This article is written by Ashpreet Kaur, IInd year student, B.B.A. LL.B, Symbiosis Law School, NOIDA. In this article, the author discusses conditions and warranties and how these affect the contract after it is formed.

Stipulation as to time- An introduction

Stipulation as to time means that setting a precondition or requirement as a part of an agreement. Section 11 of Sales of Goods Act states that unless time as a precondition is specified in the contract, a stipulation as to time is not considered as the essence of the contract. Failure of payment on the part of the buyer will not entitle the seller to repudiate the contract.

For instance, in Martindale v Smith, the defendant sold plaintiff some sack of oats, then on the defendant’s ground, under a written agreement by which the plaintiff was to have the liberty to leave the sacks on the ground for four months and was to pay them in twelve weeks. On the expiry of twelve weeks, the buyer failed to pay and asked for extra time, which the seller refused to grant. Later the buyer tendered the price, but the seller refused to accept. The seller was held liable to the buyer in trover.

But when there is a condition of time laid down in the contract, time will be the essence of contract and failure to pay in time entitles the seller to treat the contract as repudiated and sue the buyer for damages. In Ryan v Ridley, a CIF contract provided for payment in cash in London on delivery of bills of lading an insurance policy, the buyer’s failure to pay amounted to repudiation entitling the seller to damages.

But, when the seller agrees in delaying the payment, he cannot afterwards claim that time is essence according to contract. In the case of Burn & co v Morvi state, in the contract of supply of wagons, the price was agreed to be payable at three stages. The buyer defaulted at the second stage. The seller delivered the part of wagons. He was not afterwards allowed to rescind the contract on the ground of delay in payment.

When the buyer acquiesces in the delayed delivery, he cannot afterwards insist upon the right to reject. For instance, in the case of Hartley V Hymans, the plaintiff agreed to sell the defendant a quantity of cotton yarn, delivery begins in September at the rate of 1000 lbs per week. The contract expressly provided that failure to deliver within the stipulated time would render the contract liable to termination.

The seller delivered none till October and afterwards maintain an average of 500 lbs per week. During this period, the buyer complained and kept asking for better deliveries. In March, however, he cancelled the order. It was held that the time of delivery was no doubt of the essence, but the buyer had by letter of request, and his conduct waived his right to cancel the contract.

In the case of Rickards v. Oppenheim, the seller agreed to buy a Rolls Royce chassis to be ready at the latest by 28 March 1948. It was not ready on this day. The buyer pressed by delivery even after the expiry of time by which the time of delivery even after the expiry of the time by which the time of delivery became impliedly waived. It was 29 June that the buyer lost his patience and prescribed 25 as the final date of delivery after which he would not accept.

The chassis was offered for delivery on 18. The buyer refused to accept. It was held that the buyer could waive the original date of delivery by extending the time for delivery to the seller. It was further stated that the buyer could also give a reasonable notice stating that he is not going to accept the delivery after a specific specified date.

Generally, the time is taken as the essence of the contract under the following circumstances-

1. Where the parties have expressly agreed to treat it as of the essence
2. Where delay operates as injury
3. Where the nature and necessity of contract requires to be construed

This section leaves the other stipulations as to time on the terms of contract and interpretation of the courts.

Conditions and warranties

A contract of sales basically consists of terms and conditions, some of these terms and conditions form primary element of contracts like goods to be sold or money in the form of consideration, other terms and conditions form the secondary element of contract like damaged goods.

Conditions are the primary element, breach of these will lead to non-fulfilment of contract as a whole, consequently the innocent party to repudiate the contract and claim damages. Section 12(2) aptly defines conditions as a stipulation necessary to the primary purpose of the contract, the of which gives rise to a right to treat the contract as repudiated.

In the case of Baldry v Marshall, the plaintiff consulted the defendants, motor car dealers, for a car suitable for touring purpose. The defendants suggested that the Buggati car would be appropriate, and the plaintiff accordingly bought one. The car turned out to be inappropriate for the touting purpose and plaintiff sought to reject it.

The defendant relied upon a term in the contract which guaranteed the car for twelve months against mechanical defects and excluded every other guarantee or warranty. But it was held by the court that suitability of the car was a condition of the contract, that is why he is entitled to reject and have a refund of the price.

Warranty is a secondary element, whose breach will not lead to repudiation of the contract, but the innocent party can claim damages for breach. Section 12(3) defines warranty as stipulation collateral to the primary 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.

For instance, in Harrison v Knowles and Foster, the plaintiffs bought two small ships from the defendant that the dead weight capacity of each ship was 460 tons. The capacity was, in fact, only 360 tons. The court held that the capacity of ships was a warranty so the plaintiff can sue for that.

Condition treated as warranty

There are certain situations when conditions to be treated as a warranty. As a consequence, the buyer loses his right to reject the goods and can only claim damages for breach of condition.

According to section 13 of Sale of Goods Act there three situations covered under two types of waiver for the purpose of treating conditions as warranty:

• Voluntary waiver

  • Waiver by buyer- Section 13 subsection 1 states that when there is any condition precedent that has to be fulfilled by seller, the buyer has a right to waive that condition precedent or treat that condition precedent as a breach of warranty because the conditions are for the benefit of buyer he has an option to waive it. Technically the buyer is waiving the right to repudiate the contract not just the waiver of a condition precedent.

In the case of City and Industrial Development Corpn of Maharashtra Ltd v Nagpur Steel and Alloys Ltd, where the goods supplied were oversized, the buyer was fully aware of the fact so instead of rejecting them, consumed the goods without giving the seller to replace them and also paid the price for 58 consignments out of 60, all this amounted to waiver disentitling the buyer from his right to insist on the condition and making him liable to pay the balance price.

• Involuntary waiver

  • Non-severability of contract- According to subsection (2) section 13, when the buyer has accepted the goods or a part of goods which are not severable, the breach of condition on the part of seller will be considered as a breach of warranty, unless, any contrary term of contract is present, and buyer can no longer repudiate the contract, but he can claim damages form the seller.

Acceptance according to section 42 is that the buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of reasonable time, he retains the goods without intimating to the seller that he has rejected them.

For instance, in the case, Hardy and Co v Hillerner and Fowler, wheat sold under CIF contract arrived at the port of destination. The buyer took up the shipping document. The day on which the wheat was unloaded, they resold and dispatched a portion of it the sub-purchaser. The subsequently discovered that the wheat was not of the contract quality and gave the seller a notice of rejection.

All this happened in three days, therefore, a reasonable time for the examination of the goods has not expired. It was held that the transfer of the possession to the sub-purchasers was an act inconsistent with the ownership of the seller, therefore, that put an end to buyers right of rejection.  

• Excused by law due to impossibility- When any contract of sale is excused under the law due to the impossibility of act, conditions can still be treated as a warranty under section 13 sub(3). Impossible acts are defined under section 56 of the Indian Contract Act. Section 56 mentions that any agreement to do an impossible act is void.

It is to be noted that under this situation condition remains a condition but its remedy changes, for instance, in case of Wallis, sons and wells v Pratt and Haymes, House of Lord held that condition would be treated as warranty only for the remedial purpose. In this case, the defendant sold seeds to the plaintiffs as “common English Sanfoin” on the condition that the seller gives no warranty express or implied as to growth, description or any other matter.

The seed delivered to the buyer was of the wrong type. The buyer accepted the goods believing it to be of the right type and resold it to another party; as a consequence, they have to pay damages for the same. The only course open to the buyer was to sue the original seller for damages. The seller contended that the condition is reduced to warranty and they had excluded warranties.

The court held that the seller is liable to pay because the condition is reduced to warranty only for remedial purpose because goods cannot be recovered as it was sold to another party.

Implied conditions

These are the stipulation that law presumes to be present in any contract of sales, but these stipulations can be explicitly removed by the parties by express agreement. Section 14, 15, 16 and 17 enumerates these conditions as follows:

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Condition as to title

According to section 14 sub-section 1, there is an implied condition that in case of sale of goods seller has rightful title over the goods which he will pass on to the buyer and in case of an agreement to sell, the seller will have right to sell the goods when the property pass.

Which means that seller before selling the goods should have undisturbed ownership and possession which he can pass on to the buyer at the time of sales because the essence of a sale is to pass the ownership and possession of goods to the buyer in exchange of some consideration.

That is why law presumes an implied condition in every contract of sale that the seller has a right to sell. Thus in the case of Rowland v Divall, where a second-hand car was purchased from a dealer was seized by a policeman as a stolen one, the buyer may recover the full price from the seller although he had used this car for few months.

There has been an instance where the seller had full ownership of goods, but he had committed the breach of this condition. This happened in Niblett v Confectioners material Co, the defendant sold to the plaintiff 3000 tins of condensed milk. On their arrival in England from New York, it was found that 1000 tins were labelled as “Nissly” brand. Another manufacturer of condensed milk under the name of “Nestle” claimed that this was an infringement of his trademark.

The plaintiff had to remove all the labels in order to obtain the goods and subsequently sold them at a reduced value. He sued the sellers for the breach of the condition as to title. It was held that the plaintiff has a right to reject the goods or to recover the damages for loss caused by sales at a reduced price. Due to the presence of a title superior to that of seller takes away the right of the seller to sell those goods.

When the seller’s title is defeated, the buyer can claim damages from the seller because of his failure to provide the buyer with a safe and secure title. But when the seller becomes the owner of the goods before the buyer elects to avoid the contract, he may not be permitted to do so because the title had been perfected by the subsequent development.

In Barber v MWS Bank plc, there was an agreement to sell a car, the agreement included a clause under which the seller was considered as the owner of the car. But the buyer finds out that there exists a prior financial agreement in the name of the third party with money outstanding. The seller was aware of the prior interest. It was held that the declaration that the seller was the owner of the car was a condition entitling the purchaser to rescind the agreement and recover back the money paid and notwithstanding that he had had use of a car for a considerable period.

Sale by sample

Under section 17 of The Sale of Goods Act, when the goods are sold according to the sample shown, there are three implied conditions followed:

Goods sold should match the sample shown

1. The general condition is that the sample the buyer should match the description and the goods actually supplied by the seller if this does not happen then the buyer has a right to reject the goods and claim damages if any. In the case of E and S Ruben Ltd v Faire Bros and Co Ltd, it was a contract of sale of rubber material for which the sample was shown.

The material was to be a roll of specific length and width. The rubber material delivered was of measurements out of accord with the sample. The court of law held that the goods delivered were not the same as sample approved by the buyer, so he is entitled to damages even if he is not rejecting the goods.

1. In Leonard v Fowler, there was a sale of the large quantity of beans in a number of packages. The seller exhibits an average sample which he obtained by taking a small quantity from each package and mixing them. It was held by the court of law that no single package should be rejected for failing to match the sample; the test was whether the bulk was as a whole achieved that standard.
2. The buyer should have adequate opportunity to compare the goods shown as sample and goods being purchased by him.
3. The goods shall be free from any defect which is not apparent on a reasonable examination of the sample.

There should be no unmerchantable defect present in goods which cannot be seen by reasonable examination by buyer. In Durmmond and sons v Van Ingen, a cloth manufactured ordered of cloth manufacturers worsted coating which was to be in quality and weight equal to samples previously furnished.

The buyer’s object was to sell the cloth to clothier and tailor. The clothing supplied corresponded in every particular with the sample, but owing to specific defect, were unmerchantable. The same defects existed in samples but were not discoverable by usual inspection. The court of law held that the defect was latent one and, therefore, goods were unmerchantable.

The principle of this case was also followed in Godley v Perry, where a retailer tested toy catapult by pulling at the elastic and found no defect, but one of them subsequently exploded in the hands of a child who had bought it from a retailer, it was held that due to latent defect goods were unmerchantable

Usually, the sample is shown by extracting a small part of the goods to be sold or showing a pattern or demo or model of the goods to be sold.

Goods sold by description

Section 15 of The Sales of Goods Act lays down the condition that, when the goods are sold by description or sample as well as description, there is an implied condition that it should correspond with the description. In other words, the seller will be held liable under this section when; firstly goods are sold by description, and secondly, that description does not match the goods that are delivered.

Situations which can be treated as a description of goods-

• In case when the buyer has never seen the goods and purchases them as described by the seller alone. This happened in case of Varley v Whipp, this was a sale of a reaping machine which the buyer had never seen and which the seller stated to have been new the previous year and used to cut only 50 or 60 acres. On delivery, the buyer found out that machinery was extremely old and therefore returned it. The seller’s action against the buyer for the price failed. The machine herein does not correspond to the description given by the seller.
• When the buyer has seen the goods, but he relies upon the description given by the seller and difference in goods seen, and description is not apparent. For instance, Nikolson and venn v Smith Marriot, it was an auction sale of a set of linen napkins and table cloths, described as ‘dating from the 17th century’. The plaintiffs, who were dealers in antiquities, saw the set and bought it.

They subsequently found it to be the 18th-century set and sought to reject it. The court of law held that they could do so. They had relied on the description, and the discrepancy between the description and the quality could not have been discovered by casual examination.

• When packing of goods is considered as a part of the description as in case of Moore and Co Ltd and Laundaurer and Co, where, this was a contract of purchase of 3000 tins canned fruits from Australia, to be packed in cases each containing 30 tins. The seller tendered a substantial portion in a case containing 24 tins. The court of law held that the buyer could reject the whole consignment because the packing of goods was a part of the description.
• The description also includes the arrival of goods at a particular place and time.

Apart from this if goods are sold on the description as well as sample, the goods should comply with both sample and description. In other words, compliance with sample does not mean that the description can be ignored. Thus, in the case of Azemar v Casella, long staple Salem cotton was sold as equal to sample and the contract provided that if the goods proved inferior in quality, a reasonable allowance would be made to the buyer, the buyer was held not bound to accept the goods when they turned out to be not long staple cotton but only Western Madras Cotton.

Implied warranty

These are the stipulations which law presumes to be included in the contract of sales, even though, these stipulations are not explicitly mentioned in the contract unless they are excluded by express agreement of the parties. Section 14 and 16 of The Sales of Goods Act enumerates such conditions-

Quiet possession

Section 14, sub-section 2, states that a buyer shall enjoy quiet possession of goods. In other words, it is a warranty that neither seller nor anyone else should interfere with the quiet possession of the goods. On the contrary, if the buyer right is disturbed by a person having superior right than that of the seller, the buyer is entitled to hold the seller responsible for breach of the warranty and claim damages.

For instance, in the case of Rowland v Divall, the plaintiff purchased a motor car from the defendant which turned out to be stolen property the plaintiff had to restore it to the right owner. The court of law held that even though plaintiff had used that motor car for several months, he is entitled to claim damages from the seller because the buyer had not received any part of that which he contracted to receive, namely, right to property and right to possession, so there is a total failure of consideration.

The seller will only be liable on behalf of the third party, when, the wrongful act of disturbance caused by the third party are in concurrence with the sale of those particular goods which buyer had purchased. For example in the case of Empress Exportadona de Azucar v Industria Azucarera Nacional SA, the seller was involved in any party to the decision by which the seller’s government ordered withdrawal at the port of discharge a ship loaded with goods which were appropriated to the contract.

Goods should be free from encumbrances

Section 14 sub-section 3 says that goods should be free from any charge or encumbrances in favour of any third party not declared or known to the buyer before or at the time when a contract is made. For example, if the pledged goods are taken back from pledgee under any pretence and are sold further. The goods will not be free from encumbrances, and the buyer may recover damages if the possession is disturbed by the pledgee.

References

1. Law of Sale of Goods, Avtar Singh
2. Business Laws, CA Foundation