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CONDITIONS AND WARRANTIES UNDER SALE OF GOODS ACT, 1930

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This Article is written by Ishita Jain of 2nd year of B.A LLB (Hons.) of University Institute of Legal Studies, Panjab University, an intern under Legal Vidhiya

ABSTRACT

In our cycle of life, there is a constant exchange of goods and services through the process of buying and selling. This leads to the formation of contracts which further leads to the formation of certain rights and obligations on the buyers and sellers. The Sale of Goods Act, 1930 entails such contracts in which there is transfer of ownership from the seller to the buyer of the goods at a particular price. The Indian Contract Act, 1872 and the Sale of Goods Act, 1930 are interrelated to each other. In such contracts, there are certain terms, conditions and warranties etc. which are deduced upon by the parties to a contract, which they can claim in case of breach of contract. This article focuses on the conditions and warranties which the parties can claim under a contract of sale.

KEYWORDS: Sale of Goods Act, Conditions, Types of Conditions, Warranties, Types of Warranties, Difference Between Conditions and Warranties

INTRODUCTION

The Sale of Goods Act, defines and enlists the law relating to the sale of goods. A contract of sale of goods is a contract in which the seller, sells or transfers the goods to the buyer at a stipulated price. To constitute a contract of sale, it is important that there are two parties who enter into the contract with their free consent, there is full disclosure of the goods, and the goods are transferred from the ownership of one party to another at a specific price.

In a contract of sale of goods, parties stipulate in relation to the course of trade or sale. Such stipulations are the basis on which the parties decide to enter into a contract or not and they may either be in the form of a condition or a warranty. Condition is perceived as a precondition which is the basis of a contract and a warranty is like a security or guarantee which is available, if the goods purchased are damaged or contain any fault in them. Sections 11 to 17, under the Sale of Goods Act talk about the conditions and warranties and their role in the formation of contracts.

Section 11 of the act states that the stipulations in relation to time of payment is not essential to constitute a contract of sale, unless there is a contract to the contrary. However, stipulations as to time of delivery of goods are an important factor of such contracts.

CONDITION

As stated in Section 12 (2) of the Sale of Goods Act, condition is an essential part of the contract or the main subject matter of the contract on the basis of which a contract is entered into. It is on the seller to fulfil the conditions of the contract. If the same remain unfulfilled, then the contract can be terminated or repudiated by the buyer and they can also claim damages.

For instance, A wants to buy a smart watch which remains charged for an average of 15 days minimum. B suggests a watch to A as per his condition. However, its charging remains only for 5 days. Here, A can return the watch to B and claim damages for the nonfulfillment of the condition mentioned at the time of contract.

TYPES OF CONDITIONS

These include the conditions which the parties to a contract, mention to be included or be fulfilled as part of the contract. It is done either orally or through written means.

For instance, A tells B that he wants to buy a car with an average of 20km/hr. So, here, A expressly states his condition on the basis of which he will buy a car.

In a contract of sale there are certain conditions which are automatically applicable or incorporated in the contract. There are various implied conditions which are incorporated in different contracts of sale. They are as follows:

As per Section 14 (a), the implied condition on the part of the seller is that in a contract of sale, he has a right to sell the goods or transfer the ownership of the goods and in case of an agreement to sell, he has the right to sell the goods at the specified future date when the contract is to be performed.

For instance, A sells a laptop to B, but he doesn’t have the right or title to sell the same. In such a case, B would be liable to claim compensation from A and recover the money that he paid for the purchase of the laptop.

In the case of Rowland vs. Divall,[1]the plaintiff had purchased a car from the defendant, who was not the true owner and therefore, had no title to it. The plaintiff after months of use of the car was forced to return the same to the true owner. In this the court held, that the plaintiff is entitled to claim back the compensation paid for the car, from the defendant.

Implied conditions with regard to the description of the goods has been stated under Section 15 and Section 16 (2).

Section 15, states that when description of the goods forms the basis of a contract of sale, then it is essential that the goods should resonate with the description so provided. Therefore, it is an implied condition that the description should correspond with the goods sold.

For instance, If A sells a phone to B, stating it to be of topmost quality, speed etc features which in reality don’t correspond with the phone. Then B can reject the phone and claim back the price that he paid for it.

In Varley vs. Whipp,[2] the plaintiff promised to sell a new reaping machine to the defendant, however, on its delivery the defendant found the same to be old and mended. The defendant rejected the goods, as they weren’t the same as described by the plaintiff. The plaintiff sued for compensation of the price of the machine. The court held that the condition on the basis of which the defendant entered into a contract was not fulfilled, thereby the buyer had a right to reject the goods and the payment of the same.

Section 16 (2), states that the seller who sells the goods on the basis of description is endowed with an implied condition of them to be of a merchantable quality. It means that the goods should resonate with similar goods of its kind and description.

For instance, A buys a phone from B, but it turns out to be defective. Here, it is unfit for use and its merchantable quality is missing. However, if A buys the phone even after examining it, then there is no implied condition.

Section 17 mentions that, in a contract of sale by sample, there are certain implied conditions attached such as:

  1. The quality of the sample and the bulk should correspond with each other
  2. Enlist the buyer with an opportunity to make comparisons
  3. Goods should be of merchantable quality and free from any defects.

For instance, A gave samples of his cloth to B, to get the consignment to make the clothes for the army. However, the sample cloth and the cloth from which he made the clothes were different. In the instant case, B is entitled to claim damages.

In a contract of sale, where there is both sample as well as description of the goods, it is essential that the goods should resonate and correspond with both the sample and the description provided. This has been stated under Section 15.

For Instance- A through sample, sold a seed to be B, describing it as English sainfoin, however, when the same was sown, it turned out to be giant sainfoin. B, sued A for the breach of the condition and claimed for the damages. The court gave the order in favour of B.[3]

As per Section 16, when the buyer specifically tells the seller the purpose for which the goods are required, and relies on his skill and judgement, then there arises an implied condition to deliver the quality product to the buyer.

In Raghava Menon vs. Kuttappan Nair,[4] the plaintiff had purchased a watch from the defendant, however, only after a few weeks it stopped functioning properly. The plaintiff got it repaired a few times from the defendant but still didn’t work, he then filed a petition against the defendant for either replacing the watch or compensating its price. The court held that the plaintiff had a right to get the watch replaced as the defendant failed to furnish appropriate goods to the plaintiff.

WARRANTY

As defined under section 12 (3), warranty is like a security or guarantee provided to the buyer in case there is any defect in the goods sold. It is a stipulation which corelates with the main purpose or subject matter of the contract, but is not essential to the purpose of the contract. Breach of a warranty leads to the claim of damages, but the right to reject or return the goods and termination of the contract is not available. Also, if the warranty is breached, the contract can still be fulfilled. It may be defined expressly or maybe implied in a contract of sale.

TYPES OF WARRANTY

These include such warranties which are derived by the parties at the time of formation of the contract. They maybe agreed to either orally or through written means.

Implied means things which are included automatically. Implied warranty resembles to an assumption. So, therefore, implied warranties are such which the parties have not expressly declared but are assumed by them. There are various types of implied warranties such as:

Section 14 (b), states that there is an implied warranty that the buyer is entitled to enjoy the peaceful possession of the goods bought.

For instance, A stole B’s watch and then sold it to C. C in good faith bought the watch and is thereby entitled to its peaceful possession. If b sues C and claims back the watch, then C can claim damages from A under an implied warranty of peaceful possession.

In Mason vs. Burningham,[5]the plaintiff bought a typewriter from the defendant, who was not the true owner of the same, and also spent an additional cost for its repair and maintenance. However, the plaintiff had to return the same to the true owner. The court stated that the defendant had breached the contract by not allowing the plaintiff to enjoy its peaceful possession and therefore, was liable to compensate the plaintiff.

Section 14 (c), states that there is an implied warranty that the goods sold are free from encumbrances or charges against a third party of which the buyer is unaware at the time of entering into a contract.

For instance, A has given his property as collateral to B, but sells the same to C. In this case, C is entitled to claim damages from A, for whatever loss that he suffers.

There is an implied warranty that the seller has to fulfil in case of dangerous nature of goods. The seller has to disclose the nature of the goods sold, if he fails to do so, then the buyer can claim damages for the loss he suffers due to the dangerous nature of the goods.

There is an implied warranty on the seller to brief the buyer of the quality and fitness of the goods beforehand. As if the time elapses and the buyer suffers from any loss, the seller would be liable to compensate.

CAVEAT EMPTOR

The principle of caveat emptor means buyer beware. It states that it is the duty of the buyer to check and examine the goods before purchasing them. Buyer is under no authority to force the seller to disclose the defects in his goods. However, there are exceptions to this rule in which the seller becomes responsible. These are the implied conditions that are stated above which include sale by description, sample, fraud, misrepresentation, quality etc. Therefore, under such conditions the seller would be held responsible and the principle of caveat emptor cannot be applied.

DIFFERENCE BETWEEN CONDITION AND WARRANTY

CONDITIONWARRANTY
A condition is an essential element on the basis of which the contract is entered into.A warranty is like a security given to the buyer in a contract of sale.
It is mentioned under Section 12(2) of the Sale of Goods Act, 1930It is mentioned under Section 12(3) of the Sale of Goods Act, 1930
The fulfilment of a condition is precedent to enter into a contract.Warranty is a guarantee which is invoked if the goods are not up to the mark or in violation of a condition etc.
If there is violation or non-fulfilment of a condition, it is deemed as a violation of the warranty/guarantee given to the buyer, leading to repudiation of contract.In case a warranty remains unfulfilled, it does not affect the validity of the contract and it can still be fulfilled.  
If the condition is breached, it results into termination of contract along with compensation of damages to the aggrieved party.In case of warranty, only damages can be claimed by the aggrieved.

CONCLUSION

To enter into a contract of any kind there are certain essentials required to be fulfilled. The conditions and warranties mentioned under the Sale of Goods Act,1930 are essential to the subject matter of contract of sale. The buyers and sellers they enter into a contract of sale with certain preconditions and specify the course of trade, which take the form of either conditions or warranties.

REFERENCES

[1] 1922. R. 2746

[2] 1900 1 QB 513

[3] Wallis Son & Wellis vs Haynes and Pratt, (1911) AC 394

[4] AIR 1962 Ker 318

[5] 1949 2 KB 545

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