warranty
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This article has been written by Neha Mallik from VIPS, Delhi. This article talks about everything you need to know about the concept of Condition and Warranty in the light of Sale of Goods Act, 1930.

Overview

The contract of sale of goods is a special type of contract and has a huge application in the business world. These contracts are governed by the Sale of Goods Act 1930, which was earlier part of the Indian Contract Act, 1872. Because of the wide use of the contract of sale of goods, a special enactment was necessary but despite the separate legislation, the law has its root in the Indian Contract Act, 1872. Both the laws are complementary to each other,  thus the basic provisions of the Indian Contract Act are applicable to the contracts of sale. 

Whenever we buy any goods like electronic gadgets etc, we are concerned about the warranty periods. We ask the seller about the warranty to make sure that even if the product is found to be faulty after purchase we can easily get the product replaced or repaired. The terms “Condition” and “Warranty” are set out in the contract of sale in order to determine remedies the parties can claim in case of the breach by either of the parties. Here in this article, we will see the manner how these terms are defined, their differences and their legality in the light of Sale of Goods Act, 1930. 

Definition

Certain provisions need to be fulfilled as demanded in the contract of sale or any other contract. The condition is a fundamental precondition on the basis of which the whole contract is based upon, on the other hand, warranty is the written guarantee wherein the seller commits to repair or replace the product in case of any fault in the product. Section 11 to 17 of the Sale of Goods Act enlightens the provisions relating to Conditions and Warranties.

Section 12 of the Act draws a demarcation between a condition and a warranty. The determination of condition or warranty depends upon the interpretation of the stipulation. The interpretation should be based on its function rather than the form of the word used.

Condition

In the context of the Sale of Goods Act, 1930, a condition is a foundation of the entire contract and integral part for performing the contract. The breach of the conditions gives the right to the aggrieved party to treat the contract as repudiated. In other words, if the seller fails to fulfil a condition, the buyer has the option to repudiate the contract or refuse to accept the goods. If the buyer has already paid, he can recover the prices and also claim the damages for the breach of the contract. 

For example, Sohan wants to purchase a horse from Ravi, which can run at a speed of 50 km per hour. Ravi shows a horse and says that this horse is well suited for you. Sohan buys the horse. Later on, he finds that the horse can run only at a speed of 30 km/hour. This is the breach of condition as the requirement of the buyer is not fulfilled. The conditions can be further classified as follows.

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Kinds of conditions 

Expressed Condition 

The dictionary meaning of the term is defined as a statement in a legal agreement that says something must be done or exist in the contract. The conditions which are imperative to the functioning of the contract and are inserted into the contract at the will of both the parties are said to be expressed conditions. 

Implied Condition

There are several implied conditions which are assumed by the parties in different kinds of contracts of sale. Say for example the assumption during sale by description or sale by sample. Implied conditions are described in Section 14 to 17 of the Sale of Goods Act, 1930. Unless otherwise agreed, these implied conditions are assumed by the parties as if it is incorporated in the contract itself. Let’s study these conditions briefly:

  • Implied condition as to title

In every contract of sale, the basic yet essential implied conditions on the part of the seller are that-

  1. Firstly, he has the title to sell the goods.
  2. Secondly, in case of an agreement to sell, he will have the right to sell the goods at the time of performing the contract.  

Consequently, if the seller has no title to sell the given goods, the buyer may refuse or reject those goods. He is also entitled to recover the full price paid by him. 

In Rowland v. Divall (1923), the party bought a second-hand motor car from the former and paid for the same. After six months, he was deprived of it as the seller had no title to sell the car. It was held that the aggrieved party is entitled to recover the money. 

  • Implied condition as to the description

Moving to  Section 15 of the Act, In the contract of sale, there is an implied condition that the goods should be in conformity with the description. The buyer has the option to either accept or reject the goods which do not conform with the description of the good. Say for example: Where Ram buys a new car which he thinks to be new from “B” and the car is not new. Ram’ can reject the car. 

Referring to Section 16(2) of the given Act, goods must be of merchantable quality. In other words, the goods are of such quality that would be accepted by a reasonable person. For eg: A purchased sugar sack from B which was damaged by ants. The condition of merchantability is broken here and it is unfit for use. It must be noted from this section that the buyer has the right to examine the goods before accepting it. But a mere opportunity without an actual examination would not suffice to deprive the buyer of his rights. If however, the examination does not reveal the defect but within a reasonable time period the goods are found to be defective, He may repudiate the contract even if he approves the goods.

The implied conditions especially in case of eatables must be wholesome and sound and reasonably fit for the purpose for which they are purchased. For eg: Amit purchases milk that contains typhoid germs and because of its consumption he dies. His wife can claim damages. 

  • Implied condition as to sale by sample

In the light of Section 17 of the Act, in a contract of sale by sample, there may be following implied conditions:

  1. That the actual products would correspond with the sample with respect to the quality, size, colour etc. 
  2. That the buyer gets a reasonable opportunity to compare the goods with the sample. 
  3. Further, the goods are free from any defect rendering them unmerchantable. 

For example, A company sold certain shoes made of a special kind of sole by sample sale for the French Army. Later when the bulk was delivered it was found that they were not made from the same sole. The buyer was entitled to the refund of the price and damages. 

  • Implied condition as to Sale by sample as well as a description

Referring to Section 15 of the Sale of Goods Act, 1930, in a sale by sample as well as description, the goods supplied must be in accordance with both the sample as well as the description. In Nichol v. Godis(1854),  there was a sale of foreign refined rape-oil. The delivered oil was the same as the sample but it was having a mixture of other oil too. It was held in this case that the seller was liable to refund the amount paid. 

Warranty 

Warranty is the additional stipulation and a written guarantee that is collateral to the main purpose of the contract. The effect of a breach of a warranty is that the aggrieved party cannot repudiate the whole contract however, can claim for the damages. Unlike in the case of breach of condition, in the breach of warranty, the buyer cannot treat the goods as repudiated.  

Kinds of Warranty

Expressed Warranty 

The warranties which are generally agreed by both the parties and are inserted in the contract, it is said to be expressed warranties. 

Implied Warranty

Implied warranties are those warranties which the parties assumed to have been incorporated in the contract of sale despite the fact that the parties have not specifically included them in the contract. Subject to the contract, the following are the implied warranties in the contract of sale:

  • Warranty as to undisturbed possession

Section 14(2) of the given Act provides that there is an implied warranty that the buyer shall enjoy the uninterrupted possession of goods. As a matter of fact, if the buyer having got possession of the goods, is later disturbed at any point, he can sue the seller for the breach of warranty. 

For eg: ‘X’ purchased a second-hand bike from ‘Y’. Unknown to the fact that the bike was a stolen one, he used the bike. Later, he was compelled to return the same. X is entitled to sue Y for the breach of warranty.

  • Warranty as to freedom from Encumbrances

In  Section 14(3), there is an implied warranty that the goods shall be free from any charge or encumbrances that are in favour of any third party not known to the buyer. But if it is proved that the buyer is known to the fact at the time of entering into the contract, he will not be entitled to any claim.

For eg: A pledges his goods with C for a loan of Rs. 20000 and promises him to give the possession. Later on,  A sells those goods to B. B is entitled to claim the damages if he suffers any.  

  • Implied warranty to disclose Dangerous nature of the goods sold

If the goods sold are inherently dangerous or likely to be dangerous and the buyer is not aware of the fact, it is the duty of the seller to warn the buyer for the probable danger. If there would be a breach of this warranty, the seller will be liable. 

For eg: A purchases a horse from B if the horse is violent and then It is the duty of the seller to inform A about the probable danger. While riding the horse, A was inflicted with serious injuries. A is entitled to claim damages from B.

Difference between Condition and Warranty

 

BASIS FOR COMPARISON

CONDITION

WARRANTY

Meaning

It is a stipulation which forms the very basis of the contract.

It is additional stipulation complementary to the main purpose of the contract.

Provision

Section 12(2) of the Sale of Goods Act, 1930 defines Condition.

Section 12(3) of the Sale of Goods Act, 1930 defines Condition.

Purpose

Condition is basic for the formulation of the contract.

It is a written guarantee for assuring the party.

Result of Breach of Contract

The whole contract may be treated as repudiated.

Only damages can be claimed in case of a breach.

Remedies available to the aggrieved party

Repudiation, as well as damages, can be claimed.

Only damages can be claimed.

 

When does Condition sink to the level of Warranty?

Section 13 of the Act specifies the cases wherein a breach of Condition sink to the level of breach of Warranty. In the first two following points, it depends upon the will of the buyer, but the last one is compulsory and acts as estoppel against him:

  1. When the buyer waives the condition, the condition is considered a warranty.
  2. A condition would sink to the level of warranty where the buyer on his own will treat the breach of condition as a  breach of warranty.
  3. Wherein the contract is indivisible and the buyer has accepted the whole or part of goods, the condition is treated as a warranty. Consequently, the contract cannot be repudiated. However, the damages can be claimed. 

Conclusion

At the time of selling or purchasing goods, both the buyer and seller put forth some preconditions with regards to the mode of payment, delivery, quality, quantity and other things necessary. These stipulations are either considered as condition or warranty differing from case to case. These concepts are necessary to be understood as it protects the rights of parties in case of breach of the contract. 

References 


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