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CONDITIONS AND WARRANTIES.
(Ss. 12 to 17).
QUESTION BANK.
- 1. What are the implied conditions as to the quality or fitness of goods? State the rule of caveat emptor. Apr. 01
- 2. What is meant by ‘Sale by sample’? What are the conditions implied in such a sale?. Oct. 99.
- 3. State differences between condition and warranty. Oct. 98.
Q.4. Distinguish ‘warranty’ from the condition and state the consequences of their breach.
Q.5. Distinguish between ‘condition and a warranty. When does a condition descend to the level of a warranty? Explain a rule of caveat emptor. Apr. 05
SHORT NOTES.
- Condition and warranty. Oct. 2000.
- Caveat emptor. Oct 01, Apr. 01. Apr. 2000.
- Implied Warranty. Nov. 04.
SYNOPSIS
- CONDITIONS (S.12 (2)): –
- WARRANTY (S.12 (3))
III. CAN A BREACH OF CONDITION BE TREATED AS A BREACH OF WARRANTY (S.13):-
- DISTINCTION BETWEEN CONDITION AND WARRANTY: –
- IMPLIED CONDITIONS AND WARRANTIES: –
- Title (S. 14): –
- Sale by description (S.15)
- Quality or fitness (S.16): –
RULE OF CAVEAT EMPTOR (i.e. buyer be careful): –
The exception to the rule: –
- When the purpose is made Known: – (S. 16(1))
- Goods must be of merchantable Quality (S.16 (2)): –
iii. Terms annexed by usage: – (S. 16(3))
- Sale by sample (S.17): –
LAW RELATING TO CONDITIONS AND WARRANTIES
A contract of sale may sometimes be subject to stipulations (conditions). Such stipulation[1] The issue may relate to time (of payment) or goods. The stipulation as to the time of payment is not the essence of the contract of sale.[2] . Therefore, it is not a matter of study here.
We are concerned in this topic with the stipulation.[3] as to goods, such stipulations as to goods may be condition or warranty (S. 12 (1)).
I. CONDITION (S.12 (2)): –
A ‘condition[4]‘ is a stipulation essential to the main purpose of a contract, the breach of which gives rise to a right to treat the contract as repudiated[5].
Thus, a condition is so essential for the performance of a contract that if it is broken, the other party to the contract can treat the contract as broken;
In Frost V. Aylesbury Dairy Co[6].
Court Held:- that, in the sale of milk, it may reasonably be presumed (though not specifically mentioned in the contract) that milk is ordered to be consumed as food. If milk is not consumable, it is a breach of condition.
II. WARRANTY (S. 12 (3))
A ‘warranty’ is a stipulation collateral to the main purpose of the contract, the breach of which gives the right to claim for damages but not the right to reject the goods and treat the contract to be repudiated[7].
E.g. If A contracts with B to purchase 100 bags of sugar and B sends 99 bags of sugar, only the warranty or collateral condition is broken, and A will have the right to claim compensation from B for one sugar bag short but can not repudiate the whole contract as such.
But if ‘B’ sends rice bags instead of sugar, that will be a breach of ‘condition’.
Whether any particular stipulation mentioned in the existing contract is a condition or warranty depends upon each case and on the construction of the contract. A stipulation may be a condition called a ‘warranty’ in the contract.[8].
III. CAN A BREACH OF CONDITION BE TREATED AS A BREACH OF WARRANTY (S.13):-
When any contract is made with the subject to any condition, and the seller breaches that condition, the buyer may: –
(i) waive the condition, or
(ii) treat the breach of condition as a breach of warranty.
The buyer may treat the breach of condition as a breach of warranty by accepting goods from a seller who has breached the condition.
IV. DISTINCTION BETWEEN CONDITION AND WARRANTY: –
| Condition | Warranty |
| 1. A condition is an essential ingredient of a contract. | A warranty is a collateral or subsidiary term of a contract |
| 2. The breach of a condition gives the other party a right to treat the contract as repudiated. | The breach of warranty gives another party a right to claim damages. But not to treat the contract as repudiated. |
V. IMPLIED CONDITIONS AND WARRANTIES[9]: –
The condition and warranty may be expressed or implied. Conditions and warranties mentioned specifically in the contract itself are called ‘express conditions or warranties. But if they are not expressly mentioned in the contract, the law still implies certain stipulations have been made. Such implied stipulations, by law, may amount to condition or warranty. They are dealt with in Ss. 14 to 17 of the Act.[10]. But express conditions or warranties (i.e. agreed between parties) cannot negative the conditions and warranties implied under this Act. Such implied conditions and warranties are as follows: –
1. Title[11] (S. 14): –
The effect of the sale is the transfer of ownership. Therefore, it is the duty of the seller to ensure that he has the title of the goods and, therefore, has a right to sell those goods. If the seller’s title turns out to be defective, the buyer may reject the goods.[12].
2. Sale by description[13] (S.15):-
Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description. Whereas in the case of sale by ‘sample’ and by ‘description’, the goods supplied must correspond with the sample and description.
Illustration: –
X advertises a ‘new car’ for sale. On delivery, the car was found to be old. The buyer is entitled to compensation.
3. Quality or fitness[14] (S.16): –
The Act does not imply any condition or warranty as to the quality or fitness of goods unless expressly mentioned by the parties in the contract. In this way, the Act in S.16 incorporates the general rule of English Law of ‘caveat emptor’ (i.e. buyer be careful or buyer is aware). Therefore, while purchasing goods of a particular quality to fit a particular purpose (which he required), the buyer must be careful.
RULE OF CAVEAT EMPTOR[15] (i.e. buyer be aware): –
The rule of caveat emptor says that the goods which the buyer is purchasing are of the quality that he requires or if he is buying the goods for a specific purpose that they are fit for that purpose. This maxim is based on the presumption that the buyer is buying on his own skill and judgment when he affects the purchase.[16].
However, different laws have been passed to protect the interests of consumers. In India, the provisions to protect consumers found in the constitution, Indian Penal Code, The Sale of Goods Act, 1930, The Indian Contract Act, 1872; Agricultural Produce (Grading and Marking) Act, 1937; Drugs and Cosmetics Act, 1940; Drugs (Control) Act, 1950; Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954; Prevention of Food Adulteration Act, 1954; Essential Commodities Act, 1955; Essential Services Maintenance Act, 1968; Trade and Merchandise Marks Act, 1958; Standards of Weights and Measures Act, 1976; Bureau of Indian Standards Act, 1986; The Monopolies and Restrictive Trade Practices Act, 1969; Consumer Protection Act, 1986 etc. These Acts have changed the general principle of ‘caveat emptor’ with the principle of ‘caveat vendetta[17]’ (i.e. seller be aware). Now, the rule of ‘caveat emptor’ is governed more by exceptions than the rule.
The exception to the rule: –
The Act provides the following exceptions to the rule of caveat emptor to protect purchasers.
i) When the purpose is made Known (S. 16(1)): –
When the buyer has made known to the seller the particular purpose for which the goods are required, thereby relying upon the seller’s skill or judgement for selecting goods, and if it happens to be the course of the seller’s business to supply such goods, the seller is responsible if goods don’t fit for that purpose. Therefore, the doctrine of caveat emptor will not apply.
In Frost V. Ayle Bury Diary Co[18].
The court held that in the sale of milk, it might reasonably be presumed that milk is ordered to be consumed as food. Therefore, that must be consumable; otherwise, the seller is responsible for that.
ii) Goods must be of merchantable quality (S.16 (2)): –
The law implies the merchantable quality of goods. A dealer who sells goods by description is bound to deliver goods of merchantable quality.
‘Merchantable quality’ means the quality of reasonable goods dealt with in the market. For example, food and stuff ordered must be edible.
iii) Terms annexed by usage[19] (S. 16(3)): –
An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by trade usage. For example, where a contract for the sale of seeds is subject to the custom of trade, for impurities in the seed, the buyer would get a rebate on the price but would not reject the goods. The buyer is not entitled to reject the goods but gets a rebate on the price.
4. Sale by sample (S.17): –
In the case of a contract of sale by sample, there are the following three implied conditions: –
- That the bulk shall correspond with the sample in quality
- The buyer shall have a reasonable opportunity to compare the bulk with the sample.
- The goods shall be free from any defect rendering them un-merchantable, which would not be apparent on a reasonable sample examination. If out of two bags of rice, the sample from one bag is shown and told that the ‘other also contains the same sample’. The buyer can rescind the whole contract if rice from other bags is found unmatched with the sample. *****
[1] Stipulation means condition to an agreement. In other words stipulation is condition for performance of contract e.g. if the contract is entered into for ‘basmati rice’ 100 bags, basmati rice is stipulation to be supplied, any other type of quality will not do.
[2] Ss. 11, 14, 12 (1).
[3] अट. [शर्त]
[4] मुख्य अट म्हणजे अशी अट की जी कराराच्या मुख्य हेतूशी अत्यावष्यक असते की जिचा भंग झाल्यास दुस-या पार्टीस करार रद्द करुन मागण्याचा अधिकार मिळतो.
[‘मुख्य शर्त’ एक अनुबंध के मुख्य उद्देश्य के लिए आवश्यक शर्त है, जिसका उल्लंघन अनुबंध को निरस्त मानने के अधिकार को जन्म देता है।]
[5] Repudiate means to reject, to disown, to refuse to acknowledge. [fujkdkj dj.ks- ukdcwy dj.ks- laca/k rksMwu Vkd.ks-
[6] 1905.
[7] दुय्यम अट – कराराच्या मुख्य हेतूषी दुय्यम स्वरुपाची असते की जिचा भंग झाल्यास दुस-या पार्टीस करार रद्द न करता फक्त नुकसान भरपाई साठी दावा आणण्याचा अधिकार असतो.
[दुय्यम शर्त – अनुबंध के मुख्य उद्देश्य के लिए द्वितीयक, जिसका उल्लंघन दूसरे पक्ष को अनुबंध को रद्द किए बिना केवल नुकसान के लिए मुकदमा करने का अधिकार देता है।]
[8] In Maruti Udyog Ltd. V. Susheel Kumar Gabgotra (AIR 2006 SC 1586)
Facts- Complainant (purchaser) alleged that there was manufacturing defect in car purchased by him. He requested for its replacement. However, warranty conditions clearly refers to replacement of defective part and not car.
Held- Complainant is entitled for replacement of a defective part and not car.
[9] कायद्याने अभिप्रेत मुख्य व दुय्यम अटी. [निहित शर्तें और वारंटी]
[10] The Sale of Goods Act.
[11] मलकी. [स्वामित्व]
[12] In Mathu Vakri V. T.C. Abroham AIR 2001 Ker.
Court held that, the law implies in every sale that the seller has good title of the goods which he purports to sell.
[13] वर्णनाने माल विक्री. [विवरण द्वारा बिक्री]
[14] गुणवत्ता व दर्जा. [गुणवत्ता और मानक]
[15] खरेदीदार सावधान रहा [खरीदार खबरदार]]
[16] In G. Subramanyam V. Rao. [AIR 2002 A.P.]
Court held that, when the goods are present at the time of purchase, and easily assessable for the buyer for examination, the buyer was presumed to be acting on his own judgement or skill and could not afterward held seller responsible.
[17] विक्रेता सावधान रहा! [विक्रेता जागरूक रहें]
[18] 1905.
[19] चालीरिती प्रमाणे असणा-या अटी. [उपयोग द्वारा संलग्न शर्तें]