Conditions and Warranties

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’ . Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions & Warranties (Sec. 11-17) 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 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 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 a contract [sec. 12(4)] Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions & Warranties (Sec. 11-17) Example: 1 Kaushal asks a dealer to supply him a shirt which would not shrink after use and wash. The dealer supplies a shirt which shrinks after use and wash. Kaushal can reject the shirt or keep the shirt and claim damages. Here the stipulation to supply a shirt which would not shrink after use and wash is a condition. Now if Kaushal buys a particular shirt which is warranted by the dealer to be one which would not shrink after use and wash and the shirt does shrink after use and wash, Kaushal’s only remedy is to claim damages Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions & Warranties (Sec. 11-17) 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 Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Condition & Warranty Distinguished As to value: A condition is a stipulation which is essential to the main purpose of the contract, whereas a warranty is a stipulation which is collateral to the main purpose of the contract. 2. As to breach: The breach of a condition gives the aggrieved party the right to repudiate the contract and also to claim damages. 3. As to treatment: A breach of condition may be treated as a breach of warranty. But a breach of warranty cannot be treated as a breach of condition. Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions and Warranties A condition is a stipulation which is essential to the main purpose of the contract. Non-performance of the condition is non-performance of the contract A warranty is a stipulation which is collateral to the main purpose of the contract. Though it must be performed, the failure may lead to breach of warranty and not breach of contract. The affected party may only claim damages and cannot repudiate the contract. ( Eg sale of consumer goods, vehicles –some minor parts—may be replaced when defects are noticed but the vehicle itself cannot be replaced) Breach of condition is a breach of warranty. A breach of warranty is not a breach of condition Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions and Warranties When condition can be treated as a warranty: Voluntary waiver of condition by the buyer Voluntary treatment by the buyer that the breach of condition would be treated as warranty. He cannot change mind again Where a contract of sale is not severable and the buyer has accepted the goods wholly or in part , the breach of condition could only be treated as breach of warranty. Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions and Warranties Express and Implied Conditions and Warranties: Express conditions and warranties are those which are expressly declared or specified in the contract ( Eg Price, Time and place of delivery, etc) Implied conditions and warranties are those which are implied by the Law unless the parties stipulate otherwise. An express warranty or condition does not negate the implied unless the condition or warranty is inconsistent Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions and Warranties Implied conditions Conditions as to title: The seller is supposed to have good title unless contrary is proved Sale by description: Sale by description and specification—the goods would conform to the description and specification Sale by description as well as by sample—The entire goods shall match with the sample – no justification to say the bulk of the goods match with the sample Condition as to quality or fitness: Fitness for a particular purpose: For Eg, Payloaders, JCBs, Heavy Traffic Vehicles, laptop, gas stoves Condition as to merchantability: Goods are commercially saleable with the description commonly known. Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Conditions and Warranties Implied warranties Warranty of quiet and peaceful possession Warranty of freedom from encumbrances Warranty as to quality or fitness by usage of trade Warranty to disclose dangerous nature of goods ( Crackers, Acids, Phenyl, Pesticides, Fungicides)etc IMPORTANT NOTE: Implied conditions or warranties may be negatived or varied by specific contracts by the seller and the buyer or by normal dealing or by customs and practices. Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018

Rule of Caveat Emptor(page 240) “ Caveat Emptor” means LET THE BUYER BEWARE. In a contract of sale, the seller is not duty bound to disclose all the truth about the goods. Buyers should thoroughly examine before them. They may ask the seller all the clarifications required. If the seller shows the sample and the goods corresponds to the sample, the buyer cannot blame the seller anytime thereafter. In sale of goods on “as is where is” basis, buyer will not have any subsequent claims Exceptions to the above rule: a) Fitness for buyer’s purpose(expressly or by implication) ; b) sale under a patent or a trade name; c) Merchantable quality ( if the buyer has examined the goods); d) Usage of Trade; and e) Consent by fraud Unit II – Sale of Goods Act, Legal Aspects of Business - Mr.K.Mohan Kumar, AP/MBA 9/12/2018