market practice.' The contract did not specify grade, purity standards, or testing procedures. When the rice arrived, the restaurant found it to contain 15% impurities (broken grains, stones), whereas standard market practice in Delhi for restaurant-grade rice is 2-3% impurity. The restaurant rejected the consignment and sued for damages. Vikram contends that the goods met 'usual market practice' as stated. How would a court likely decide, and on which principle?

The restaurant wins because 'usual market practice' is an objective standard based on established trade norms, not subjective seller discretion. In Delhi's restaurant supply market, 2-3% impurity is standard for restaurant-grade rice. Rice with 15% impurity breaches this implied quality requirement and can be rightfully rejected.

  1. AVikram wins because the contract used the phrase 'usual market practice,' which gives him discretion to determine quality levels
  2. BThe restaurant wins because 'usual market practice' has an objective meaning based on established trade standards in that market, and the rice falls below itCorrect
  3. CNeither party can claim breach because the contract is too vague to enforce the quality requirement
  4. DThe restaurant wins only if they can prove that Vikram deliberately supplied substandard rice to make extra profit

Explanation

Under the Sale of Goods Act, when a contract refers to 'usual market practice,' 'merchantable quality,' or similar terms, these are interpreted objectively based on established trade customs and standards in that particular market and trade. In Delhi's restaurant supply market, restaurant-grade rice typically contains 2-3% impurities. Rice with 15% impurity falls significantly below this objective standard. Vagueness is resolved by reference to trade practice, not by giving the seller unilateral discretion. The restaurant's rejection is legally valid.

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