Condition and Warranty

Condition and warranty can be defined as stipulations, obligations or provisions directly associated with goods or services that buyers and sellers impose on each other. A requirement or event that should be performed before the completion of another action, is known as ‘Condition’. A ‘warranty’ is an assurance given by the seller to the buyer about the state of the product, that the prescribed facts are genuine.

Condition and Warranty

What is the meaning of condition?

Meaning of a Condition: – A requirement or event that should be performed before the completion of another action, is known as Condition. In common parlance, a condition is a mandatory requirement of a contract upon which the entire contract relies and the condition of the contract is breached then the victim has the absolute right to reject the contract. Certain terms, obligations, and provisions are imposed by the buyer and seller while entering into a contract of sale, which needs to be satisfied, which are commonly known as Conditions. The conditions are indispensable to the objective of the contract.

According to Section 12 (2) of the Sale of Goods Act, 1930, “A condition is a demand necessary for the main purpose of the contract, and the breach of the same gives the aggrieved party the right to reject the contract”. In addition, he can take action for the loss suffered.

For Example: – Karan purchase a car from Jai with a condition that the car should be suitable for touring purposes. Later Karan found that the car is not suitable for the touring purposes. Here, Karan has the right to repudiate (reject) the contract and can take action for his loss.

What are the types of Conditions?

There are two types of conditions, in a contract of sale which are: –

  1. Expressed Condition: – It that states that there must be or should be a condition for the fulfillment of the contract. These conditions are generally mandatory for the functioning of the contract where both the parties agree on the said or express condition. Expressed conditions are the conditions which are clearly defined and agreed upon by the parties while entering into the contract.
  1. Implied Condition: – This type of conditions are implied to the parties and these conditions exist even if they are not there in the contract.
    • Condition as to Title [Section 14(a)]: – This means that the seller has the right to sell the goods only if he is the actual owner and holds the title of the goods or is the agent of the title holder. If the seller does not have the ownership of the said good and sells it to the buyer, it is a breach of the condition.
    • Sale by Description [Section 15]: – A sale that takes place without the buyer seeing the goods and only getting their description from the seller. In a sale by description, there is an implied condition that the goods must be correspond to the description given in the catalogue. For example: – ‘A’ sold ‘B’ 12 bags from the market known for the waste silk on his way from Kolkata to Ahmedabad. There is a condition that the silk ‘B’ is purchasing should be from the market of waste silk. If it’s not ‘B’ is entitled to reject the goods.
    • Condition as to Fitness or Quality [Section 16(1)]: – Generally, there is no implied condition for the quality or fitness of goods sold for a particular purpose. However, the condition of reasonable quality or fitness of the goods for a particular purpose may be implied on the part of the seller. For example: – ‘A’ buys a bottle of hot water from a chemist. The bottle burst and A’s wife was injured. Thus the condition regarding reasonable fitness was violated. Hence ‘A’ is entitled for the refund and compensation for the loss.
    • Condition as to Merchantability [Section 16(2)]: – Where the goods are purchased by the description from a seller who deals with the goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods will be of merchantable (suitable for sale) quality. Provided that, if the buyer has checked the goods before purchasing them there shall be no implied condition in regard to any defect in the product. For example: – ‘A’ buys a certain quantity of black yarn from ‘B’ who is a cotton trader. ‘A’ learns that the white ants are harming the black thread. Thus the condition of merchantability has been violated and ‘A’ is entitled to reject as the goods as they are unmerchantable (not suitable to sell).
    • Conditions of the Wholesomeness: – In the case of food items and provisions, there is another implied condition that the goods must be healthy, except as an implied condition as to merchantability. For example: – ‘A’ supplies milk to ‘B’. Milk contains bacteria and B’s wife consumes milk and he discovers a disease. She later dies due to the disease. Therefore, there was a breach of condition regarding the suitability of the supply and ‘A’ was liable to pay damages to ‘B’ in this case.
    • Condition as to Sale by Sample (Section 17): –  In a contract of sale by sample, there is an implied condition that: –
      • The bulk will conform to the sample in quality;
      • The buyer has or will be given a reasonable opportunity / chance to compare the bulk with the sample, and
      • The goods will be free from any defects that may make them unmerchantable (not suitable to sale).
      • For example: – A company selling some belts made of a special material by sample for the Indian Army. The belts are found to be made of cheap quality plastic, not searchable by general inspection. In this case, the buyer is entitled to a refund of the price and damages.

What is the meaning of warranty?

Meaning of Warranty: – A warranty is a guarantee given by the seller to the buyer about the quality, fitness and performance of the product. It is an assurance provided by the manufacturer to the customer that the said facts about the goods are true and at its best. A warranty is an additional condition and a written guarantee that is collateral (security) for the main purpose of the contract. A warranty is a surety given by the seller regarding the state of the product.

The effect of a breach of warranty is that the aggrieved party cannot reject the entire contract, however, can claim for damages. Unlike a breach of condition, in breach of warranty, the buyer cannot reject the goods. A warranty is a stipulation which is collateral to the main purpose of the contract. If there is a breach of warranty, the affected party can only claim damages and has no right to reject the contract.

According to Section 12(3) of the Sale of Goods Act 1930, a warranty is an additional condition and a written guarantee which works as a collateral (surety) for the main purpose of the contract. And the effect of the breach of the same is that the victim cannot repudiate (reject) the whole contract but can claim for the damages. It states that the aggrieved party only has the right to sue for damages and not to avoid the contract.

For Example: – Karan purchase a car from Jai with a warranty for one year for defective parts from the original date of purchase. After 6 months Karan found that the horn is not working properly. Here, the manufacturer can get the horn repaired or can replace it with a new horn. Right gets the right to claim for the damages.

What are the types of Warranty?

The types of Warranty are as follows: –

  1. Express Warranty: – An express warranty can take many different forms, whether spoken or written, and is basically a guarantee that the product will meet a certain level of quality and reliability. If the product fails in this regard, the manufacturer will fix or replace the product at no additional charge. Many such warranties are printed on the product’s packaging or made available as an option.
  1. Implied Warranty: – Section 14 (b) and section 14 (c) of the Sale of Goods Act, 1930 stipulate the implied warranty for the contract of sale of goods. Unless the circumstances of the contract are such as to show a different intention, the warranties contained in each contract of sale are as follows: –
    1. Warranty as to Undisturbed Possession [Section 14(a)]: – If the buyer’s right to possession and enjoyment of the goods are disturbed in any way as a result of the seller’s defective title, the buyer may sue the seller for damages for breach of this warranty. For example: – Ramesh sold second hand scooter to Suraj for Rs. 100 on the repair of this scooter. Police have seized this scooter due to theft. Suraj filed suit against Ramesh for recovery of damages for breach of quiet possession warranty including cost of repair. It was believed that Suraj was entitled to his recovery.
    2. Warranty as to Non-Existence of Encumbrances [Section 14(b)]: – It is an implied warranty that ensures that the goods are free of any encumbrance or charge from any third party that has not been known to the buyer at or before the contract of sale. For example: – Ramesh takes a loan from Suresh and mortgages his scooter to Suresh in security. Later Ramesh sold this scooter to Arun who brought it in a good faith, here Arun can claim compensation from Ramesh as his possession is disturbed due to Suresh taking charge.
    3. Warranty to disclose the dangerous nature of the goods: – In case of goods of a dangerous nature, the seller must inform or warn the buyer of the potential danger. If the seller fails to do so, the buyer can hold him liable for breach of the implied warranty. For example: – ‘A’ sold a tin of disinfectant to ‘B’, knowing that it was likely to be dangerous to ‘B’, if it was opened without special care. ‘B’ opened the tin, where the disinfectant powder went into her eyes, causing her injury. Here, ‘A’ was held liable for the loss to ‘B’, as he failed to warn ‘B’ of the potential danger.
    4. Warranty as to Quality or Fitness by Usage of Trade [Section 16(4)]: – An implied warranty as to quality or suitability for a particular purpose may be attached to the use of the trade. We can say that any warranty that is not expressed becomes an implied warranty.

When a condition can be considered as a warranty?

As in Section 13 of the Sale of Goods Act, 1930, a contract cannot be avoided even on the breach of a condition in the following cases: –

  1. Voluntary Waiver of Condition [Section 13(1)]: – Where the contract of sale is subject to any condition to be fulfilled by the seller, and the seller failed to fulfil the condition then the buyer may waive the condition or elect to consider the breach of the condition as a breach of warranty. If the buyer once decide to waive the condition later he cannot insist the seller to fulfil the condition.
  1. Acceptance of Goods by Buyer [Section 13(2)]: – Where the contract of sale cannot be severed and the buyer has accepted the goods or part thereof, breach of any condition fulfilled by the seller can only be regarded as a breach of warranty and not the breach of condition.
  1. Conversion of Condition into Warranty: – Where the buyer decide to convert the breach of condition into breach of warranty, e.g. He claims damages rather than rejecting the contract.

Difference between Condition and Warranty

The following are the major differences between condition and warranty in contract law: –

MeaningA condition is an obligation which requires being fulfilled before another proposition takes place.A warranty is a surety given by the seller regarding the state of the product.
ProvisionSection 12(2) of the Sale of Goods Act, 1930 defines Condition.Section 12(3) of the Sale of Goods Act, 1930 defines Condition.
PurposeCondition is basic for the formulation of the contract.It is a written guarantee for assuring the party.
Result of Breach of ContractThe whole contract may be treated as repudiated.Only damages can be claimed in case of a breach.
Remedies available to the aggrieved partyRepudiation, as well as damages, can be claimed.Only damages can be claimed.

What is doctrine of Caveat Emptor?

Meaning of Caveat Emptor: – The word “Caveat Emptor” is a Latin word that means, let the buyer beware. In other words it is not a part of the seller’s duty to point out the defect of a good witch being offered for sale, but rather it is the duty of the buyer to satisfy himself about the quality as well as the suitability of the goods. The Principle of Caveat Emptor deals with the implied conditions and warranties. It is not the duty of the seller to reveal all the defects in the goods and so he should not be held responsible for the same.

The person buying the goods should keep their eyes open, keep the mind active and use caution when purchasing the goods. If he makes the wrong choice, he will have to bear the consequences of lack of skill and judgment in the absence of any misrepresentation or guarantee by the seller.

Exceptions to ‘Caveat Emptor’s Principle’

In some circumstances, although doctrine has no application. They are as follows: –

  1. In case of concealing the secret defect: – When the seller has deliberately concealed a defect that is not apparent on the responsible investigation of the goods.
  1. In case of misrepresentation by the seller: – If the seller made a false representation in relation to the goods and the buyer relied on him for his loss.
  1. Merchantable Quality: – In the case of goods purchased by the description from the seller dealing in the category of goods, there is an implied condition that the goods will be of merchantable quality.
  1. Fitness for buyer’s purpose: – When the seller is the manufacturer or dealer of the type of goods sold by him and the buyer has told him the purpose for which the goods are required and is dependent on the skill and judgment of the seller, there is an implied condition that the goods are reasonably suitable for the purpose for which they are expected. This is called fitness as a condition.
  1. In case of sale by sample: – Where the goods are sold by sample and the goods supplied by the seller do not conform to the sample.
  1. In case of sale by description: – Where the goods are sold by description and the goods supplied by the seller do not conform to the description to the buyer of the product.
  1. In the case of sale by samples as well as details: – Where goods are sold with a sample as well as a description and the goods supplied do not conform to the sample as well as the description given to the buyer of the product.

Leave a Reply