Condition & Warranty

The Sale of Goods Act, 1930

Conditions & Warranties (Sec. 11-17)

 In a contract of sale, parties make certain stipulations, i.e., agree to certain terms regarding the quality of the goods, the price and the mode of its payment, the delivery of goods and its time and place. These stipulations are called either Conditions or Warranties.

Stipulation=Terms/Representations/Circumstances

 

All the stipulations in a contract of sale are not of equal importance. Some of them are essential to the main purpose of the contract which is called “conditions” and some are collateral to the main purpose of the contract which is called “warranties”.

therefore, these stipulations can be of two types:

• Conditions
• Warranties

 

Stipulations as to time

Stipulations as to time in a contract of sale fall under the following two heads:

               1. Stipulation relating to time of delivery of goods

               2. Stipulation relating to time of payment of the price                            

 

Stipulation relating to time of delivery of goods 

If time is fixed for delivery of the goods and the seller makes a delay, the contract is voidable at the option of the buyer.

 In the case of late delivery, therefore, the buyer may refuse to accept the delivery and may put an end to the contract.

Stipulation relating to time of payment of the price

The general rule is that ‘time of payment is not deemed to be the essence of the contract’ unless a different intention appears from the terms of the contract (sec. 11).

Therefore, if the buyer makes a delay in the payment of the price, the seller cannot avoid the contract on that account but he can only claim compensation for the same.

The parties are, however, free to express a different intention in their contract. They may make the time of the payment of the price as the essence of the contract.

In the following case, the time is considered to be the essence of the contract.

Where the parties have expressly agreed to that it is a condition

Where the delay operates as injury to the party

Where the nature and necessity of the contract requires it to be a condition

 

 

Conditions & Warranties (Sec. 11-17)

Sec. 12(2) defines a ‘condition’ as, ‘a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated’ (denied),

Sec 12(3) defines a ‘warranty’ as, ‘stipulation collateral to the main purpose of the contract, the breach of which gives rise to claim for damages but not to a right to reject the goods and treat the contract as repudiated’ .

 Effect of Breach

The effect of a breach of a ‘condition’ is to give the aggrieved party a right to treat the contract repudiated, i.e., if price has been paid, the buyer can claim the refund of price plus damages for breach and refuse the goods.

In case of breach of ‘warranty’, only damages can be claimed, i.e., the buyer must accept the goods and claim damages for the breach of warranty.

 Example: 1

Say ‘X’ wants to purchase a car from ‘Y’, which can have a mileage of 20 km/lt. ‘Y’ pointing at a particular vehicle says “This car will suit you.”

Later ‘X’ buys the car but finds out later on that this car only has a top mileage of 15 km/ liter.

This amounts to a breach of condition because the seller made the stipulation which forms the essence of the contract.

In this case, the mileage was a stipulation that was essential to the main purpose of the contract and hence its breach is a breach of condition.

 Example: 2

A man buys a particular horse which is warranted quiet to ride and drive. If the horse turns out to be vicious, the buyer’s only remedy is to claim damages.

But if instead of buying a particular horse, a man asks a dealer to supply him with a quiet horse and the dealer supplies him with a vicious one, the stipulation is a condition, and the buyer can return the horse and can also claim damages for breach of contract (Hartley vs Hyman)

 

The illustrations are a clear proof of the fact that an exactly similar term may be a condition in one contract and a warranty in another depending upon the construction of the contract as a whole

 The court is not to be guided by the terminology used by the parties to the contract, but is to be guided by the intention of the parties which can be gathered from the terms of the contract and circumstances.

 Whether a stipulation in a contract of sale is a ‘condition’ or a ‘warranty’ depends in each case on the construction of the contract

Example,

A agrees to supply a suit to B by 15th November, which the latter wants to wear on the day of his marriage to be held on 16th November, the time of the delivery of the suit is a condition.

On the other hands, if the suit which A agrees to deliver to B by 15th November is required by the buyer to be used in the following winter season, the time of delivery is a warranty.

The court has to look to the intention of the parties by referring to the terms of the contract and the surrounding circumstances to judge whether a stipulation is a condition or a warranty

 

When breach of Condition is to be treated as a breach of Warranty?

 Section 13 deals with cases where a breach of condition is to be treated as a breach of warranty, as a consequence of which the buyer loses his right to rescind (repudiate) the contract and has to be content with a claim for damages only.

These cases are as follows:

(1) Voluntary waiver by buyer:

Although on a breach of condition by the seller, the buyer has a right to treat the contract as repudiated and reject the goods, but he is not bound to do so

He may instead elect to waive the condition, i.e., to treat the breach of condition as a breach of warranty and accept the goods and sue the seller for damages for breach of warranty

Example:

               A agrees to supply B 10 bags of first quality sugar @ Rs. 1625 per bag but supplies only second quality sugar, the price of which is Rs. 1500 per bag. There is a breach of condition and the buyer can reject the goods. But if the buyer so elects, he may treat it as a breach of warranty, accept the second quality sugar and claim damages @ Rs. 125 per bag.

 (2) Acceptance of Goods by buyer:

Where a contract of sale is not severable (indivisible) and the buyer has accepted the goods or part thereof, 

The idea behind the provision is that when the buyer has a choice of either accepting or rejecting goods and he chooses to accept them, his right of rejection can no more be exercised.

 

 Express & Implied Conditions & Warranties

 Express condition or warranty:

 These may be of any kind that the parties may choose to agree upon, eg, it may be agreed that delivery of goods shall be made or taken on or before a certain date.

 Implied conditions and warranties:

They are deemed to be incorporated by law in every contract of sale of goods unless the terms of the contract show a contrary intention

 Implied conditions

• Condition as to title (sec. 14)
• Sale by description (sec. 15)
• Condition as to quality or fitness for buyer’s purpose [sec. 16(1)]
• Condition as to merchantable quality [sec. 16(2)]
• Condition as to wholesomeness
• Implied condition in the case of sale by sample (sec. 17)
• Implied condition in the case of sale by sample as well as description (sec. 15)

 

1. Condition as to title (sec. 14(a))

In a contract to sale, it is an implied condition that the seller should be the true owner of the goods sold and he should be having the right to sell these goods. Therefore the conditions as to title provided that:

Seller must be the owner of goods

Seller must not infringe a trade mark or patent.

Seller acquire the right to sell:

(a) In a contract of sale, the seller acquire the right to sell at the time of making the contract.

(b) In a agreement to sell, the seller shall acquire the right to sell when the property in goods shall be in his same.

Consequences of Breach of Condition as to Title. The aggrieved party has the right to cancel or repudiate the contract.

 Example- In the case of Rowland v Divall,

the plaintiff purchased a motor car from the defendants and used the same for several months.

The defendant had no title to the car and, therefore, the plaintiff was compelled to give it up to the true owner.

The plaintiff sued the defendant to recover back the price which he had already paid.

It was held that even though the buyer had used the car for some months, he was entitled to recover back the whole of the price paid by him.

 

 2. Sale By Description (sec-15)

When the goods are sold by given the description, there is an implied condition that the goods are sold shall the description so given.

Consequences of breach: Where the goods supplied by the seller are not according to the description given, then the seller commits a breach of condition and therefore, the buyer can reject the goods and repudiate the contract. This includes the following situations :

(i) Where the buyer has not seen the goods and relies on the description given by the seller. Here the goods should correspond the description so given else it shall amount to breach of condition and the buyer can repudiate the contract.

(ii) Where buyer has seen the goods but relies on description stated. It may be case that although the buyer saw the goods he bought, but still relied on the description given by the seller about the goods. In such cases also, if the description does not correspond with the goods, it amount to breach of condition in the contract.

 

Example- 

The internet website of a leading photocopying company offered a “2003 Machine”, in new condition and with original parts. Mr. Manzoor placed an order for the same, for his shop. When the machine arrived, it was found that the stand was partly broken, the glass was not original and a few switches were not functioning.

Mr. Manzoor was entitled to reject the machine since the goods (viz., the photocopy machine) did not correspond with the description on the website.

 The description may be regarding the class or kind of the goods, e.g., First quality wheat or B-30 sugar or long staple cotton, weight or measurements of the goods or the condition of the goods sold or the type of packing, etc.

 

3. SALE BY SAMPLE (Sec 17)

When goods are sold by sample, there is an implied condition that:

the bulk shall correspond with the sample.

The buyer shall have reasonable opportunity to compare bulk with the sample.

The goods shall be free from any defect.

 

4. SALE BY SAMPLE AND DESCRIPITION. (Sec 15)

Where the goods are sold by showing a sample and also by giving description, the goods must correspond both to the sample shown and the description stated.

Where the goods corresponding with the sample but do not corresponding with the description or vis-a-vis, it shall amount to breach of condition and the buyer can repudiate the contract.

 

EXAMPLE:-

 In Wallis v Pratt, there was a contract of sale by sample of seed described as “English sainfoin”. The seed was sown and when the crop was ready, it was discovered that the seed supplied and the sample shown were not of “English sainfoin” seed but of “giant sainfoin” seed. It was held that there was a breach of condition and the buyer was entitled to recover damages.

5.CONDITION AS TO QUALITY OR FITNESS (Sec 16)

Generally: there is no implied condition or warrantee as to fitness.

(The rule of Caveat Emptor) (Read it also)

 But Where:  the buyer needs goods for a special purpose and

a) buyer tells that purpose to seller.

b) The buyer relies on skill and judgment to the seller.

c) The seller deals or trades in similar goods.Then: it is an implied conditions that the goods sold should serve the purpose of serve.

 EXAMPLE:-

An order placed for some cart horses to be used for carriage purpose. The horses supplied were the race horses unfit for the carriages. These is a breach of conditions.

 Situations where Seller is not liable

1. If the buyer suffers from an abnormality:-

If buyer has some abnormality, then such abnormality should be made known to the seller at the time of sale, else the seller shall not be liable. If the buyer suffers a harm due to his over sensitiveness, then the seller can not be blamed for it. Example-Skin disease

 2. If the buyer purchases a product under a TRADE MARK or PATENT:-

then the seller shall not be liable as he does not rely on the skill and judgment of seller. But where the buyer relies on skill of seller and tells him that relying on seller he is seller he is buying a particular trade marked product, the seller be held liable if buyer suffers a loss.

 

6. CONDITION AS TO MERCHANTABILITY- U/S 16(2)

When Goods are sold by description and the seller trades in the similar goods. then: merchantability means:

[i] the goods should be fit for consumption.

[ii] the goods should not be injurious when used.

[iii] the goods should not infringe a trade mark or a patent.

 (If the goods are not saleable in the market as the goods of a certain description, they are not of merchantable quality.)

7. Condition as to wholesomeness

Wholesome: Free from any defects which render them unfit for human consumption.

 

Implied Warranties

1) WARRANTY AS TO QUIET POSSESSION: U/S 14(B)

In a contract of sale is an implied warranty that the buyer shall enjoy quiet possession of the goods. If the buyer is disturbed as to possession of goods because of the defective title of the seller, the buyer can claim from the seller on account of breach of warranty of quiet possession of goods.

2) WARRANTY OF FREEDOM FROM CHARGES OR ENCUMBRANCES :

The goods should not be subject to any charge or a right in favor of a third party. If there is a charge or encumbrance on the goods sold and the buyer has to discharge the same, he is entitled to get compensation for the same from the seller.

 

3) WARRANTY OF DISCLOSING THE DANGEROUS NATURE OF GOODS TO THE INGNORANT BUYER