CONDITIONS AND WARRANTIES SUBMITTED TO MISS FALAK KHANNA

CONDITIONS AND WARRANTIES SUBMITTED TO: MISS. FALAK KHANNA

Riya Gupta (2295) Kalpana (2297) Saryu Thakur (2269) Srishti (2229)

When forming a contract, a party make a statement with a view to inducing the other party to enter into the contract. Such statements when made before entering into the contract are known as representatives. Such a representative may be mere expression of an opinion or commendation by the seller of his goods-what is known as a “puff”. Such representatives may or may not be a part of the contract and this depends upon the intention of the parties. Where it is not a part of the contract, it has no legal consequences. On the other hand, if it forms an integral part of the contract and other party relies upon such a representation, it will be a ‘stipulation’ within the meaning of section 12 of the Act and may be either treated as a condition or a warranty.

Conditions and Warranties [Sec 12(1)] “A stipulation in a contract of sale with reference to goods which are subject matter there of, may be a condition or a warranty. ” All the stipulations in a contract of sale are not of equal importance. Some of them are essential to the main purpose of the contract which are called “conditions” and some are collateral to the main purpose of the contract which are called “warranties”. So therefore, these stipulations can be of two types: (1)Conditions (2)Warranties

Representations Forming Part of the Contract Are called as Stipulations as to main purpose of contract Are called as conditions U/S 12(2) If Breach of Condition Effect: - Repudiation of Contract U/S 12(2) Not Forming Part of the Contract Are left out rightly as they are only expression of opinion devoid of any legal consequences Stipulations collateral to the main purpose of contract Are called as warranties U/S 12(3) If Breach of Warranty Effect: - Claim for Damages U/S 12(3)

Conditions [Sec 12(2)] “A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. ” In order to influence the buyer to purchase the goods, the seller makes certain statements regarding the goods, which can be of two types 1. Statements in praise of the goods, which do not form a part of the contract: These statements are given merely in praise of the goods having no legal consequences. 2. Statements which form an integral part of the contract: These statements are known as “STIPULATIONS”. A stipulation gives rise to legal consequences.

Essentials of a Condition 1. It is essential to the main purpose of the contract. 2. The non fulfillment of condition causes irreparable damage to the aggrieved party which would defeat the very purpose for which the contract is made. 3. The breach of a condition gives a right to the aggrieved party to rescind the contract and recover the damages for breach of condition. Example A agreed to supply goods on 1 st Sept. to B. B informed A, that the same goods were to be supplied on 2 nd Sept. to C. A failed to supply goods on 1 st Sept. Held, here time is essential to main purpose of contract, hence a condition and B cancel the contract.

Warranties [Sec 12(3)] “A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. ” Essentials of a Warranty 1. It is collateral to the main purpose of the contract. 2. The breach of warranty causes damage to the aggrieved party and does not defeat the main purpose of the contract. 3. The aggrieved party can only claim damages for breach of warranty but can repudiate the contract.

The breach of a condition entitles the injured party to repudiated the contract, to refuse the goods and if he has already paid for them, to recover the price. The remedy in case of breach of warranty is the recovery of damages only. It does not give right to reject the goods and treat the contract as repudiated. Thus, a condition is more vital than warranty. The following illustration make the nature of the terms clear. A man buys a particular horse which is warranted quite to ride and drive. If the horse turns out to be vicious the buyer’s only remedy is to claim damages, unless he has expressly reserved a right to return it. But if instead of buying a particular horse, a man applies to a dealer to supply him with a quiet horse, and the dealer supplies him with vicious one, the stipulation is a condition. The buyer can either return the horse or keep it and claim damages. Of course, the right of selection must be exercised within a reasonable time.

Whether a stipulation in a contract is a condition or a warranty depends in each case on the construction of the contract. No special words are necessary to create a warranty or a condition; a stipulation may be a condition though called a warranty in the contract. The intention of the parties must be ascertained before a court comes to a conclusion. The same phrase in two different contracts may in one case amount to a condition and in other to a warranty. Stipulation as to time: The stipulations as to time may be of two classes. (i) As to time of payment (ii) Other stipulations as to time e. g. with regard to the performance of the contract, delivery of goods, etc. Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not of the essence of a contract of sale. The law regards such stipulations as mere warranties and not as conditions. However, the parties may intend otherwise and may make time of payment of the essence of contract. The parties may provide in the contract that the time of payment shall be regarded as a condition, and the buyer’s failure to pay in time will entitle the seller to put an end to the contract.

Whether any other stipulation as to time is of the essence of the contract or not, depends on the terms of the contract. In case of other stipulations such as for delivery of goods, time is one of the essence of the contract. In the following case, also, the time is considered to be the essence of the contract. (a) Where the parties have expressly agreed to that it is a condition (b)Where the delay operates as injury to the party (c) Where the nature and necessity of the contract requires it to be a condition. Example: X sold certain goods to Y to be paid for on delivery. Y failed to pay after the goods had been in part delivered. X stopped further deliveries. It was held that delivery was subject to the condition of payment and the condition being broken, X was entitled to bring an action for the recovery of goods.

Difference between Condition & Warranty Basis Condition Warranty 1. Meaning Condition is a stipulation as to the main purpose of the contract. Warranty is a stipulation collateral to the main purpose of the contract. 2. Section 12(2) Section 12(3) Condition is a wider term. Warranty is smaller is its scope. 4. Consequences of breach Breach of condition can repudiate the contract. Breach of warranty does not repudiate the contract, at the most a claim for damages can be made. 5. Interchange-ability U/S 13(1) a buyer can opt to treat a condition as a warranty and have a recourse to a smaller remedy of claiming compensation only. A warranty can never be treated as a condition. 6. Compulsory Interchange-ability U/S 13(2) where the contract of sale is not severable (divisible) and the buyer has accepted part goods, the breach of condition is to be compulsorily treated as breach of warranty. No such compulsion exists for a warranty to be treated as a condition. 3. Scope

When Condition to be treated as Warranty Section 13

(1)Voluntary waiver by buyer. In a contract of sale, although on a breach of condition by a seller, the buyer has a right to treat the contract as repudiated and he can reject the goods, but he is not bound to do so. Instead he can elect to waive the condition i. e. to treat the breach of condition as breach of warranty and accept the goods and sue the seller for damages for breach of warranty. Example: X agrees to sell Y, 100 bags of particular quality of Basmati rice @ Rs. 4500 per bag. But he supplied second quality Basmati rice @ Rs. 3500 per bag. It is breach of condition and he can refuse to accept the delivery by rejecting the goods. But if the buyer elect to treat the breach of condition as breach of warranty, he can accept the second quality Basmati rice and claim the damages @ Rs. 1000 per bag.

(2)Treating the condition as warranty The buyer may elect to treat a breach of a condition as a breach of a warranty. The two cases mentioned above are voluntary in nature and depend solely on the will of the buyer. On discovery of the breach of a condition a party having the right to repudiate the contract must exercise it; and if he does not, he is taken to have waived his right to repudiate it. Example: X agreed to supply Y 5000 metres of fine cloth at the rate of Rs. 30 per metre, but supplies only the medium quality, the price of which is Rs. 15 per metre. There is a breach of condition and Y can reject the goods. However, if Y accepts the goods he can claim the damages at the rate of Rs. 15 per metre.

(3)Acceptance of goods by buyer Where the contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition can only be treated as a breach of warranty, but can only maintain an action for damages, as if the condition were only a warranty. Similarly where a buyer sells the goods to the subbuyer and directs delivery to be mailed to him, the act amounts to an unconditional acceptance of the goods. Example: A contract was made for the sale of wheat on c. i. f. terms. The buyer took the documents and resold and delivered part of the wheat to sub-buyers without making a proper examination thereof. The wheat having been found of inferior quality, they claimed to reject it. It was held that the resale and delivery of part of the wheat was an act inconsistent with the ownership of the seller and the right to reject the goods had been lost.

TIME AS THE ESSENCE OF CONTRACT v Regarding the importance of various stipulations as to time. Section 11 provide as under: § The general rule as stated US is that failure by the buyer to make the payment on the appointed date does not entitle the seller to repudiate of contract of sale. Although the seller may be allowed to withhold delivery of goods until he receives the payment from the buyer. § So where the buyer delays the payment of price, the seller can at the most claim compensation and can not repudiate the contract.

RULES FOR STIPULATION AS TO TIME (1)General Rule. Time is not considered as the essence of the contract unless the parties intentionally make it essence of the contract. Example: Ø A agreed to sell and deliver his bike to B for Rs 1, 00. A delivered the bike in two months. Held, B can only treat delay by A in delivery of bike as breach of warranty and claim charges. (2)Time expressly made essence of contract. Where the parties to the contract of sale intentionally and expressly make time as a stipulations to the main purpose of the contract i. e. a condition, then delay in performance shall amount to breach of condition and therefore contract can be repudiated. Example: Ø A agreed to sell his bike to B Rs 10, 000 and deliver it to B on the date of B’s marriage. A did not deliver the bike on B’s marriage date. Held, B can repudiate the contract as A committed breach of condition.

(3)Extended time is also essence of contract. Where time was made the essence of the contract and later by manual consent the time so allowed was extended, then this extended time shall also become essence of contract. Therefore, where the party commits delay to perform within this extended time, the aggrieved party can repudiate the contract. Ø Example: A contracted to sell and supply 15 chairs to B on 14 jan, 2014 at Rs 250 per chair. But on request made by A, B extended the time delivery of chairs by another week. A still could not deliver the chairs within the extended time. Held B could repudiate the contract.

A. EXPRESS CONDITIONS AND WARRANTIES. The terms that have been expressly made as conditions as warranties by the parties shall be called conditions and express warranties. B. IMPLIED CONDITION AND WARRANTIES These are those conditions and warranties which the law incorporate into every contract of sale. Apart from the express conditions and warranties, implied conditions and warranties that have been proved under the section 14 -17 of sale of Goods Act, 1930 are binding on the parties in every contract of sale. Breach of implied conditions can lead to repudiation of contract and breach of implied warranties can only enable the aggrieved party to claim damage.

IMPLIED CONDITIONS 1. Condition as to title : U/S 14(a) In a contract to sale, it is an implied condition that the seller should be the true owner of the goods sold and he should be having the right to sell these goods. Therefore the conditions as to title provided that: (i) Seller must be the owner of goods sold. (ii) Seller must have the right to sell. (iii) Seller must not infringe a trade mark or patent. (iv) Seller acquire the right to sell: (a) In a contract of sale, the seller acquire the right to sell at the time of making the contract. (b) In a agreement to sell, the seller shall acquire the right to sell when the property in goods shall in his same. Consequences of Breach of Condition as to Title. The aggrieved party has the right to cancel or repudiate the contract.

2. Sale By Description (U/S 15) When the goods are sold by given the description, there is an implied condition that the goods are sold shall the description so given. Consequences of breach: Where the goods supplied by the seller are not according to the description given, then the seller commits breach of condition and therefore, the buyer can reject the goods and repudiate the contract. This includes the following situations : (i) Where buyer has not seen the goods and relies on the description given by the seller. Here the goods should correspond the description so given else it shall amount to breach of condition and the buyer can repudiate the contract. (ii) Where buyer has seen the goods but relies on description stated. It may be case that although the buyer saw the goods he bought, but still relied on the description given by the seller about the goods. In such cases also, if the description does not correspond with the goods, it amount to breach of condition in the contract.

3. SALE BY SAMPLE AND DESCRIPITION. Where the goods are sold by showing a sample and also by giving description, the goods must correspond both to the sample shown and the description stated. Where the goods corresponding with the sample but do not corresponding with the description or vis-avis, it shall amount to breach of condition and the buyer can repudiate the contract. EXAMPLE: N agreed to sell to D oil described as pure refined oil by showing a sample. The goods delivered where the same as the sample but contained a mixture of vanaspati oil. Held, D could cancel the contract.

4. CONDITION AS TO QUALITY OR FITNESS U/S 16(1) Where: • the buyer needs goods for a special purpose. • buyer tells that purpose to seller. • The buyer relies on skill and judgment to the seller. • The seller deals or trades in similar goods. Then: it is an implied conditions that the goods sold should serve the purpose of serve. EXAMPLE: - An order placed for some cart horses to be used for carriage purpose. The horses supplied were the race horses unfit for the carriages. These is a breach of conditions.

EXCEPTIONS: 1. When the goods are used for only one purpose: - where goods sold can be used for a specific purpose only, then the purpose need not to be told to the seller and he is deemed aware of it. 2. If the buyer suffers from an abnormality: - If buyer has some abnormality, then such abnormality should be made known to the seller at the time of sale, else the seller shall not be liable. If the buyer suffers a harm due to his over sensitiveness, then the seller can not be blamed for it.

3. If the buyer purchases a product under a TRADE MARK or PATENT: - then the seller shall not be liable as he does not rely on the skill and judgment of seller. But where the buyer relies on skill of seller and tells him that relying on seller he is buying a particular trade marked product, the seller be held liable if buyer suffers a loss. 4. If the goods can be used for a number of purposes: - where the good scan be used for different purpose, the buyer must tell the particular purpose for which he required the goods. If he does not, he cannot hold the seller liable if the goods do not suit his purpose.

When: 1. Goods are sold by description and 2. The seller trades in the similar goods. then: merchantability means: [i] the goods should be fit for consumption. [ii] the goods should not be injurious when used. [iii] the goods should not infringe a trade mark or a patent. EXAMPLE: Sunil bought coal from a seller by description. When Sunil used this coal at home, it blasted and Sunil suffered an accident. Held, the seller was liable. 5. CONDITION AS TO MERCHANTABIL ITY- U/S 16(2)

CONDITION AS TO MERCHANTIBITY [i] right to examine the goods: if the defect could not be revealed even after a reasonable examination, then the seller is held liable. Such defect which can not be revealed by reasonable examination are called as latent defects. [ii] implied condition is negative if defect is patent defect : Defect are of two kinds. • patent defect: the defects which can be revealed by reasonable level of examination. • latent defect: defect which cannot be revealed by reasonable level of examination. the seller is not held liable if the defects in the goods were patent defects.

6. SALE BY SAMPLE: U/S 17 When goods are sold by sample, there is an implied condition that: the bulk shall correspond with the sample. The buyer shall have reasonable opportunity to compare bulk with the sample. The goods shall be free from any defect. The seller is liable only for the latent defect. The seller is not liable for patent defects. where: a) the bulk does not correspond with the sample. b) If the buyer is not given a reasonable opportunity to inspect c) If the goods are defected because of an existence of a latent defect.

An implied condition as to quality or fitness for a particular purpose may be annexed by the custom or be implied from the usage of trade. In some cases, the purpose for which the buyer buys the goods implied from the nature of the article purchased, or implied from the custom of the trade. In these situation, the goods must comply with the custom or usage of goods. EXAMPLE: Bottle of the milk purchased by the buyer implies the purpose for which it was purchased, hence the bottle must be fit for the purpose else, the seller shall be liable. 7. CONDITION IMPLIED BY CUSTOM/ USAGE OF TRADE: U/S 16[3]

defects Patent defect A defect that can be identified on reasonable level of examination of the goods is called as patent defect. The seller when selling goods is not liable to buyer for any patent defect existing in the goods. The buyer shall stand liable for the patent defect existing in the goods. Example: a seller sold a wooden table to a buyer. The table was not balancing properly on its four legs. The buyer bought it without inspecting the table. Held, the buyer was liable. Latent defect A defect which cannot be revealed on the ordinary level of inspection done of goods is called as latent defect. The seller is liable for any latent defects existing in the goods. The buyer is not responsible foe the latent defects. A seller sold a wooden table to a buyer which was effected by termites from within. The defect could not be revealed on the ordinary examination of table. Held, the seller was liable.

IMPLIED WARRANTIES WARRANTY AS TO QUIET POSSESSION : U/S 14(B) q. WARRANTY OF FREEDOM FROM CHARGES OR ENCUMBRANCES : U/S 14(C) q WARRANTY AS TO QUALITY OR FITNESS BY USAGE OF TRADE : U/S 16(4) q

(1) WARRANTY AS TO QUIET POSSESSION : U/S 14(B) In a contract of sale is an implied warranty that the buyer shall enjoy quiet possession of the goods. If the buyer is disturbed as to possession of goods because of the defective title of the seller, the buyer can claim from the seller on account of breach of warranty of quiet possession of goods. (2) WARRANTY OF FREEDOM FROM CHARGES OR ENCUMBRANCES : U/S 14(C) The goods should not be subject to any charge or a right in favor of a third party. If there is a charge or encumbrance on the goods sold and the buyer has to discharge the same, he is entitled to get compensation for the same from the seller. (3) WARRANTY AS TO QUALITY OR FITNESS BY USAGE OF TRADE : U/S 16(4) By the custom of trade an implied warranty as to quality of product can be annexed.

DOCTRINE OF CAVEAT EMPTOR The maxim, caveat emptor means “let the buyer beware”. The doctrine of caveat emptor states that when the buyer was given a chance of examining the goods but he did not examine them, infact relied on his own skill and judgement and makes a bad selection then he cannot blame anybody except himself. In other words unless the buyer specifies his purpose for buying the goods, it is not the duty of the seller to give the buyer suitable goods required by him (buyer).

EXCEPTIONS TO THE RULE q WHERE THE BUYER MAKES THE PURPOSE KNOWN TO SELLER [IMPLIED CONDITION AS TO QUALITY OR FITNESS U/S 16(1)] q. MERCHANTABLE QUALITY [IMPLIED CONDITION AS TO MERCHANTABILITY U/S 16(2)] q. SALE OF AN ARTICLE UNDER A PATENT OR TRADE MARK q. CONSENT BY FRAUD q. USAGE OF TRADE q. WHERE THE SELLER CONCEALS A LATENT DEFECT

WHERE THE BUYER THE PURPOSE KNOWN TO SELLER Where the buyer makes known t the seller the particular purpose for which the buyer requires the goods and relies on the skill and judgment of the seller, then it becomes the duty of the seller to provide the goods which are suitable for the buyer purpose. SALE OF AN ARTICLE UNDER A PATENT OR TRADE MARK Where the buyer demands a product of a specific patent or trade marked product and does not rely on the judgment of the seller and subsequently suffers some loss, then the buyer cannot hold the seller liable, but under few circumstances the seller shall stand liable. CONSENT BY FRAUD Where the consent of the buyer is obtained by the seller, and the buyer suffers any loss then the seller shall be liable. USAGE OF TRADE An implied condition as to quality or fitness for a particular purpose may be annexed by usage of trade. WHERE THE SELLER CONCEALS A LATENT DEFECT A latent defect is a defect which cannot be revealed with ordinary examination of the goods.

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