Legal

Concept Of Condition And Warranty

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This Blog is written by Ravikiran Shukre from Manikchand Pahade Law College, Aurangabad. Edited by Saumya Tripathi.

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ABSTRACT

Contract of Sale or Agreement to Sale are the main crux or we can say is the “Heart of Commercial Law”. Can we imagine these contracts without the main ingredients in it? Can we imagine a Commercial Law without Conditions and Warranties? Well, the answer is simply NO! Because, when parties come together having Consensus ad-idem and willingness to create legal relationship between them for a lawful consideration and valid and legal objective; which is not declared as void by any law then it is called as a Contract. And in such contracts, parties mutually decide the terms and conditions for the performance of each other’s legal duty which is casted on them by that contract.

We can say that; Salt is necessary ingredient to make a recipe tasty in the same way, Conditions and warranty in a contract make contract complete and meaningful because, conditions in a contract is very essential element of that contract; that its breach is to be considered as a failure to the contract. Breach of condition invokes action/claim of damages to the other party who has committed such breach or repudiation of a contract. But, on the other hand, warranty is considered as a collateral to the contract and its breach does not lead to the “failure of a contract”. Meaning of warranty can be stated as in “One-year maintenance warranty”. But, in case of breach of warranty, one can only choose for the damages for the same and not the repudiation of the contract. One cannot avoid the contract for the breach of this. Warranty in a contract is not that much necessary as that of the Conditions; warranty is a collateral to the contract. This is because Conditions are the main purpose for creating the contract and the performance of the legal duties by parties.

INTRODUCION

Sale of Goods Act, 1930 one of the most prominent enactment in case of Commercial Law. Sale of Goods Act, 1930, the name of the enactment itself explains that this enactment deals with “Sale of Goods” in everyday life. At first, Sale of Goods Act was a part of Indian Contract Act, 1872 comprising of Chapter VII with sections ranging from 76 to 123, but then it was repealed and a new and fresh enactment was enacted named Sale of Goods Act, 1930 for the comfort of general public. This Act governs the sale of goods and is complementary to the Contract Act, 1872. General principles for the formation of a contract are applicable to this Sale of Goods Act, 1930. Sale of Goods Act, expressly defines terms ‘buyer and delivery’. A buyer is a person who buys or agrees to buy goods[1]. And voluntary transfer of possession from one person to another is called as delivery[2]. A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in the goods to buyer for a price followed by an express term when buyer and seller actually agrees upon. It does not matter whether the agreement is verbal or written.

There are certain circumstances where, sometimes, seller does not provide the buyer the goods that was agreed, then buyer has a right to get what was agreed or he can demand his money back. But when parties form a written contract, they fix the terms and conditions for the mutual performance of their respective duties. But there remains an unexpressed part to it and this unexpressed part is recognised by law. Law recognises both, the expressed terms and conditions and unexpressed part is supplementary to the original contract.

This can be explained by a simple example as, whenever we buy goods like electronic gadgets like, mobile phones, laptops, etc. we are concerned about their warranty period. We curiously ask seller about the warranty of that product so as to make sure that, if in case, the product is found to be faulty after our purchase, we can easily get that product easily replaced or repaired. The terms “conditions and warranty” are set out in contract of sale or in an agreement to sell in order to determine the remedies available for the parties if in case; there is a breach in a contract. Now, the expressed part in a contract is referred to as conditions and unexpressed part in a contract is referred to as a warranty, both are recognised by law but warranty is a supplementary to the contract.

STATUTORY PROVISIONS

(A). Buyer: A buyer is a person who buys or agrees to buy goods[3].

(B). Delivery: A voluntary transfer of possession from one person to another is called as delivery[4].

(C). Condition: A stipulation essential to the main purpose of the contract, breach of which gives rise to right to treat the contract as repudiated[5].

Conditions can be classified into two categories as (I) Express Conditions and (II) Implied Conditions.

1) Express Condition can be defined as a condition which has been expressly stated in terms of the contract and failure to which allows a party to either repudiate the contract in whole or claim for damages.

2) Implied Conditions can be defined as those conditions which have not been expressly stated but which law presumes to be inherently a part of the contract that it need not to be laid down in clear and written terms but are to be mutually understood by the parties.

3) Implied Condition as to title, etc. [6]

4) Implied Conditions under a sale by description[7]

Goods must correspond with description.
Goods must be of merchantable quality.
Condition of wholesomeness.

5) Conditions as to quality or fitness for any particular purpose of Goods[8]

Goods must be reasonably fit for such purpose.
Goods must be of merchantable quality.

6) Implied Conditions as to sale by sample[9]

Correspondence with Sample.
Buyer’s opportunity of comparing bulk order with sample.
Goods must be free from any defect and must be of merchantable quality.

(D). Warranty: A stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated[10].

Warranties can also be defined into two categories as (I) Express Warranty and (II) Implied Warranty.

1) Express Warranty can be defined as the warranties which are agreed by the both parties and are inserted in the contract.

2) Implied Warranty can be defined as those warranties which parties assume to have been incorporated in a contract of sale despite the fact that the parties have not specifically included them in a contract.

3) Implied Warranty of quite possession of goods[11].

4) Warranty as to goods free from encumbrances in favour of third party[12].

5) If the goods sold are inherently dangerous and the buyer is not aware of this fact, then it is the duty of the seller to warn buyer for the probable danger. If there is breach of this warranty, then seller would be held liable.

DOCTRINE OF CAVEAT EMPTOR

The doctrine of ‘Caveat Emptor’ means ‘buyer be aware’. Generally, buyer is expected to be extra careful while buying the goods from a seller and seller is not liable for any defects in goods sold by him. This principle is embodied in Section 16 of the Sale of Goods Act, 1930, there is no implied condition or warranty as to quality or fitness of goods for any particular purpose. “Quality of Goods” includes their state or condition. There are certain exceptions to this doctrine as –

• False representation by seller

• Seller actively conceal a defect in a product

• Buyer relying upon skills of the seller

• Goods bought by description

SIGNIFICANCE OF THIS DEVELOPMENT

Intention in a contract may be manifested either expressly or impliedly and it is fundamental that, which is plainly or necessarily implied in the language of a contract is as much a part of it as that which was expressed. What the function of law in these cases is, to supply in contract what is presumed to have been carelessly omitted or to have been deemed perfectly obvious by the parties, the parties being supposed to have made those stipulations which as honest, fair, and just men they ought to have made.

Once it is determined that, what the implied provisions are, they are read into a contract and, the rights of parties are to be adjudged as though such provisions were expressed. Implied promises already exist where equity and justice require the party to do or to refrain from doing the thing in question. the courts are justly prudent, careful and cautious in implying rights obligations, promise, in case they make contract speak where it was intended to be silent or make it contrary to what, as may be gathered from all the terms of the contract, was the intention of the parties[13].

DIFFERENCE BETWEEN CONDITION AND WARRANTY

Conditions and Warranties are essential for proper completion of a contract. Condition is a main purpose for the formation of a contract. Conditions in a contract is very essential element of that contract; that its breach is to be considered as a failure to the contract. Breach of Condition invokes action/claim of damages to the other party who has committed such breach or repudiation of a contract. But, on the other hand, Warranties are collateral to the contract its breach does not repudiate the contract. Its breach does not lead to “failure of a contract”. If there is a breach of warranty then, party can only claim for damages but cannot treat the contract as repudiated. Party cannot avoid a contract if there is a breach of warranty in a contract.

Condition is stipulation essential to a contract and is a very important aspect of a contract for the performance of the legal duty. Warranty is a collateral to the purpose of a contract. Warranty is a written guarantee for assuring the party.

ANALYSIS

Contract of Sale or Agreement to Sale are the main crux or we can say is the “Heart of Commercial Law”. When parties come together having Consensus ad-idem and willingness to create legal relationship between them for a lawful consideration and valid and legal objective; which is not declared as void by any law then it is called as a Contract. And in such contracts, parties mutually decide the terms and conditions for the performance of each other’s legal duty which is casted on them by that contract.

Such contracts are comprised of conditions and warranty either expressly or impliedly which are important so as to performance of that contract. Conditions are the main stipulations which must be fulfilled for the sake of appropriate performance on part of each of the party.

Warranties are collateral to the main stipulations i.e. conditions of a contract. These are not that much essential as that of the conditions.

Breach of the main stipulations i.e. conditions of a contract, invokes claim for damages as well as right to treat a contract as repudiated. But, breach of a warranty in a contract does not lead to “failure of a contract”. If there is a breach of warranty then, party can only claim for damages but cannot treat the contract as repudiated. Party cannot avoid a contract if there is a breach of warranty in a contract.

CASE LAWS[14]

Niblett v. Confectioners’ Material [15]: Claimant purchased 1,000 tins of condensed milk from the defendant. These tins were labelled as ‘Nissly’. Nestle told claimant that if they attempted to sell these on, they would apply for an injunction to prevent the sale as the label was similar to Nestle’s labels of condensed milk. The claimants agreed not to sell them and brought an action against sellers. It was held that, the sellers did not have the right to sell the goods and therefore, buyers were entitled to repudiate the contract.

Nicholson & Venn v. Smith Marriot [16]: Table of napkins sold at auction which were said to be authentic property of Charles I, but that turned out to be false. Claimant was entitled to damages for the breach of contract but, Justice Hallet held the claimant could have avoided the contract on the ground of mistake.

Shivallingappa v. Balakrishna and Son [17]: The buyer ordered for the best quality ‘Toor Dal’. The Dal was loaded in rain and by the time it reaches the destination, it was damaged by moisture. It was held that, since the damaged toor dal could not be sold as best quality Toor Dal because it was no longer of merchantable quality. The buyer was entitled to claim damages.

CONCLUSION

Both buyer and seller put forth some preconditions regarding mode of payment, delivery location, quality, quantity etc. and other necessary things. These stipulations are either considered as conditions or warranty; as it differs from case to case. These concepts are important to understand the rights of parties’ in case of any breach of contract.

Breach of condition can be treated as breach of warranty. However, breach of warranty cannot be treated as breach of condition. The construction of a contract defines whether stipulation is a condition or is a warranty. Conditions in a contract is very essential element of that contract; that its breach is to be considered as a failure to the contract. Breach of Condition invokes action/claim of damages to the other party who has committed such breach or repudiation of a contract. But, on the other hand, Warranties are collateral to the contract its breach does not repudiate the contract. Its breach does not lead to “failure of a contract”. If there is a breach of warranty then, party can only claim for damages but cannot treat the contract as repudiated. Party cannot avoid a contract if there is a breach of warranty in a contract. Condition is stipulation essential to a contract and is a very important aspect of a contract for the performance of the legal duty. Warranty is a collateral to the purpose of a contract. Warranty is a written guarantee for assuring the party.

REFERENCE

[1] Section 2 (1) of Sale of Goods Act, 1930

[2] Section 2 (2) of Sale of Goods Act, 1930

[3] Section 2 (1) of Sale of Goods Act, 1930

[4] Section 2 (2) of Sale of Goods Act, 1930

[5] Section 12 (2) of Sale of Goods Act, 1930

[6] Section 14 of Sale of Goods Act, 1930

[7] Section 15 of Sale of Goods Act, 1930

[8] Section 16 of Sale of Goods Act, 1930

[9] Section 17 of Sale of Goods Act, 1930

[10] Section 12 (3) of Sale of Goods Act, 1930

[11] Section 14 (2) of Sale of Goods Act, 1930

[12] Section 14 (3) of Sale of Goods Act, 1930

[13] Conditions implied and express – Sale of Goods Act

[14] Case laws on condition and warranty

[15] (1921) 3 KB 387 Court of Appeal

[16] (1947) 177 LT 189

[17] AIR 1962 Madras 426

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2776977

https://blog.ipleaders.in/condition-warranty/

http://www.legalservicesindia.com/articles/condi.htm

http://www.legalserviceindia.com/legal/article-241-implied-conditions-and-warranties-under-the-sale-of-goods-act-1930-with-reference-to-the-rule-of-cav.html