Conditions & Warranties
In this part we discuss about Conditions & warranties attached in a Contract of Sale, such as :
- Express Conditions
- Implied Conditions
- Express Warranty
- Implied Warranty
- Doctrine of Caveat Emptor
Statements in Contract of Sale
At the time of formation of contract of sale, the seller makes various statements in respect of the goods to be sold.
Depending on the importance and legal bearing on the contract, the statements may be classified as :
Simple Commendations in Contract of Sale
Some of the statements made by seller may be mere expression of opinion or commendation. Such statements do not form part of the contract and do not have any legal effect on the contract.
Stipulations in Contract of Sale
Stipulations are Important statements which become part of the contract of sale, and intending purchasers rely upon those representations. Stipulations have legal effect on the contract.
Ex: Mira approaches Akash, a dealer in readymade garments, and asked him for some good clothes for forthcoming party which she has to attend. Akash shows her a party wear and said “You will be looking charming on this wear in the party”. Mira purchased it, but nobody in the party appreciated her dress. Mira cannot rescind the contract (i.e return the dress to Akash) as the representation made by him is merely an expression of opinion and does not amount to stipulation.
Stipulation in Contract of Sale – Legal definition
A stipulation or a representation in a contract of sale is an Important representation with reference to goods, which may be a condition or a warranty (s. 12(1)).
Stipulation in Contract of Sale – Classifications
Depending on the nature of the statements, Stipulations may be classified as :
- Conditions : Stipulations which are essential basis of the Contract are called Conditions
- Warranties : Stipulations which are collateral to the essential Conditions are called Warranties
Conditions in Contract of Sale
Conditions are Stipulations that form essential basis of the contract. Conditions are so essential part of contract that their non-fulfilment may be considered as a substantial failure to perform the contract at all, by the other party.
Condition – Legal Definition
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” (s.12(2))
Ex: P approaches Q, a dealer of car, and told him “I want a car which can give an average of 17 km. per Iitre. Q pointed one particular car which can suit his purpose. P believing the statements made by Q, purchased that car but afterwards it was found that the car average was only 10 km. per litre. It can be treated as a breach of condition and P can rescind the sale as the main condition of sale (i.e.17 km / litre) was not fulfilled.
Types of Conditions in Contract of Sale
Depending on mode of expression, Condition may be broadly classified as follows :
Express Conditions in Contract of Sale
An express condition means a condition in the contract of sale (oral or written) which is expressly agreed to by the buyer and seller at the time of formation of contract of sale. A contract may contain any number of Express Conditions.
Implied Condition in Contract of Sale
Implied conditions are provided by law and are presumed to be present in every contract of sale though may not be expressly recorded in the contract of sale.
Express exclusion of Implied condition in Contract of Sale
Such implied conditions can be excluded in course of dealings between the parties, or by usage of trade (s. 62).
Such exclusion of implied condition is known as ‘
Implied conditions can bind both the parties, if they are not expressly excluded in the agreement, by the parties.
Implied Conditions in Contract of Sale
Every contract is made subject to certain Implied Conditions, non-fulfillment of which may result to the termination of contract
- Condition as to Title : Sellers right to sell the goods in the form as expressed in the contract of sale [s. 14(a)]
- Condition as to Description : Goods must actually correspond with the description as per contract (s. 15)
- Condition as to Sample: Goods must be as per sample shown (s. 17)
- Condition as to Sample and Description : Goods must be as per sample shown and also correspond to the Description in the contract.
- Condition as to Quality or Fitness : Goods should be suitable to Buyer’s needs, of right quality and free from defects. [s. 16(1)]
- Condition as to Merchantability : Goods shall serve the expected purpose, as per the name [s.16(2)]
- Condition as to Wholesomeness : Goods meant for human consumption will not adversely affect the health of a normal human being
- Condition implied by Customs : Goods must fulfil the requirements of customary usage [s.16(3)]
Implied Condition as to Title in Contract of Sale
Condition as to title means that the seller has the right to sell the goods for which he has made the contract of sale. ‘Right to sell’ means the right to pass the ownership of goods in the form as expressed in the contract of sale.
Right to sell : In a contract of sale, if there is no different intention as is expressed in the contract, there is an implied condition on the part of seller that seller has right to sell the goods.
In case of Sale, he has a right to sell the goods, and in case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass.
When a seller having no title to the goods at the time of sale, but subsequently acquires it, then the title will deemed to be defective to both the original buyer and the subsequent buyer.
Infringement : In case of sale by infringement of trademark, the condition that the seller has a right to sell the goods will be broken by him.
Ex: K represented to L some goods of ‘Samsang’ brand during sale of those goods. Afterwards, it was found that ‘Samsang’ brand was an infringement of ‘Samsung’ brand. Therefore, L was legally bound to remove the labels of ‘Samsang’ brand pasted on goods bought by him. Consequently, the goods became unbranded which adversely affect the right of buyer to sell these goods. Held, it will be treated as a breach of condition as to title, even though K was competent enough to pass the ownership to L.
Implied Condition as to Description in Contract of Sale
Condition as to description means that the goods delivered to the buyer must actually correspond with the description of goods given by the seller(s. 15). If a false description of goods is given by the seller to buyer before the formation of contract of sale, it will be considered as a breach of condition as to description.
Description of Goods in Contract of Sale
The seller gives a description of goods proposed to be sold to the buyer. Sometimes, packing of goods can form a part of description.
- Goods Complying Description : The seller agrees to supply the goods to the buyer corresponding to the description
- Buyers Relying on description : The buyer buys the goods relying on the description given to him,
The buyer may rely on the description given by the seller in following situations :
- when the buyer has seen the goods and relies the description given by seller,
- when the buyer has seen the goods but relies on the statement delivered by seller and the deviation of the goods from description is not apparent,
Implied Condition as to Sample in Contract of Sale
Condition as to sample means that where the seller shows to the buyer a sample of goods and agrees that the goods supplied by him shall be same as the sample shown (s.17).
Goods sold by sample – Conditions of Sale
- The seller shows a sample of goods proposed to be sold to the buyer and the buyer buys the goods relying on the sample shown to him.
- The goods supplied by the seller shall correspond with the sample shown by the seller.
- The seller shall give reasonable opportunity to the buyer for inspection of goods to satisfy himself that the goods supplied correspond with the sample shown to him.
- Goods shall be free from any latent defect (defect which cannot be discovered even after making a reasonable inspection of the goods). The seller is not responsible for apparent defects (defects visible or discoverable by examination of the goods).
If any of the above requirements are not fulfilled, it would amount to a breach of condition as to sample.
Implied Conditions as to Sample and Description
Condition as to sample as well as description means that the goods shall correspond to the description as well as sample i.e., both the ‘condition as to description’ and ‘condition as to sample’ must be fulfilled.
Sale by Sample and Description : Condition of Sale under Sale of Goods Act
- The seller shows a sample of goods and gives a description of goods proposed to be sold to the buyer;
- The seller agrees to supply the goods to the buyer that will correspond to the sample as well as description given by him
- The buyer buys the goods relying on the sample shown to him, and description given to him.
If any of the above requirements are not fulfilled, it would amount to a breach of condition as to Description & sample.
Implied Conditions as to Quality or Fitness
Generally, there is no implied condition as to quality or fitness of the goods for a particular purpose in a contract of sale.
It is the duty of the buyer to ensure that he buys goods suitable to his needs, are of the right quality and free from defects (s.16(1)).
- Seller is not responsible, if the buyer finds that the goods do not satisfy the purposes for which he intended to buy the goods
- Seller is normally not bound to disclose any faults in the goods to the buyer.
Exceptions to Conditions of Quality & Fitness under Sale of Goods Act
Following are the exception to the above rules, in which case seller is responsible, if the following requirements are fulfilled:
- Buyer informing the Purpose : The buyer, expressly or by implication, makes known to the seller the particular purpose for which he requires the goods, the seller would be held liable if the goods do not suit the particular purpose for which he buys the goods.
However, if the buyer does not mention the purpose for which the goods would be used, the seller cannot be hold liable if the goods do not suit the particular purpose for which he buys the goods.
- Seller exercising his judgement and skill : The seller exercises his judgement and skill and suggests that the goods will suit the buyer’s purpose.
- Abnormality : If the buyer purchasing an article for a particular use is suffering from an abnormality or inherent defect which is not disclosed to the Buyer
- Trade Name : If the buyer purchases goods under a trade name (i.e., brand name), the implied condition that articles are fit for a particular purpose shall not apply if the circumstances show that the buyer relied on the brand name.
Implied Conditions as to Merchantability of Goods under Sale of Goods Act
Condition as to merchantability means that the goods shall serve the purpose which is expected of them, as per the name given to them.
For Goods purchased for re-sale, condition as to merchantability is fulfilled only if such goods can be used for such purpose and can be resold under the same name.[s. 16(2)]
Merchantable Quality of Goods sold under Sale of Goods Act
Goods are of merchantable quality, if reasonable person acting reasonably would Accept them after having examined them thoroughly.
Where a watch dealer sells a thing describing it to be a watch, there is an implied condition that such thing shall tell only the correct time. So, a watch that will not keep time, a pen that will not write, a tobacco that will not smoke, cannot be regarded as merchantable.
Ex. M agrees to sell his Maruti esteem car to N. At the time of taking delivery, N finds that the car is not running. In this case, the condition as to merchantability is not fulfilled since a car not running cannot be described as a car.
Implied Conditions as to Merchantability – Applicability of Rules
The condition as to Merchantability shall apply if the seller trades in the contracted type of goods, and sells the goods by description.
It is immaterial, whether the seller is the manufacturer of such goods or not.
Implied Conditions as to Merchantability – Non Applicability of Rules
The condition as to merchantability shall not apply :
- If the buyer purchases the goods after inspection, where the defects in the goods could be revealed.
- For goods for consumption by normal human being, even though the goods was not suitable for to a particular buyer due to some peculiar reason associated with such particular buyer.
Implied Conditions as to Wholesomeness under Sale of Goods Act
Goods for human consumption will not adversely affect the health of a normal human being ( i.e; the goods shall be wholesome).
This condition is an extension of the condition as to merchantability and applies to goods meant for human consumption (i.e., foodstuffs, provisions etc).
Implied Conditions of Customs & Usage under Sale of Goods Act
The seller must fulfil the requirements of custom or usage, associated with the goods, if any [s. 16(3)].
If goods are being purchased from a manufacturer, it is an implied condition that the goods shall be the same as are being manufactured by him.
Ex: Rama asked for a hot water bottle to Kabir, a retail chemist. He was supplied one which burst after use and injured his wife. Held, Kabir was liable for breach of implied condition as Rama had sufficiently made known the use for which he required the bottle.
Sale by Description vs Sale by Sample under Sale of Goods Act
|Sale by Description||Sale by Sample|
|Applicability||Condition as to sale by description shall apply where seller gives description of goods. The seller agrees to supply the goods corresponding to the description given and consequently, the buyer buys the goods relying on the description given to him.||The condition as to sale by sample shall apply where the seller shows a sample of goods. The seller agrees to supply the goods corresponding to the sample shown and consequently, the buyer buys the goods relying on the sample shown to him.|
|Examination||The goods may be sold by description, even if the buyer has not examined the goods or its sample,.||The goods cannot be sold by sample, unless the buyer has examined the sample of goods.|
|Quality||In sale by description, the goods must correspond to the description.||In sale by sample, the goods must correspond to the sample.|
|Latent Defects||In a sale by description, the seller shall not be liable for any latent defects.||In a sale by sample, the seller shall be liable for the latent defects.|
Warranty in Contract of Sale
Warranty is a stipulation collateral to the main purpose of the contract of sale. Breach of warranty may give rise to a claim for damages but not to a right to reject the goods and contract to be as repudiated (s.12(3)).
If a representation to warranty is found to be false, the buyer cannot repudiate the contract, but he shall have a right to claim damages for non-fulfilment of the warranty.
But, no remedy can be availed on breach of warranty if the fulfillment of warranty becomes impossible by law.
Ex: X, a customer, went to B, horse dealer, to buy a healthy horse. B pointed at a particular horse and said it to be healthy which can run at a speed of 20k.m. per hour. X bought that particular horse and subsequently found that the horse is healthy, but it could run only at a speed of 12 k.m. per hour. X wanted to reject the horse and to have the refund of the price. In this case, the representation made by B, is a warranty (can run 20 km / hour), collateral to the main purpose (Healthy Horse). Thus, X cannot reject the horse on the ground of non fulfillment of warranty
Types of Warranties in Contract of Sale
Warranty may be classified as follows:
- Express Warranty
- Implied Warranty
Express Warranty in Contract of Sale
An express warranty means a warranty expressly stated and mutually agreed upon, between the parties, at the time of formation of contract of sale.
- Implied Warranty in Contract of Sale
An implied warranty means a warranty that is not expressly agreed to by the parties in the contract of sale but is presumed by law to be present in every contract of sale.
Exclusion of Operation of Implied Warranty in Contract of Sale
Since Implied warranties are only presumed, the parties to a contract can exclude the operation of certain implied warranties from their contract of sale (called express exclusion of implied warranty)
Consequences of Non Fulfilment of Implied Warranty
If any of such implied warranties is not fulfilled, the buyer can sue the seller for recovery of damages for breach of such warranty.
Implied Warranty in Sale of Goods Act
Following Types of Implied Warranties are presumed in a contract of Sale
- Quiet possession of Sold Goods under Sale of Goods Act
Buyer shall have quiet possession of goods (s.14(b)). The seller or any third person claiming under a superior title or under his authority, shall not interfere with the quiet enjoyment of the buyers.
If Buyer’s possession is disturbed, he is entitled to hold the seller liable for breach of warranty. The object of this warranty is to protect the buyer against a wrongful disturbance of his possession by a third party.
- Freedom from encumbrances of Sold Goods under Sale of Goods Act
Goods shall be free from any charge in favour of any third party (s.14(c))
If the goods are found to be charged in favour of a third party, the seller is liable to the buyer to pay damages for breach of warranty. However, if the buyer knows of any encumbrance on the goods at the time of entering into a contract, he becomes bound by the same and cannot claim any compensation from the seller for breach of warranty.
- Disclosure of dangerous nature of goods under Sale of Goods Act
In case of goods of dangerous nature, the seller shall warn the buyer of the probable danger.
In case of goods which to the knowledge of the seller, are dangerous or likely to be dangerous and the buyer is ignorant of the same, there is an implied warranty that the seller shall warn the buyer of the probable danger during selling the goods.
If the Buyer suffers any injury consequent upon the seller’s failure to warn the buyer, the buyer can recover damages from the seller.
Ex: S sold a tin of disinfectant powder to P. He knew that it was likely to be dangerous if it was opened without special care being taken, but he did not warn P and sold it to him. P without knowledge of danger, opened the tin whereupon the disinfectant powder flew into his eyes and injured him. Held, S was liable for damages to P, as he should have warned P of the probable danger.
- Customs or Usage of Trade under Sale of Goods Act
An implied warranty or condition as to quality of fitness for a particular purpose may be annexed by the usage of trade.
- Purity of Goods under Sale of Goods Act
The trade mark, if any, on goods, is genuine under Indian Merchandise Mark Act, 1819 and goods are pure or genuine.
Exclusion of Implied conditions & warranties
Implied conditions & warranties may be excluded by following methods
- By express contract: The implied conditions and warranties can be negated or varied by an express agreement by both the parties (s.62).
- By usage of trade: Implied conditions can be excluded by prevalent trade usage. If the established usages provides for exclusion of the liability, the parties are not liable for breach of implied terms in a contract of sale.
- By course of dealing: The parties may vary rights & obligations during the course of dealings between them.
Condition vs Warranty in Sale of Goods Act
|Sale of Goods Act 1930 Conditions vs Warranty|
|Definition||A condition is a stipulation essential to the main purpose of the contract [s. 12(2)].||A warranty is a stipulation collateral (i.e., subsidiary) to the main purpose of the contract [s. 12(3)].|
|Consequences of breach||In case of breach of a condition, the buyer can repudiate the contract and claim damages or both.||In case of breach of a warranty, the buyer has no right to repudiate the contract but can claim damages only.|
|Treatment||A breach of a condition may be treated as a breach of warranty.||A breach of warranty cannot be treated as a breach of condition.|
Breach of Condition & Breach of Warranty in Sale of Goods Act
On breach of condition, buyer can repudiate the contract and claim for damages. On breach of warranty, buyer can not repudiate the contract but can claim damages only.
Sometimes, breach of condition may be treated as a breach of warranty, by the buyer. In such case, the buyer looses the right to repudiate the contract but can make a claim for damages.
Voluntary waiver of Condition in Breach of Contract of Sale
Where Buyer voluntarily opts to treat breach of Contract as Breach of warranty (s.13(1).
On exercising the option by the buyer, the buyer can only claim damages for loss suffered and cannot afterwards rescind the contract on the ground of breach of condition.
Ex: X purchased 20 kg. of Deshi Ghee from B for Rs.8000. Later on, A noticed that the Ghee was not Deshi but retained the goods. Thus A treated the breach of condition as breach of warranty, X can claim only damages from B instead of full price of Deshi Ghee.
Acceptance of the Goods by the Buyer under Sale of Goods Act
The buyer is deemed to have accepted the goods (s.13(2)) in following cases:
- When he intimates the seller that he has accepted the goods, or done anything akin to ownership of the seller,
- Where he retains the goods after the lapse of a reasonable time without intimating the seller about rejection of goods.
Impossibility of fulfilment of Warranty
If the fulfillment of any condition or warranty is excused by law by reasons of impossibility or otherwise, it shall be treated as breach of warranty rather than a condition (s. 13(3))
Doctrine of Caveat Emptor in Sale of Goods Act
The term caveat emptor means ‘buyer be aware’.
The buyer is expected to take utmost care and diligence while purchasing the goods. If buyer’s selection of goods turns out to be wrong, or do not serve the intended purpose, he cannot hold the seller liable (s.16).
The seller is not duty bound to give to the buyer goods which are suitable for a particular purpose of the buyer.
Doctrine of Caveat Emptor – Non Applicability
Doctrine of Caveat Emptor is not applicable under ‘conditions of sale’
- Quality or Fitness (s.16(1))
- Merchantability (s.16(2))
- Sample as well as Description
Doctrine of Caveat Emptor in Fraud or Misrepresentation
Doctrine of Caveat Emptor is not applicable in cases of Fraud or misrepresentation.
- Consent by Fraud : Where the consent of the buyer is obtained by fraud by the seller or where the seller knowingly conceals a latent defect (that could not be discovered on a reasonable examination), the doctrine of caveat emptor does not apply. Such a contract is voidable at the option of the buyer.
- Misrepresentation by Seller : Where the seller sells the goods by making misrepresentation and the buyer relies on it, then the buyer can avoid the contract and claim damages.
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