Introduction
Conditions and warranties are some of the most important terms that are used during the sale of goods. A contract is concerned with the quality and price of goods, the mode in which payment will be made, the delivery of goods, the time of performance, and the place where the goods are to be delivered.
A contract is usually comprised of two things during the formation of a contract i.e Conditions and Warranties. A Condition in a contract is the major term while A Warranty is used as a less important term.
Relevant Provisions
Sections 12-17 of the Sale of Goods Act, 1930.
Defining the term “Condition”
According to the Section 12(2) of the Sale of Goods Act, 1930
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.
Necessary Ingredients of Condition
The necessary ingredients of conditions are the following.
- Essential Stipulation
- The main purpose of the contract.
- Right to repudiate in case of breach of condition.
Defining the term “Warranty”
According to Section 12(3) of the Sale of Goods Act, 1930
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.
Necessary Ingredients of Warranty
- Collateral Stipulation
- Breach leads to a right to claim damages
- No right to repudiate the contract in case of a breach but gives rise to a right to claim damages
Kinds of Conditions
The following are the two types of conditions.
A) Express Condition
Express conditions are those conditions that are expressed and communicated by the parties at the time of the contract and both parties agreed upon those conditions.
B) Implied Condition
Implied conditions are those conditions that the law incorporates into the contract. The reason is that the law assumes that the parties usually intended to incorporate those conditions into the contract.
The law usually incorporates the following implied conditions into a contract unless it is expressly stated by the parties.
1. Transfer of Title; U/s 14(d)
The implied condition on the part of the seller is that only the owner or his agent can transfer the title of the goods. As a result of this condition, if the seller’s title is proven to be defective, the buyer can reject the goods and recover his price. In this situation, the buyer cannot treat it as a breach of warranty, he must return the goods.
Example: ‘A’ purchased bike from ‘B’. ‘B’ had no title. ‘A’ was compelled to return the bike to the original title holder. If ‘A’ returns the bike to the original title holder, ‘A’ would be entitled to get full payment.
2. Sale by Description; U/s 15
When there is a contract of sale of goods by description there is an implied condition that the goods shall match the description. If the goods are not according to the description, the buyer can reject them. The description must include the characteristics, quantities, etc.
3. Condition as to the Fitness; U/s 16(1)
When the buyer informs the seller about the purpose for which the goods are required there is an implied condition that goods shall be reasonably fit for that particular purpose. This condition is deemed to exist if the following are satisfied;
- Buyer should expressly or impliedly have informed the seller.
- Buyers should rely on the seller’s skill or judgment.
- Goods must be of the description of the kind the seller deals with.
4. Condition as to Merchantability; U/s 16(2)
Merchantability asserts that the goods are reasonably fit for the ordinary and intended purpose for which they are sold.
Merchantability means that goods must be saleable in the market. The implied condition exists that the seller would tell about any defect.
5. Sale by Sample; U/s 17
In case of sale by sample, the goods must be supplied according to a sample agreed upon. Following are some implied conditions in this regard;
- The bulk shall correspond with the sample quantity.
- Buyers shall have a reasonable opportunity to compare the bulk with the sample.
- Goods shall be free from all defects.
Kinds of Warranties
The following are the two types of warranty.
A) Express Warranty
An express warranty is that to which the parties agree at the time of the contract.
B) Implied Warranty
An implied warranty is that which is incorporated by the law only and not expressed by the sale dead.
The law usually incorporates the following implied conditions into a contract unless it is expressly stated by the parties.
1. Quiet Possession
It is the right of a buyer that he must enjoy the quiet possession of goods and it is an implied warranty on the part of the seller.
2. Freedom from Encumbrances
Incumbrances mean burden. Freedom from incumbrances means that the goods must be free from all burdens, charges, and encumbrances.
3. Disclosure of the dangerous Nature of Goods
It is the duty of the seller to disclose the facts about the dangerous nature of the goods. The reason is that no contract is supposed to endanger the life of another person.
Legal Effects of Condition and Warranty
The legal effects of the condition and warranty are discussed below.
A) Effects of Condition
Conditions are directly linked with the subject matter of the contract and their performance is compulsory to the performance of the contract. At the non-fulfillment of a condition, the aggrieved party may consider it to be a non-performance of the whole contract. Thus breach of a condition gives the aggrieved party the right to repudiate the contract. The aggrieved party may also file a suit for damages in this regard.
Example: If ‘A’ and ‘B’ enter into a contract of sale of rice where ‘A’ lays down a condition in the contract that the rice has to be purely white in color and upon delivery, he finds out that ‘B’ has not sent the purely white rice, he can repudiate the whole contract on the basis of non-performance of this condition.
B) Effects of Warranty
The legal status of warranties in the contract is that they are less important and their performance is not vital for the performance of the whole contract. But this does not mean that their fulfillment is not necessary. The law provides remedies for the breach of warranties by awarding damages to the aggrieved party. However, the aggrieved party cannot repudiate the contract or refuse to take the goods on the basis of a breach of warranties.
Distinctions between Condition and Warranty
1. As to Nature
Condition is an obligation in its nature that requires to be fulfilled for the completion of the contract.
Warranty is the surety given by the seller regarding the facts of the goods.
2. As to Construction
Conditions are always constructed to be of great importance in the contract but warranties are not.
3. As to Remedies
In case of breach of condition, the innocent party has the right to cancel the contract and can claim damages.
In case of breach of warranty, the innocent party only can take legal action against the other party.
4. As to the Right of waiver
Right of waiver in a contract is available for the breach of condition but not for the breach of varieties.
5. As of Importance
Condition is an important and integral part of the condition and it directly affects the contract.
Warranty is not so important part of the contract as a condition and it does not directly affect the contract.
6. As to the Violation
The violation of a condition leads to the violation of a warranty too.
The violation of the warranty does not affect the condition.
7. Termination of Contract
Breach of any condition may result in the termination of the contract. Breach of warranty may not result in the termination of the contract.
When does a Condition turn into a Warranty?
It must be remembered that
- a condition can change into a warranty under special circumstances
- a warranty never turns into a condition
However, the Sale of Goods Act, of 1930 deals with circumstances where a condition might turn into a warranty. According to Section 13 of the Sale of Goods Act, 1930; the following are the situations where a condition might be changed into a warranty.
Waiver: A condition changes into a warranty where the party who has been injured, decides to not treat it as a breach of a condition but rather as a breach of warranty.
Acceptance by Buyer of Goods, Which cannot be severed: Where the goods are not severable and the buyer has accepted the goods, in whole or in part, and then there is some breach of conditions from the seller, it would be held to be a breach of warranty since the buyer would not be able to reject or repudiate the contract. Except in the cases of expressed or implied provision
Performance Excused by Law: If the performance of a condition is excused by law then nobody can force him to perform that condition of the contract.
Final Note
A condition is a term of the contract which goes to the root of the contract. Therefore, if there is a breach of a condition there is no contract and the buyer may cancel the contract and return the goods. If it is impossible to return the goods, the buyer may sue for damages.
In contrast, a warranty is not a vital term of the contract to sue for damages.
FREQUENTLY ASKED QUESTIONS
Define Condition and Warranty. Distinguish between the two.
(2019-A, 2019-A 5 year, 2015-S, 2015-A)
Define condition and warranty. What are the implied conditions provided under the Sale of goods Act?
(2018-A, 2017-S, 2016-S, 2014-S)
Define and distinguish between Condition and Warranty. Under what circumstances a breach of condition is to be treated as a breach of warranty?
(2010-S)
Define and distinguish between condition and warranty. Explain implied and express warranties in a contract of sale.
(2008-S, 2008-A)
Define and state the difference between a condition and a warranty of a contract. When a condition may be treated as a warranty?
(2007-S)
REFERENCES
- The Contract Act, 1872
- N-Series by M.A. Chaudhary
- Law of Contract by Avtar Singh
