CONDITIONS & WARRANTY UNDER THE SALE OF GOODS ACT, 1930

INTRODUCTION

At the time of selling the goods, a seller usually makes certain statements or representations with a view to inducing
the intending buyer to purchase the goods. Such terms are generally about the nature and quality of goods and their fitness for the buyer’s purpose. When these statements or representations do not form a part of the contract of sale, they are not relevant and have no legal effects on the contract. But when these form part of the contract of sale and the buyer relies upon them, they are relevant and have legal effects on the contract of sale.

A representation that forms a part of the contract of sale and affects the contract is called a stipulation. However, every stipulation is not of equal importance. Some of these may be very vital while others may be of somewhat lesser significance. The more significant stipulations contained in a contract of sale of goods have been called as “Conditions”, while the less significant stipulation has been given the name “Warranties”.

SECTION 12 CONDITION AND WARRANTY

“A condition is 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”

A Condition forms the core of the contract i.e. considered essential to the main purpose of the contract. Therefore, the repercussion would be a repudiation of the contract or claim for damages or both depending upon the breach and case. Breach of a Condition makes a contract voidable on the part of the non-defaulting party to the contract

Example

P wants to purchase a car from Q, which can have a mileage of 20 km/liter. Q pointing at a particular vehicle says “This car will suit you.” Later P 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 that 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.

“A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated”

Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.

Warranty is treated as collateral to the main purpose of a contract and therefore, the repercussions of breach of warranty by one of the parties would be only a claim for damages by the non-defaulting party.

Example

Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes to promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it from Shyam. The car turns out to be unfit for touring purposes. Here, the term that the ‘car should be suitable for touring purposes’ is a condition of the contract.

It is so vital that its non fulfillment defeats the very purpose for which Ram purchases the car. Ram is therefore entitled to reject the car and have refund of the price.

Difference between conditions and warranties:

SECTION 13 WHEN CONDITION TO BE TREATED AS WARRANTY

Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated.

Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect

Section 13 specifies cases where a breach of condition be treated as a breach of warranty. As a result of which the buyer loses his right to rescind the contract and can claim damages only.

In the following cases, a contract is not avoided even on account of a breach of a condition:
(i) Where the buyer altogether waives the performance of the condition. A party may for his own benefit, waive a stipulation. It should be a voluntary waiver by the buyer.
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty. That is to say, he may claim only damages instead of repudiating the contract. Here, the buyer has not waived the condition but decided to treat it as a warranty.
(iii) Where the fulfillment of any condition or warranty is excused by law by reason of impossibility or
otherwise

EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES

Terms of a contract of sale of goods can be both express or implied. When a stipulation (Condition or Warranty) is expressively provided in the contract of sale of goods, it is considered an express stipulation. On the other hand, when the contract does not expressively provide for an express Condition or Warranty, however, due to the nature of the contract or intention of the party there is the existence of a Condition or Warranty in the nature, it is known as implied Condition or Warranty.

The Sale of Goods Act provides provisions for express and implied Conditions and Warranties.

IMPLIED CONDITIONS

Section 14 of the Sale of Goods Act states that “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”, which means that it is an implied condition that the seller of good has the right to sell it or has the right to transfer the title of the property.

Therefore, when the seller’s title to the property turns out to be defective or the seller does not have the right to transfer the property to the buyer, it gives the right buyer to repudiate the contract of sale of goods and to claim the money from the seller in addition to damages, if any. A seller can only sell or transfer the oppression of the property when he is the true owner of the property or has the right to transfer the property.

The Sale of Goods Act also provides for situations when goods are sold by description i.e. there is a contract of selling the goods by the description given. In such situations, it is an implied condition that the goods sold to the buyer should match the description given about the goods.

If the goods do not match the description given, in such cases the buyer can repudiate the contract making the contract voidable at the option of the buyer. The buyer cannot be compelled to accept the goods when the goods sold are not in accordance with the description provided.

Where goods are to be sold to the buyer as per the sample as well as the description is given. However, if the goods sold to the buyer match or are in accordance with the sample but are not in accordance with the description given, the buyer can repudiate the contract on the breach of such stipulation.

In such situations, the necessity of goods sold to the buyer to be in accordance with the sample as well as the description is treated as an implied condition and breach of the same gives the right to the buyer to repudiate the contract of sale of goods.

When goods are sold under the contract of sale of goods, the Sale of Goods Act enumerates certain implied conditions, breach of any would provide the right to repudiate the contract. The following are the conditions: –

1. The bulk shall correspond with the sample in quality;
2. The buyer shall have a reasonable opportunity of comparing the bulk with the sample; and
3. The goods shall be free from any defect rendering the un-merchantable, which would not be apparent on a reasonable examination of the sample.

It can be concluded that this condition is applicable where the defects are latent as the section states that which (defects) could not be discoverable by an ordinary examination of the goods. The buyer can repudiate the contract if the defects are found after some time due to the potential existence of the defect but not presently evident.

IMPLIED WARRANTIES

The Sale of Goods Act enumerates an implied Warranty that the buyer shall have complete possession of the goods sold to him and shall enjoy quiet possession of such goods. In case of any kind of disturbance, the buyer can sue the seller for the breach of the Warranty and can claim damages arising out of the such breach.

Section 14 of the Sale of Goods Act also provides for implied warranties. section 14 also provides for an implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party, not declared or known to the buyer before or at the time the contract is entered into.

The Sale of Goods Act also makes provisions for an implied warranty as to quality or fitness for a particular may be annexed or attached by the usage of trade.

If goods sold are of dangerous nature and as per the usage of trade the seller has to disclose the dangerous nature of goods and if the seller does not disclose, the buyer can sue the seller for breach of implied warranty.

MUST READ

SALE AND AGREEMENT TO SELL (SALE OF GOODS ACT, of 1930)

FORMATION OF THE CONTRACT OF SALE 1930

TRANSFERS OF ACTIONABLE CLAIM