Conditions and Warranties

Conditions and Warranties

A stipulation in a contract of sale with reference to goods may be a condition or a warranty.

(i) Condition: A condition is a stipulation which is essential to the main purpose of the contract. It is core to the contract. The non-fulfilment of the condition cancels the very contract. In other words, if a condition is broken, it leads to cancellation of contract. eg. ‘A’ intends to buy a motorbike from ‘B’. ‘A’ insists that the bike should give him a mileage of 50 kms per litter. He prefers to have red colour bike. ‘B’, a mechanicgets a bike which gives him 55 kms per litter. But the colour is green. In this case, ‘A’ cannot cancel the contract. Since ‘A’ is very particular about the mileage, it is a condition to the contract. That part of contract is fulfilled by ‘B’. However, ‘A’ can ask the mechanic ‘B’ to bear the cost of repainting it with red colour.

(ii) Warranty: Warranty represents a stipulation which is collateral to the main purpose of the contract. It is of secondary importance to the contract. The violation of warranty entitles the affected party to claim damages or compensation from the other party. But he cannot cancel the contract altogether. In the above example, preference of red colour represents warranty. Mechanic ‘B’ breaks the warranty in the above contract by acquiring a green colour bike. Hence, ‘A’ is entitled merely to demand just change of colour by instructing ‘B’to repaint it with red colour and making him bear the cost of repainting.

In short, the stipulation or condition is contract specific. In other words, it can be determined with reference to the terms and conditions of the contract. Let us further examine the difference between conditions and warranties:

Implied Conditions and Warranties

In every contract of sale, there are certain expressed and implied conditions and warranties. The term implied conditions means conditions which can be inferred from or guessed from the context of the contract. Following are the implied conditions:

Implied Conditions

1. Conditions as to Title

In the case of sale, seller has a right to sell the goods. The buyer can assume that the seller has a right to sell the goods. eg. ‘R’ purchased a motorcar from ‘D’ and used it for 4 months. Later after six months, true owner came and proved that he is a true owner. In this case, ‘R’ has to return the car to the true owner and claim the full price paid by him from ‘D’.

2. Conditions as to Description

In a contract of sale by description, there is an implied condition that goods supplied should agree with the descriptions made by the seller. eg. ‘A’ has bought a machinery from ‘B’ who described it to be just one year old. After buying the machinery and using it for a month, ‘A’ came to know that it is very old machinery. In this case, ‘A’ can return the machinery to ‘B’ on the ground that machinery is not as per the description i.e. not recent one.

3. Sale by Sample

Where goods are sold by showing samples by the seller eg. foodgrains, cloth, medicine, chemicals etc., the bulk of goods supplied by the seller should be similar to the sample shown by the seller. In other words, where the goods supplied do not match with the samples; the buyer can very well return the goods subject to the following conditions:

1. The bulk of the goods must correspond with the sample in quality

2. The buyer should have a reasonable opportunity of comparing the bulk with the sample and

3. The good must be free from any defect rendering them unsalable.

4. Conditions as to Quality or Fitness

There is no implied condition as to the quality or fitness for any particular purpose of goods. But goods must be fit for a particular purpose if

(i) The buyer has made known to the seller the particular purpose for which he needs the goods

(ii) The buyer relies on the seller’s skill or judgement and

(iii) The goods are of a description which is in course of the seller’s business to supply

eg. ‘A’ bought set of false teeth from a dentist. The set did not fit into A’s mouth. Held that he could reject the set as the purpose for which it was bought was known to the dentist.

5. Conditions as to Merchantability

If goods are bought by description and the seller is a dealer in goods of that description, the implied condition is that goods must be of merchantable quality. It only means that the goods must be saleable in the market under that denomination. “A watch that will not keep time, a pen that will not write and tobacco which will not smoke, cannot be regarded as merchantable under such names.”

6. Condition as to Wholesomeness

In the case of eatables, the goods must be wholesome besides being merchantable.

eg. ‘F’ bought milk from ‘A’, a dairy owner. The milk was contaminated with germs of typhoid fever. F’s wife on taking the milk became infected and died of it. ‘A’ was held liable in damages.

7. Condition Implied by Trade Usage

An implied condition as to quality or fitness for a particular purpose can also be fixed by the usage of trade.

Eg.‘X’ sold certain drugs by auction to ‘Y’. In the auction sale, there is a trade custom to declare any defect in the goods. But ‘X’ sold the goods without such declaration. Later, such goods were found to be defective. In this case, ‘Y’ can claim refund of the price on the ground of breach of custom.

Implied Warranties

(i) Quiet Possession

There is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. If the buyer’s possession is disturbed by a person having a superior right to that of the seller, the buyer is entitled to claim the damages.

eg. ‘X’ sold a second hand radio to ‘Y’ who spendsRs. 100 on the repairs of the radio. This radio was seized by the police as it was a stolen one. ‘Y’ filed a suit against ‘X’ for the recovery of damages for breach of warranty of quiet possession including the cost of repair. ‘Y’ won the case. In other words, he was held entitled to recover the damages.

(ii) Free from Any Encumbrances

The goods bought must not have been subject to any charge or right in favour of a third party. If the buyer’s possession is disturbed by reason of the existence of any encumbrance, he is entitled to claim damages for breach of warranty.eg. ‘X’ borrowed Rs. 50,000 from ‘Y’ and hypothecated his autorickshaw with ‘Y’ as security. Later on, ‘X’ sold the autorickshaw to ‘Z’ who bought it in good faith. In this case, ‘Z’ can claim damages from ‘X’ because his possession is disturbed by ‘Y’ having a encumbrance on the auto.

(iii) Warranty in the case of Dangerous Goods

Where the seller knows that the goods he is selling are dangerous or likely to be dangerous to the buyer and the buyer is ignorant of the danger, the seller should warn the buyer of the probable danger, otherwise he will be liable to compensate the buyer in case of any injury.eg. ‘C’ bought from ‘A’ a tin of disinfectant powder. ‘A’ knew that the lid of the tine was defective and that if it was opened without special care, it might be dangerous. Yet ‘A’ did not warn ‘C’. ‘C’ opened the tine in the usual way whereupon the powder flew into her eyes, causing injury. Held that ‘A’ was liable in damage to ‘C’ as he should warned ‘C’ of the probable danger.

Unpaid Seller - Meaning

A seller is deemed to be an unpaid seller when the whole of the price has not been paid or (b) a bill of exchange or other negotiable instrument given to him has been dishonoured. Thus it would be obvious that a seller who has received only a part of the price is also an unpaid seller. Seller includes not only the actual seller but also an agent of a seller or a consignee.