LAW OF CONTRACT

Chapter No. 15

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 CONDITIONS AND WARRANTIES

A contract of sale of goods contains various terms or stipulations

regarding the quality, price mode of payment, delivery of goods, time of
performance and place where the goods are to be sent. The major terms
are called conditions and minor terms are called warranties.

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 CONDITIONS

DEFINITION OF CONDITION

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.
(Sec.12(2)).

Thus, a condition. is essential for the main purpose of the contract. Its
non-fulfillment causes irreparable loss to the aggrieved party. In case of violation
of condition, the aggrieved party can cancel the contract.

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 CONDITIONS

EXAMPLES

a. A contracts to deliver 100 Royal fans to B. But A delivers Climax fans. It is

breach of condition. B can accept or reject them and claim damages.

b. Basked M a car dealer to suggest him a car for touring purposes. M

suggested Buggatti car. B purchased the car and found it unfit. Held, it was
breach of condition. B could return the car. (Baldray vs. Marshall) 1

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 WARRANTIES

DEFINITION OF WARRANTY

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 right to reject
the goods and treat the contract as repudiated. (Sec. 12(3))

In other words, a warrantee is not essential for the main purpose of the
contract. The breach of warranty gives the injured party a right to recover
damages only but not to reject the contract.

EXAMPLE

A promises to deliver to B 100 fans at his office. But A delivers them at

his home. It is a breach of warranty. B can claim damages only.

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 DIFFERENCE

BETWEEN CONDITION AND WARRANTY

The following are the points of difference between the two:-

Condition Warranty
1. Value
A condition is a stipulation essential to A warranty is a stipulation not
the main purpose of the contract. essential to the main purpose of the
Contract.

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 DIFFERENCE

BETWEEN CONDITION AND WARRANTY

The following are the points of difference between the two:-

Condition Warranty
2. Basis

It forms the basis of a contract and It does not form the basis of a contract
Goes direct to the root of the contract. and does not go direct to the root of
the contract.
3. Breach

The Breach of a condition gives the The breach of warranty does not give
aggrieved party the right to reject the the aggrieved party a right to reject the
Contract contract .

4. Treatment
A breach of condition may be treated A breach of warranty cannot be treated
as a breach of warranty. as a breach of condition.
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 DIFFERENCE

BETWEEN CONDITION AND WARRANTY

The following are the points of difference between the two:-

Condition Warranty

5. Option

In breach of condition, the In breach of warranty the aggrieved

aggrieved party has an option to claim party has no option to reject the
damages instead of reacting the contract. He can only claim damages.
Contract.

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 CONDITION TREATED AS WARRANTY

A breach of condition is treated as a breach of warranty under the

following cases:

1. OPTION OF BUYER

The breach of condition by the seller gives the right to the buyer to
reject the goods, But he is not bound to do so. He may treat the breach of
condition as a breach of warranty and accept the goods and accept the goods
and claim damages. (Sec. 13(1))

EXAMPLE

A agrees to supply B first grade sugar but supplies second grade sugar,
B can reject it B may accept the second grade sugar and claim damages.

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 CONDITION TREATED AS WARRANTY

2. ACCEPTANCE OF GOODS BY BUYER

Where the buyer has a accepted the goods, he cannot reject them but
can claim damages. If the buyer has accepted only part of the goods and the
contract is Indivisible, he will have to accept the remaining part also. But in
divisible contract he can reject the remaining goods, if he has accepted only part
thereof. (Sec. 13(2)).

EXAMPLE
J contracted to sell horns to R. The horns were delivered in 19 boxes
by installments. R accepted 1 box and rejected others being dented. J sued for
the price for all horns, Held, that R could reject (Jackson vs. Rotax Motor Car
Co)2.

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 IMPLIED CONDITIONS AND WARRANTIES

IMPLIED CONDITIONS

The conditions and warranties which are included in contract are called
express. The conditions and warranties which are not included in the contract
but the law presumes their existence in the contract are called implied.

IMPLIED CONDITIONS

Unless otherwise agreed, the law includes the following conditions in a

contract of sale of good.

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

1. CONDITION AS TO TITLE
It is implied condition that in a sale the seller has a right to sell goods
and in an agreement to sell he will have a right to sell the goods at the time
when the ownership is to pass. Thus, if the seller's title proves to be defective
the buyer can reject the goods and recover his price. (Sec. 14(a)).

EXAMPLE
R purchased a car from D. After few months, the police took away the
car as it was stolen. R sued D to recover the price. Held, that R can recover the‘
price. (Rowland vs. Dival)3

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

2. SALE BY DESCRIPTION
In a contract of sale of goods by description; it is an implied condition
that the goods shall correspond with the description. If the goods are not
according to the description, the buyer can reject the goods. If the seller supplies
different goods, the buyer is not bound to accept such goods. (Sec. 15).

EXAMPLES

a. A advertised a car for sale as Corolla, 1990 Model B after buying the car
found it of an earlier model. B could return the car.

b. S contracted to supply new Singer car to A. The car supplied had run some
mileage. It was held that there was a breach of condition and A could reject the
car. (Andrew Bros vs. Singer & Co)4
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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

3. SALE BY SAMPLE

In case of sale by sample, the goods must be. supplied according to a

sample agreed. It is subjected to the foll9wing are conditions. (Sec. 17).

a. The bulk shall correspond with the sample in quality.

b. The buyer shall have reasonable opportunity to compare the bulk
with the sample.
c. The goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on reasonable
examination of the sample.

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

EXAMPLE

There was sale by sample of two parcels of wheat. The seller showed
the bulk of one parcel but not the other. It was held' that the buyer could cancel
the contract. (Lorymer vs. Smith)5

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

4. Sale by Sample as Well as by Description

When the goods are sold by sample as well by description, there is an

implied condition that the bulk of the goods shall correspond with the sample
and the description. If the goods supplied correspond only with the sample and
not the with the description. Or vice versa the buyer can reject the goods.
(Sec.15).

EXAMPLE

N agreed to sell G foreign refined grape oil. The oil supplied

corresponded with the sample but was mixed with hemp oil. Held that the ail was
not in accordance with the description, so the buyer could reject. (Nichol vs.
Gadts)6 ,

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

5. CONDITION AS TO FITNESS OR QUALITY

Where the buyer informs to the seller about the particular purpose far
which the goods are required, there is an implied condition that the goods shall be
reasonably fit far such purpose. This condition applies if the following requirements
are satisfied.

a. The buyer should inform the seller about the purpose of goods.

b. The buyer should rely an the seller's skill or judgment.

c. The seller’s business must be to sell goods of that type. (Sec. 16(1))

EXAMPLE

A enters into an agreement with B to buy 100 oil filters to be used for
Suzuki cars. The oil filters were unfit. A can reject them.
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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

6. CONDITION AS TO MERCHANTABILITY

The term merchantable means that the goods must befit for the ordinary
purpose far which such990ds are used. Where goods are bought by description
from seller who deals in goods of that description, whether he is the;
manufacturer or producer or not there is implied condition that the goods shall be
of merchantable quality. The goods must be free from hidden defects.

(Sec.16(2)).

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

EXAMPLES

a. A purchases a black yarn from B, a dealer-in yarn and finds' it damaged/ by

ants. It is a breach of condition. A can to reject it.

b. M bought a battle of wine from F. When M tried to open the battle a piece of
it brake off and injured him. Held that the battle was not of merchantable quality
(Morelli vs. Fitch & Gibbons)7

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

7. CONDITION BY CUSTOM

An implied condition as to quality or fitness for a particular purpose may

be annexed by the usage of trade. In some cases the purpose for which the
goods are required may be ascertained from the acts and conduct of the parties
to the sale or from the nature of description of the article purchased. (Sec.16 (3))

EXAMPLE

X sold goods by auction to Y. In a sale by auction there was a custom to

declare any fault in the goods. Goods were sold without declaration. Goods were
found damaged. Held, Y could reject the goods:

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 IMPLIED CONDITIONS AND WARRANTIES

Implied Conditions

8. CONDITION AS TO WHOLESOMENESS

Wholesomeness means beneficial for health. This condition applies only

in contract of sale of eatables and provisions. In such cases goods supplied must
be merchantable and wholesome. It means that the goods must be fit for
consumption.
EXAMPLES
a. F bought milk from A, a dairy owner. The milk contained germs of typhoid
fever. F's wife on taking the milk became infected and died. A, was held liable in
damages (Frost vs. Ayles Bury Dairy Co Ltd)8

b. C bought a bun containing a stone which broke C's tooth. Held C could
recover damages. (Cheproniere vs. Mason)9 '

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 IMPLIED CONDITIONS AND WARRANTIES

IMPLIED WARRANTIES

IMPLIED WARRANTIES

Unless otherwise agreed the law includes the following warranties into a
contract of sale of goods: .

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 IMPLIED CONDITIONS AND WARRANTIES

IMPLIED WARRANTIES

1. QUIET POSSESSION

It is an implied assurance to the buyer that he shall have the possession

and enjoyment of the goods .sold to him without disturbance from the seller or
any other person. lf the buyer is disturbed in the enjoyment of the goods due to
the seller’s defective title, he can claim damages from the seller. (Sec. 14 (b))

EXAMPLE

M purchased a second hand typewriter from B. M spend money on its

repair and used it for some months. The typewriter was found to be stolen and M

had to return it to its true owner. Held, M could recover damages and price.
(MasonV8. Burningham)10

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 IMPLIED CONDITIONS AND WARRANTIES

IMPLIED WARRANTIES

2. FREEDOM FROM ENCUMBRANCES

It is implied warranty on the part of seller that, the ,goods shall be free
from encumbrance in favour of any third party. the warranty will not apply
where such encumbrances are declared to the buyer when the contract is
made. If the possession of the buyer is disturbed due to such charge in
favour of third party he can claim damage (Sec.14 (c)).

EXAMPLE
A pledges his car with B and promises to give its possession the next
day. A sells his car to X. B asks X about the pledge affair. X pays the
amount of pledge to B. X can recover compensation from A.

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 IMPLIED CONDITIONS AND WARRANTIES

IMPLIED WARRANTIES

3. USAGE OF TRADE

An implied warranty as to quality or fitness for a particular purpose may be

annexed by the usage of trade (Sec. 16(3)).

EXAMPLE

Shahalam market offers to pay damage on the fading of colour of cloth.

Every seller of cloth of that market is bound by this warranty.

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 IMPLIED CONDITIONS AND WARRANTIES

IMPLIED WARRANTIES

4. DISCLOSURE OF DANGEROUS GOODS

The implied warranty on the part of the seller is that if the goods are of
dangerous nature he will warn the ignorant buyer about the probable
danger. In case of breach of this warranty the buyer is entitled to claim
compensation for the injury caused to him.

EXAMPLE
C purchased a tin of disinfectant Powder from A. A knew that if tin is not
opened with special care it may be dangerous but told nothing to C. C
opened the tin in the normal way and as a result the powder flied into his
eyes and caused injury. A was held liable (Clarke vs. Army &Navy Coop
Lta)11.

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 DOCTRINE OF CAVEAT EMPTOR

Doctrine Of Caveat Emptor

Coveat emptor means let the buyer beware According to this principle it
is the duty of the buyer to be careful while purchasing goods of his requirement.
The buyer must examine the goods thoroughly. He should also see that the goods
are suitable for his purpose. If the goods prove to be defective or do not suit his
purpose, the buyer cannot hold the seller liable for the same. If the buyer, at the
time of making the purchases, depends upon his skill and makes a bed choice, he
must blame himself for his own folly.

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 Doctrine of Caveat Emptor

According to section 16 (a) the seller is under an obligation to inform the

buyer of any defect, in the goods sold at the time of contract, except, in a case
where the defect is obviously known to the buyer. It means that if the defects are
in the knowledge of seller he must inform to the buyer about those defects
provided those defects are not obvious. But it the defects are obvious, the seller is
not bound to inform to the buyer.

EXAMPLE

A purchases a horse from B.A needs the horse for riding but he does not
mention to B. The horse is not suitable for riding A cannot reject the horse.

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 Doctrine of Caveat Emptor

EXEPTIONS

The doctrine of Caveat Emptor is subject to the following exceptions:

1. PURCHASE DESCRIPTION

Where the goods are purchased by description the doctrine of caveat

emptor does not apply if they do not correspond with the description, (Sec 15)

EXAMPLE

V sold a reaping machine to W describing that it is 1 year old. W found it

to be 2 years old. W could return it as it does not correspond with description.

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 Doctrine of Caveat Emptor
EXEPTIONS

2. PURCHASE BY SAMPLES AND DESCRIPTION

Where the goods are bought by sample as well as by description and

the bulk of the goods do not correspond both with the sample or with the
description, the buyer is entitled to reject the goods. (Sec. 15)

EXCEPTIONS

A sells Air Filter to B saying that it is genuine and fit for Corolla car. B
finds that it is fit but not genuine. Bean reject it.

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 Doctrine of Caveat Emptor
EXEPTIONS

3. FITNESS FOR PURPOSE

Where the buyer informs the seller about particular purpose for which he
needs the goods and relies upon seller's skill and judgment. The seller must
supply the goods which shall be fit for the buyers purpose.[See16(1)].

EXAMPLE

A purchased two trousers from B, a manufacturer. On wearing A became

ill. His illness was caused by chemical irritant which B failed to remove in the
process of manufacturing. B was held responsible,

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 Doctrine of Caveat Emptor
EXEPTIONS

4. Merchantable Quality

Where the goods are bought by description from a seller who deals in.
goods of that description there is an implied condition that the goods shall be of
merchantable quality. But if the buyer has examined the goods, there is no implied
condition as regards defects which such examination ought to have revealed
(Sec.t6(2))

EXAMPLE

A bought a milk from B, a dairyman, It was contaminated by germs. A's

wife got infected and died of it B was held liable in damages.

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 Doctrine of Caveat Emptor
EXEPTIONS

5. USAGE OF TRADE

Where the trade usage attaches an implied condition or warranty as to

quality or fitness and the seller deviates from that the principle of Caveat Emptor
dose not apply. [sec 16(3)].

EXAMPLE

A purchase a hot water bottle from B, a retail chemist. While A's wife
used the bottle, it burst and injured her, The use of bottle was known to B. B was
liable for breach. (Priest vs. Last) .

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 Doctrine of Caveat Emptor
EXEPTIONS

6. PURCHASE BY SAMPLE

Where the goods are bought by sample the principle of Caveat Emptor
does not apply if the bulk does not correspond with the sample or if the buyer is
not provided an opportunity to compare the goods With sample: (Sec17)

EXAMPLE

X buys Oil Filter from Y by showing a sample. The oil filter does not
correspond with a sample. X can return it.

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 Doctrine of Caveat Emptor
EXEPTIONS

7. CONSENT BY FRAUD

Where the seller makes a wrong statement intentionally to the buyer and
the buyer relies on it or where the seller actively conceals the defects in the
goods, which could not be discovered on a reasonable examination this principle
does not apply. (Sec.17 of Contract Act).

EXAMPLE

A knows that his watch is made in Pakistan. In order to sell his watch A.
tells B that it is made in Switzerland. B buys the watch. B can reject the contract.

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 Doctrine of Caveat Emptor
EXEPTIONS

8. CONSENT BY MISREPRESENTATION

Where the seller makes a misrepresentation arid the buyer relies on it

the doctrine of caveat emptor does not apply. Such a contract is voidable at the
option of the buyer. The buyer can reject the contract. (Sec.18of contract Act)

EXAMPLE

A while selling his horse to B, tells him that the horse is sound. B buys it
and finds the horse to be unsound. B can reject the contract.

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