Category: Commerce Notes PPT

As consumer technologies have advanced, societal habits have changed. Even a decade ago, if you had to buy something, you would have to get out of your home, reach your neighbourhood store, collect that item and turn back.

With smartphones in every hand now, and with the presence of some of the biggest global E-commerce platforms in India’s retail ecosystem, one of the social habits that have undergone a radical change is the purchasing behaviour.

Presently, most people would instead buy goods online than venture out. The market for E-commerce in India is enormous and expanding almost daily. As the footprints of the internet reach out to smaller villages and hamlets, E-commerce needs of today’s business world cannot be overlooked.

Let us analyse both traditional commerce and E-commerce.

Defining Traditional Business

It is the system of buying and selling goods that has reigned supreme for hundreds of thousands of years. The barter system was the first-known form of traditional commerce. Any activity that facilitates the exchange of goods and services against money is traditional commerce.

Once the exchange of goods and services is completed, traditional business is over.

This type of commerce is present across the world. In many poorer nations in South America, Asia and Africa, it is still the only sort of buying and selling recognised and practised.

On a broader note, it entails the customer’s visit to a market or a local store, choosing all required goods, ensuring their quality (especially when it comes to perishable goods like food items), paying for them and heading home.

Defining E-commerce

E-commerce, or Electronic Commerce, can be defined only as the exchange of goods and services online, i.e. via the internet. Nowadays, almost all the major E-commerce players serve everything we need – from food items to toiletries – on their platforms. Support, logistics, delivery, bookings, payments and everything else is made via electronic medium. 

There are some sub-types of E-commerce. They are:

• B2B Commerce: When any transaction takes place between two businesses via an electronic medium, it is termed B2B commerce.

• B2C Commerce: When transactions happen over the internet between an organisation and its customers directly, it is termed B2C commerce. It is the most typical type of E-commerce, and it has revolutionised the way people purchase items they need.

• C2C Commerce: When the Internet facilitates transactions between customers only, and no business is involved in any manner, it is C2C commerce. A good example would be people looking to sell their old books. They could easily advertise their wares on any free online platform, and get responses from interested parties.

For Advanced Students: Did you know that Jeff Bezos, the owner of online retailing giant Amazon, started off selling used books in his garage back in the United States? You can read more about how he created an empire online.

For more details on various aspects of E-commerce, visit ‘s relevant pages.

Comparing Traditional and E-commerce

Before we begin analysing the many differences between traditional commerce and E-commerce, let us see how they compare against each other.

For simplicity, the comparison has been tabulated.

 

Attention, Advanced Students: Can you think of any other basis of comparison between E-business vs traditional business? You can start by focusing on customer interaction and service, types of products and its variety, exchange of information between buyers and sellers and returns/refunds.

These will leave you with plenty of options.

Traditional Commerce is the system of buying and selling goods that have been the standard medium for selling and buying goods for hundreds of years. The first known system of commerce is known as the barter system and any activity that facilitates the exchange of goods and services for money is defined as traditional commerce. This form of commerce is prevalent all across the world, and even today in the poorer parts of the world like South America, Asia, and Africa, it is still the most widely accepted model of buying and selling goods.

Electronic Commerce or E-Commerce as it is widely known can be defined only as the purchase of goods and services online, which is via the internet. In recent times, almost all the major E-commerce players serve everything we need – from food items to toiletries and even electronics on their platforms. Support, logistics, delivery, bookings, payments, and everything else is made via electronic medium. 

Difference Between E-Commerce and Traditional Commerce

There are innumerable differences between traditional commerce and E-commerce but to give an objective picture, some of the differences are presented. 

E-commerce is generally facilitated by technology that is rapidly progressing. It is faceless and efficient, i.e. not present in a physical form. But the traditional business involves face-to-face interaction with the customer during the exchange of goods or services. Both the mediums today accept payments via cash or other digital means. There are no boundaries for E-commerce and it is a global phenomenon. So, if you are searching for a book on Amazon’s Indian platform, and you find out that your required book is available only overseas, you have the option to purchase from that country. Also, Unlike E-commerce, traditional commerce has physical and geographic locations. These limitations have provided the opportunity for E-commerce to chug far ahead in terms of sales and margins. In the field of E-commerce, all advertisements are digital. Surrogate and third-party advertisements are prevalent. Offline or traditional businesses generally rely on banners and hoardings, avenues that have been available for centuries. E-commerce can also boast one-to-one marketing channels, while traditional commerce only has one-way marketing and information flow.

The diminishing balance method, also known as the reducing balance method, is a method of calculating depreciation at a certain percentage each year on the balance of the asset which is brought from the previous year. The amount of depreciation imposed for each period is not fixed but it goes on decreasing moderately as the opening balance of the asset in each year will minimize. Hence, the amount of depreciation becomes higher at the beginning and gradually becomes slower in the subsequent period, while the charges of repairs and maintenance increase.

The method of calculating the diminishing balance method is almost similar to the fixed installment method with the exception that depreciation expenses are imposed each year at a fixed percentage, and not on the original cost of the asset but on the reducing opening balance of the asset as brought forward from the previous year. Therefore, the system of calculating depreciation is known as the diminishing balance method. 

This method of calculating depreciation is suitable for those assets whose repairing charges increase as they become old. Under this method, the value of assets can never be equals to zero. This method is suitable for calculating assets like Plant & Machinery, buildings, boilers, etc.  

                                 

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What is the Formula for Calculating Depreciation Value using the Diminishing Balance Method?

The formula to calculate depreciation value using the diminishing balance method is as follows:

Depreciation Value: (Net Book Value –  Scrap Value) Depreciation Rate

How to calculate Depreciation Expense using the Diminishing Balance Method?

To calculate the depreciation expense using the diminishing balance method, you need to know the following information.

To calculate the depreciation expense using the diminishing balance method, you need to know the following information.

Net Book Value:  It is the amount at which the asset value is recorded by business organizations in its financial records. Netbook value is calculated as the original cost of an asset, minus any accumulated depreciation, accumulated depletion, accumulated amortization, and accumulated impairment.

The original cost of an asset is referred to as the acquisition cost of an asset, which is the cost required not only to purchase or construct the asset but also includes the sales taxes, delivery charges. Customs duties, and set up costs.

The depreciation, depletion, or amortization related to the asset is the process by which the original cost of an asset is chargeable over its useful life, less any estimated salvage value. Therefore, the asset net book value should decline at a continuous and estimated rate over its useful life. At the end of its useful life, the net book value of an asset should be approximately equal to the salvage value.

Salvage Value:  It is an amount that an asset is estimated to be worth at the end of its useful life.

Depreciation Rate: It is the rate at which the value of assets is reduced each year.

Using the information given above, you can easily calculate the depreciation expense in just two steps.

Step 1: Calculate the depreciation expense using the following formula:

Depreciation Value: (Net Book Value –  Scrap Value) Depreciation Rate

Step 2: Subtract the depreciation cost from the asset’s current book value to determine the remaining book value of an asset.

These two steps are repeatedly used throughout the asset’s useful life. In the final year of the asset’s useful life, you should subtract the residual value from the current book value and record the amount of depreciation. 

Diminishing Balance Method Advantages

1. The calculation of depreciation amount using the diminishing balance method is quite easy. It does not require any special knowledge to calculate the depreciation expense using this method. 

2. This method of calculating depreciation is applicable for valuable assets like buildings, plants and machinery, equipment, etc having a long life.

3. In this method, a higher amount of depreciation is deducted in the initial years. So, it helps to minimize the impact of obsolescence of assets.

4. The diminishing balance method of depreciation is acceptable by tax authorities. Hence, it provides tax benefits to the company. 

5. Diminishing balance method balances the yearly burden on the profit and loss account in terms of both depreciation and repairs. The depreciation amount continues to decline while the expenses on repairs continues to increase. Hence the  total expense against revenue over different years remains more or less the same.

Diminishing Balance Method Disadvantages

1. It is quite tedious to estimate the appropriate rate of depreciation.

2. The asset value cannot be brought down to zero.

3. As depreciation cost is high initially, it results in lower net income during the initial period.

4. Depreciation is neither based on the asset value nor evenly distributed throughout the useful life of an asset.

5. It is not an ideal method for the assets like Plant and Machinery as these assets do not lose their value easily.

Diminishing Balance Method Example

1. A company has brought a car that values INR 500,000 and the useful life of the car as expected by the buyers is ten years. And the residual value is expected to be INR 24,000. 

Hence, using the diminishing method calculate the depreciation expenses. 

The rate of depreciation is 60%

Solution: The formula says: Depreciation expenses = (Net Book Value – Residual Value) * Depreciation Rate 

The value of the statement is as follows:

• Net Book Value = INR 500,000 (in the first year which is equal to the cost of the car)

• Residual Value = INR 24,000

• Depreciation Rate = 60%

Therefore, the solution will be:

Depreciation Expense= (500, 000 – 24,000)* 60% = INR 2,85,600

2. A XYZ limited  purchases a truck for ₹ 5,000. It was estimated by the company that each year the truck will lose 40% of its  value and will be left with a  scrap value of ₹ 1,000. Using the reducing balance method, calculate the depreciation expense for the first five years.

Solution: 

Conclusion

A diminishing balance method is an accelerated method of calculating depreciation amount as it depreciates the asset value over its useful life. Although it is a bit complex to calculate depreciation in companion to the straight-line method but is highly useful for deferring tax payments and maintaining low profitability of the business in the initial years.

Every society faces this economic problem which is the problem of how to make the best use of the limited and scarce resources. The economic problem does exist. The problems are there as the needs and wants of people are endless, while the resources available to satisfy their needs and wants are limited.

In our next section, we will know about the three main problems of an economy. Like other economies, India being a developing economy faces the same problems. Added to these are the social challenges which the nation has to go through while dealing with the growth. 

 

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Three Main Economic Problems

What to Produce?

The Societies decide the best combination of goods and services which meet their varied wants and their needs.

How to Produce?

The Societies also need to decide the best combination of the factors which will create the desired output for the goods and services.

For Whom to Produce?

The final question is, for whom to produce? Societies need to decide the section of people who will benefit from the output from the economic activity, and how much will they get is another question. This is often called the ‘Problem of Distribution’.

Current Economic Issues in India

Weak Demand

With the stagnated growth of demand, this seems to be the biggest challenge for the economy at the current moment. Demand for important goods and commodities like fuel, food, consumer goods, and power has fallen over the last few months.

While India’s demand woes began in the year 2019, the outbreak of coronavirus worsened the scenario. The consumer demand of India is declining as for the low household incomes caused due to the major job losses in the wake of this raging pandemic which has forced closures of the factories and businesses.

Rise of Unemployment

The latest unemployment figures, released by the Centre for Monitoring Indian Economy (CMIE), are evidence of this economic weakness. The CMIE data show that about five million or 50 lakh salaried jobs were lost in the month of July, with total layoffs in the formal sector to over 1.8 crores.

Rising Coronavirus Cases

There is the view that India will face the impossibility to tackle the economic crisis unless it manages to bring the Covid-19 situation under control in the country. India went for a strict lockdown on March 25 and decided to gradually have her un-lockdown phases.

Economic Challenges in India

India is a new country when we talk about the economy. It came out of colonial rule of the UK which left India as the poorest of the countries. After independence we as a country are still learning and trying our best to bring our country and its economy to a better place. But there are a lot of challenges in our way to achieve it. Let us have a look and discuss those challenges we face as a country in the path of economic development. 

The first issue is the huge disparity in economic standard of the citizens in the country. Historically India was divided into a caste system where a certain section of society was able to gather most of the economy and resources with them for a long time. With time this became a cycle of recursion and the wealth accumulated in the segment out of the reach of many. After independence efforts were made where the resources redistribution were attempted and completed to some extent. After independence also the accumulation of wealth continued and has been mostly with the government officials and politicians. The matter of fact is money creates money. So the disparity will keep on increasing. According to a recent survey 57% of countries’ wealth is within the top 10% of the population. This disparity prevents us from growing further as the lower half of the population don’t have the basic infrastructure or facilities to pace themselves for a world we are currently leaving.

The second issue we have is our education and education policy. We have been continuing education from colonial rule where the main aim of the education was to create people who can work for the British government in administration. We lack to create curiosity in students, we lack in providing an experimental environment where they can explore their interest. It causes them to be interested in government jobs. After they finish education they don’t want to be entrepreneurs. These attitudes prevent India from being economically self-sufficient.

Third Issue with India is the weak infrastructure. With the infrastructure we have in the country, industrial development is not easily possible. With the less production of goods India is still highly dependent on imports to meet our needs. The less production means less jobs and less economic prosperity of the country.

There are far more challenges to India’s economic development but these could be the first one’s we start with to resolve.

In the business sector and accounting department, cost is the monetary value that a company needs to spend in order to produce something. Cost means the amount of money which a company spends on the creation or production of the goods or services. 

Also, to understand cost, we need to check from a seller’s point of view, cost is that amount of money that is spent to produce a good or a product. While, from a buyer’s point of view the cost of a product is also known as the price of the product. This is the amount that the seller charges for buying the particular product, and it includes both the production cost (borne by the seller) and the mark-up price (for the profit of the seller), which is added by the seller in order to make a profit.

In accounting terminology, the term cost refers to the monetary value of expenditures engaged with the production of goods. In the further section we will know more about the elements of cost.

Example of Costing 

When it comes to recording the costs, it’s done according to the purpose and the reason for the cost. For instance, when there is a record of the cost of purchase inventory it is booked under the account of cost of goods sold when a sale of the goods are made. When you record costs that are necessary for the organization, which includes rent, salary, and more, it is recorded as a selling expense and it is added in the multi-step income statement. 

Types of Cost

Private Costs 

These are the costs incurred that the buyer pays to the seller when the purchase of goods is completed.

External Costs 

This is a cost that is incurred when the buyer is asked to pay as per the result of the transaction. 

Social Costs 

The social costs are a sum of private and the external costs. 

Defensive Cost 

This is an environmental expenditure that is incurred to prevent any environmental damage. 

Labor Costs 

This is the cost that occurs for travel time, training costs, and more. 

Elements of Cost Accounting

In Accounting, a cost is composed of three elements – 

The above three elements can either be direct and indirect cost.

Thus, to understand the elements of cost we need to learn them vividly.

As there will be only one product and the process of manufacture is simple, the raw material if any is directly charged to the production of the period in total cost.

The labor costs are collected periodically on a regular basis through pay rolls which are prepared separately for each work department.

Expenses other than material and labor are chargeable expenses like excise duty, royalty, expenses on designs, patterns and models.

Overhead – Another Element of Cost

Overhead consists of all the indirect costs. Overhead is also known as the on-cost, supplementary cost, burden cost etc.

Overhead consists of three elements:

1. Indirect materials

2. Indirect labor 

3. Indirect expenses

• Indirect materials – These materials cannot be conveniently identified with the individual cost units. They are generally of minor importance. Examples of indirect materials are – coal, lubricating oil, sand paper, soap, etc.

• Indirect labor –This cannot be identified with a particular cost unit. Indirect labor is not engaged in the production process directly but only this is indirectly and this assists in the production operations. Examples of indirect labor are peon, supervisor, clerk, watchman etc.

• Indirect expenses – All kinds of indirect costs, other than the indirect materials and indirect labor costs, are termed as indirect expenses. This cost cannot be directly identified with a particular job, process or identified with work order and is common to cost units and cost centers. Examples of Indirect expenses – rent and rates, insurance, depreciation, power and lighting, cartage, advertising.

 

Cost Center in Cost Accounting

A cost center is a department or function within an organization which does not directly add to the profit but still incurs costs the organization money to operate effectively. Cost centers merely contribute to a company’s profitability indirectly. Managers of cost centers, like human resources and accounting departments. They are responsible for keeping their cost line low budget. 

Thus, to sum up:

• A cost center is a function within an organization which does not directly add to the profit but still costs money to operate, like working in the accounting, HR, or IT departments. 

• The main use of a cost center is to track the actual expenses for comparison to the budget.

• A cost center indirectly contributes to a company’s profit professing in operational excellence, customer service, with enhanced product value.

• The manager is only responsible for keeping the costs in line with the budget and who does not bear any responsibility regarding the revenue or in investment decisions.

• Whatever operations that take place in cost’s center, they don’t get displayed in the company’s profit. However, services, such as customer service enhance the overall value of the company 

Equilibrium occurs when there is a state of no change. This tells us that equilibrium price is a price where both the seller and the buyer are in the position of no change.

Theoretically speaking, at this price,

Amount of goods demanded by the buyers = Amount of goods supplied by the sellers

Therefore, both the demand and supply work in synchronisation with the equilibrium price. In other words, the equilibrium price is where the state of the market supply and demand get equally balanced, which also then makes the prices for that certain product steady.

Cause and Results

Generally, when this happens, prices of these goods go down and this happens because of an oversupply of goods and services, this as result, increases the demand for these goods and services.

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Here in the diagram above, we can observe that the equilibrium price shows through the intersection of the supply and demand curve in the equilibrium price graph.

Equilibrium Price is also known as market-clearing price. 

Characteristics

The equilibrium of a market has certain major characteristics:

• The behaviour of the agents is consistent.

• Agents are not given any incentives in exchange for a change in behaviour.

• The equilibrium price formula calculates the equilibrium outcome that is governed by a dynamic process.

Example

We can take an example to understand the definition of Equilibrium Price better:

If we calculate this table with the help of the equilibrium price formula:

• In the given table, the quantity of demand is equal to the supply at the price of Rs. 60. This makes the Rs. 60 price as the equilibrium price. If instead of this price, we take any other price from the table, there can be a shortage or a surplus.

• The surplus would occur because if we take any value lower than 60, the quantity of supply would be more than the demanded quantity.

• The shortage would occur if we take a value of more than 60, the amount of the demand would be bigger than the available supply.

Equilibrium Price Definition

When the quantity of supply of goods matches the demand for goods, it is called the equilibrium price. The market is said to be in a state of equilibrium when the main experience is in the phase of consolidation or oblique momentum. Then, it can be concluded that demand and supply are comparatively equal. Equilibrium price examples are discussed below as well.

Equilibrium price definition can be understood this way, the neutral point of price where both the buyers and sellers are satisfied. An equilibrium price example: at equilibrium, there is neither scarcity nor state of abundance unless there is a change in the elements of demand and supply. With the increase or decrease in demand and supply, inverse behaviour occurs. 

Finding the Equilibrium Price

We can find the equilibrium price by using the equilibrium price formula. These are the steps:

• Calculate the supply function

• Calculate the demand function

• Set the equal amount of quantities for the demand and supply and solve these to get an equilibrium price

• Put this equilibrium price into a supply function

• Check the result by putting the equilibrium price into the demand function

Equilibrium Price Example

Let’s take an example for better understanding of equilibrium price definition:

Calculating with the Help of the Equilibrium Price Formula:

In this table, the quantity of demand is the same as the supply at the price of Rs. 60. Hence, the price of Rs. 60 is the equilibrium price. If we take any other value, there can be either shortage or surplus. Particularly, for any value lower than Rs 60, the quantity of supply is more than demanded, hence there is a surplus. Similarly, for any value more than Rs. 60, the amount of demand is more than the supply, creating a shortage. This type of question can also be solved by the equilibrium price graph.

This equilibrium price example shows that an equilibrium price can change the quantity of demand and supply.

More About Equilibrium Theory

A state of no change is called equilibrium. So clearly, at the equilibrium price, both buyer and seller are in the position of no change. Theoretically, at this price, the amount of goods demanded by buyers is equal to the amount supplied by the sellers. Hence, both demand and supply work in synchronization with the equilibrium price; this is an equilibrium price example. Equilibrium is the state of balancing of market supply and demand, and consequently, prices become steady. Generally, the reason for prices to go down is an oversupply of goods or services, resulting in higher demand for goods or services. Equilibrium price definition explains the state of equilibrium is the result of the balancing effect of demand and supply.

The equilibrium price is showing through the intersection of the demand and supply curve in an equilibrium price graph. It is also called the market-clearing price. The determination of the market price is the purpose of microeconomics, and hence microeconomic theory is also known as price theory. 

Equilibrium Price Graph

Here, given below is a graphical representation of demand and supply at an equilibrium price which validates the equilibrium price definition.

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How does a Supply Shock Affect Equilibrium Price and Quantity?

A supply shock affects equilibrium price and quantity positively and negatively. Supply shock indicates a sudden good change that means if it is a positive shock, the equilibrium price and quantity go up, and if it is a negative shock, it will be vice versa. 

How do Supply and Demand Affect Equilibrium Price?

With the upward shift, the supply decreases, the equilibrium price increases and demand stays stable. With the downward change in supply, the supply increases and the equilibrium price falls.

With the upward shift, demand increases, equilibrium price increases and supply stays stable. With the downward change in demand, demand decreases, equilibrium price decreases and supply remains steady.

It can be calculated using the equilibrium price formula.

Did you know?

• The equilibrium theory was introduced and developed by a French economist, Leon Walras, in the late 19th century.

• Walras used this theory to multi-market settings by bringing in another good into his model, which then helped him to calculate price ratios.

• The contribution of Walras’ to the theory helped economics to grow into a study that includes mathematical analysis at its centre.

Section 12(2) of Sales of Goods Acts (1932) explains that express and implied conditions help one to get a clear and good contract. A condition is a matter which always needs to be clearly specified to the seller. Conditions can be both implied or expressed. The express and implied condition also helps the formulation of a diverse contract which is extremely essential. A buyer has the right to know the conditions beforehand so that he or she can refuse to accept goods during its delivery if the conditions mentioned in the contract are not fully or partially satisfied. Express and implied conditions help a buyer to make decisions regarding the purchase and hence a sense of security in the matter of purchase. They in fact give warranties to the buyer as per their demands.

Express and Implied Conditions

According to Section of Sales of Goods Acts (1932), ‘A condition is a stipulation essential the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. Condition is a crucial matter in a sale agreement that is specified by a buyer to the seller.

Conditions, in terms of sale, can be of two types. It can either be implied conditions or expressed.

A buyer has the right to refuse to accept goods during its delivery in case of any discrepancy with the pre-discussed conditions in a contract. Express and implied conditions and warranties help to formulate a lucid, clear, as well as detailed contract. This, in turn, enables a buyer to make better decisions regarding the purchase. Express and implied conditions can be said to be a warranty as per the buyer’s demands.

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Implied Conditions in a Contract of Sale

An implied condition is when it is neither written nor declared by any party but is automatically implied by law. Unless a contrary agreement is made, these conditions continue to be valid on a sale transaction. Section 14 to 17 under the Sale of Goods Act, 1930 provides implied condition definition along with its types.

Condition as to Title

Each contract of sale, irrespective of the product type, has to follow two conditions that are implicit in an agreement-

1. In case of a sale, a person has the right to sell the products.

2. In case of an agreement to sell, a person has the right to sell the products when the property is to be passed. The buyer also has the right to reject the goods and claim its price if it turns out to be defective.

Say, a particular person buys a car from a seller who illegally possesses it. If after a few months, the legal owner of the car claims his property back, the buyer would be bound to return it to him. However, in such cases, he has the right to file a lawsuit against that seller and recover the selling price from him. All these intricacies might not be embodied in any contract, but are by default, present as implied conditions.

Condition as Per Description

If a product does not stand up to its description or specifications, the buyer can refuse to accept it. This provision is mentioned in Section 15 of the Sale of Goods Act.

For example, if a piece of clothing does not match its description, a buyer can claim its price back. He or she has the right to reject it in the context of implied conditions that it did not match the description given by the seller.

Condition as to Sale by Sample

When products are sold in bulk, a seller often provides a sample product to the buyer for him to judge its quality. Once the buyer is convinced with the sample, he goes on to buy more of it. Implied conditions in a Contract of Sale of Goods sold on the basis of a sample are: When products are sold in bulk, a seller often provides a sample product to the buyer for him to judge its quality. Once the buyer is convinced with the sample, he goes on to buy more of it. Implied conditions in a Contract of Sale of Goods sold on the basis of a sample are:

1. The bulk of products sent later must exactly match the sample.

2. The buyer has the right to compare the bulk of products with the sample and must not be deprived of it.

3. The goods sent after the sample product must be defect-free, just like the sample.
   For example, a shoe manufacturer sends a perfect shoe sample to the seller. But at the time of delivering the actual order, he delivers shoes of poorer quality. According to the conditions implied in a Contract of Sale of Goods, the seller can claim a refund as well as a compensation price for the damage caused.

Sale by Sample as well as a Description

When products are sold through the sample as well as description, the seller is liable to provide goods that abide by the description as well as correspond to the sample.

Condition Referring to the Quality or Fitness of a Product

There are usually no implied conditions on the quality or fitness of goods which are being sold for a specific purpose. However, the quality of a product and its reasonable fitness is implied when a buyer purchases it from the seller. Here, implied in fact conditions are as follows:

• If a buyer had already expressed his purpose of purchase.

• If a buyer trusted the judgement of the seller.

• If a seller runs a business of supplying goods of the concerned description and quality.

Condition as Per Merchantability

This implied condition is applicable only when the goods are of ‘merchantable quantity’ or are saleable under reasonable conditions.

Condition Based on Wholesomeness

When it comes to eatables, certain implied conditions apply to it. It is related to wholesomeness as well as the merchantability of such products. If a customer ends up facing health issues after consuming any edible product, he can sue the seller and claim compensation.

Express Conditions

Unlike the implied conditions of the Sale of Goods Act, expressed conditions are the ones that are mentioned or specified in a contract of sale. It is included in a contract on the mutual agreement of both the parties (buyer and the seller).

Expressed conditions differ from implied conditions because of the fact that expressed conditions are the conditions that have to be mentioned or specified in an agreement or contract of sale prepared between both the buyer and seller.

Condition Based on Wholesomeness

When it comes to eatables, certain implied conditions apply to it. It is related to wholesomeness as well as the merchantability of such products. If a customer ends up facing health issues after consuming any edible product, he can sue the seller and claim compensation.

Implied Conditions 

Implied conditions are those conditions that even when not expressed in words or written in the contract are considered to be warranted by the law to be present in the sales contract. In fact, they are automatically implied by law unless any agreement contrary to it is prepared by both parties.