Condition and Warranty Under Sale of Goods Act

The Sale of Goods Act 1930 provides the definition for a Condition as – ““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” and for a Warranty as – “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”.[i]

A Condition forms the core of the contract i.e. considered as an essential to the main purpose of the contract. Therefore, the repercussion would be repudiation of the contract or claim for damages or both depending upon the breach and case.[ii] Breach of a Condition makes a contract voidadble on the part of non-defaulting party to the contract. However, a Warranty is treated as a collateral to the main purpose of a contract and therefore, the repercussions of breach of warranty by one of the parties would be only a claim for damages by the non-defaulting party.

A breach of Warranty by one of the parties does not make the contract a contract voidable and does not give any right to the non-defaulting party to repudiate the contract. The same position is further, clarified by section 59 of Sale of Goods Act, which provides that when there is a breach of warranty by the seller, this breach does not provide the buyer with the right to breach the contract, he may only sue the seller for breach of Warranty in diminution or extinction of the price. Whether a particular stipulation in the contract is a Condition or a Warranty, depends on the case to case.

A breach of warranty by one party cannot treated as one of breach of condition, however, a breach of a Condition by one of the parties to the contract can be treated as a breach of Warranty.  The Sale of Goods Act provides for the situations when a breach of a Condition by one of the parties can be treated as breach of warranty under a contract of sale of goods.[iii] Those situations being: –

  1. When the buyer himself waives the Condition, which gives right to the buyer to repudiate the contract on breach of that particular stipulation; or
  2. When the buyer treats the Condition as a Warranty and does not repudiate the contract on the basis of such breach; or
  3. Where the contract is non-severable and the buyer has accepted either the whole goods or any part under the contract; or
  4. Where the law itself excuses the fulfilment of a Condition.

EXPRESS AND IMPLIED CONDITONS AND WARRANTIES

Terms of a contract of sale of goods can be both express or implied. When a stipulation (Condition or Warranty) is expressively provided in the contract of sale of goods, it is considered as express stipulation. On the other hand, when the contract does not expressively provide for an express Condition or Warranty, however, due to the nature of the nature of the contract or intention of the party there is existence of a Condition or Warranty in the nature, it is known as implied Condition or Warranty. The Sale of Goods Act provides provisions for express and implied Conditions and Warranties.

IMPLIED CONDITIONS

Section 14 of the Sale of Goods Act states that, “an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass”, which means that it is an implied condition that the seller of a good has the right to sell it or has the right to transfer the title of the property. Therefore, when the seller’s title to the property turns out to be defective or the seller does not have the right to transfer the property to the buyer, it gives the right to the buyer to repudiate the contract of sale of goods and to claim the money from the seller in addition to damages, if any. A seller can only sell or transfer the oppression of the property when he is the true owner of the property or has the right to transfer the property.

The Sale of Goods Act also provides for situations when goods are sold by description i.e. there is a contract of sell the goods by description given. In such situations, it is an implied condition that the goods sold to the buyer should match the description given about the goods. If the goods do not match with the description given, in such cases the buyer can repudiate the contract making the contract voidable at the option of buyer. The buyer cannot be compelled to accept the goods when the goods sold are not in accordance to the description provided.[iv]

Where goods are to be sold to the buyer as per the sample as well as the description given. However, if the goods sold to the buyer matches or are in accordance to the sample but are not in accordance with the description given, the buyer can repudiate the contract on the breach of such stipulation. In such situations, the necessity of goods sold to the buyer to be in accordance with the sample as well as description is treated as an implied condition and breach of the same gives the right to the buyer to repudiate the contract of sale of goods.[v]

When goods are sold under the contract of sale of goods, the Sale of Goods Act enumerates certain implied conditions, breach of any would provide the right to repudiate the contract. Following are the conditions: –

  1. the bulk shall correspond with the sample in quality;
  2. the buyer shall have a reasonable opportunity of comparing the bulk with the sample; and
  3. the goods shall be free from any defect rendering the un-merchantable, which would not be apparent on reasonable examination of the sample. It can be concluded that this condition is applicable where the defects are latent as the section states that which (defects) could not be discoverable by an ordinary examination of the goods. The buyer can repudiate the contract if the defects are found after sometime due to potential existence of the defect but not presently evident.[vi]

Also, section 16 of the act mentions that there is no implied condition as to the quality or fitness of the goods for any particular purpose. However, section 16 also clarifies that the condition as to the reasonable fitness of goods for a particular purpose may be implied if the buyer had made known to the seller to select the best goods and the seller has ordinarily been dealing in those goods. This implied condition will also not apply if the goods have been sold under a trademark or a patent name. An implied condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. In case of eatables, there an implied condition that the eatables shall be wholesome.

IMPLIED WARRANTIES

The Sale of Goods Act enumerates an implied Warranty that the buyer shall have complete possession of the goods sold to him and shall enjoy quite possession of the such goods. In case of any kind of disturbance, the buyer can sue the seller for the breach of Warranty and can claim damages arising out of such breach.

Section 14 of the Sale of Goods Act also provides for implied warranties. section 14 also provides for an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party, not declared or known to the buyer before or at the time the contract is entered into.

The Sale of Goods Act also makes provisions for an implied warranty as to quality or fitness for a particular may be annexed or attached by the usage of trade.[vii] If goods sold are of dangerous nature and as per the usage of trade the seller has to disclose the dangerous nature of goods and if the seller does not disclose, the buyer can sue the seller for breach of implied warranty.

THE RULE OF CAVEAT EMPTOR

Section 16 of the Sale of Goods Act states that, “subject to the provisions of this Act or any other law for the time being in force, there is not implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale”, brings the common law rule of Caveat Emptor, which means ‘let the buyer beware’.[viii] When the sellers display their goods in the open market, it is for the buyer to make a proper selection or choice of the goods. The buyer alone shall be responsible for checking the quality and suitability of goods before a purchase is made. The said rule owes its origin to the fact that in the early times most of the sales used to took place in the market.[ix]

However, the rule of caveat emptor has certain exceptions to it.

  1. when a buyer brings the purpose of buying goods to the knowledge of the seller, relies on seller’s skill and goods are of a description which is in the course of seller’s business, it becomes the duty of the seller to deliver reasonably fit goods to the buyer;
  2. Where the goods are sold by sample and the goods do not match with the sample;
  3. Where the goods have been sold by both sample and description and the goods match with sample but do not match with the sample; and
  4. When the goods have been sold by making some fraud or misrepresentation.

[i] S. 12, Sale of Goods Act, 1930.

[ii] S. 12(4), Sale of Goods Act, 1930.

[iii] S.13, Sale of Goods Act, 1930.

[iv] S. 15, Sale of Goods Act, 1930.

[v] S.15, Sale of Goods Act, 1930.

[vi] S. 17, Sale of Goods Act, 1930.

[vii] S. 16, Sale of Goods Act, 1930.

[viii] Commr Of Customs (Preventive) v. Aafloat Textiles (I) Pvt Ltd and Ors. (2009) 11 SCC 18.

[ix] Morley v. Attenborough, (1849) 3 Exch 511.

Did you find this blog post helpful? Subscribe so that you never miss another post! Just complete this form…

LEAVE A REPLY