Business Law (Law 207)

Md Sazzad Hossain
(Collected from Delhi University)

Conditions and Warranties

Both Conditions and Warranties are important elements of every contract.

Conditions

The term “Condition” may be defined as a representation made by the seller, which is so
important that, its non-fulfilment defeats the very purpose of the buyer. As a matter of fact,
it is a stipulation, which forms the basis of a contract of sale, i.e., which is essential to the
main purpose of the contract.

According to Section 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.

This implies that a condition forms the essence of a contract of sale. Any breach will
therefore result in damages to the buyer and will give him the right to bring an end to the
contract of sale. The goods can be returned and the buyer has the right to get his money
back.

 Case Law 1:

Baldry v. Marshall[1]:

Baldry consulted the car dealer, and told him that he wanted to purchase a car for the
purpose of touring. The Car dealer, Mr. Marshall suggested that a Bugati car would be
fit for the purpose. Baldry bought the car as he believed the car dealer. However, the
car was found to be unsuitable for touring purposes. The Court ruled that the
suitability of the car for the purpose of touring was a Condition because that was the
very purpose for which Baldry has purchased it. Thus, Baldry could return the car to
the dealer and receive the refund for the same. 

Warranties

The term “Warranty” may be defined as a representation made by the seller. The non-
fulfillment of a warranty does not defeat the very purpose of the buyer. In fact, it is a
stipulation, which is not essential to the main purpose of the contract of sale, i.e., it is only
subsidiary or collateral to the main purpose.

According to Section 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 the right to
reject the goods and to terminate the contract.”  Therefore, a Warranty does affect the
contract in some way but it is not as important as Condition, which results in bringing the
contract to an end. If there is a breach of warranty the buyer cannot end the contract but
he does have the right to claim damages for the loss he suffered because of the breach.

Illustration: Malti goes to a cosmetic shop to buy an eyeliner. The shopkeeper

states that the eyeliner was waterproof and would not get washed off, unless it was
removed with cotton. However, later on when Malti used the eyeliner she found
that it was not waterproof. Here a breach of warranty took place and Malti is

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
entitled to claim damages only.

  Distinction between Conditions and Warranties 

Basis of Distinction Conditions Warranties

1. Essential vs. Collateral It is a stipulation, which is It is in the nature of a

very important for the collateral only.
purpose of the contract.

2. In the case of The party can bring the The party can only claim
Breach/Condition/Warranty contract to an end. damages.

3. Basic difference A breach of condition can A breach of warranty cannot

also be considered as a be considered as a breach of
breach of warranty. condition.

  

Case Law 2:

Wallis Sons and Wells v. Pratt[2]:

A sold some quantity of seeds to B which were described as ‘Common English Sanfoin’.
One of the terms of the contract was that “the seller gives no warranty expressed or
implied as to growth, description or any other matter”. Later on, it was found that the
seeds delivered to B were not ‘Common English Sanfoin’ but ‘Gain Sanfoin’, which was
different and of inferior quality. B accepted the goods believing it to be ‘Common English
Sanfoin’. B resold the seeds to C, who recovered damages from B because of the inferior
quality. As B has accepted the goods, his only remedy was to bring an action for
damages against A.  He sued A for damages. The seller (A) contended that the condition
was reduced to warranty as the buyer (B) had accepted the goods. And he is not liable
because the liability for warranty is expressly excluded in the contract. The Court
rejected the contention of the seller (A), and the buyer (B) was allowed to recover
damages from him (A). The Court observed that the condition is converted into warranty
only for the purpose of remedy. 

Thus, where the Condition is changed to Warranty, the buyer can recover damages for the
breach of a Condition, even if the liability for Warranty is expressly excluded in the
contract. 

When a Condition can be treated as a Warranty

According to Section 13, “A breach of a Condition can also be considered as a breach of

Warranty in the following cases:

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
 Where the buyer on his own waives a condition that is an essence of the contract. In
such a situation, the buyer cannot insist on the conditions being a part of the
contract of sale.
 Where the buyer chooses to treat the breach of condition as a breach of warranty
only and thereby, only claims damages but does not end the contract.
 Where the buyer has already accepted the goods, whole or in part. In such a
situation, the contract cannot be terminated. The buyer can only claim damages,
when he finds that some conditions have remained unfulfilled.”

Types of Conditions and Warranties

There are certain standards that need to be followed by every seller as part of his
obligations. The law presumes that there are some implied conditions and warranties in
every contract of sale. These pertain to the nature of the good, its quality and rightful
ownership. There are both express conditions and warranties as well as implied conditions
and warranties.

Express Conditions and Warranties

These are always clearly stated in the contract of sale.

Illustration:  Sonia buys a Nokia Cellphone , model No.1500. Here, the Model No.
is an express condition. If the Nokia Dealer gives a warranty for one year and that
is stated in the sale document then the Warranty for one year is considered as an
Express Warranty. 

Implied Conditions and Warranties: Such Conditions and Warranties are implied by law
in every contract of sale of goods unless these are specifically excluded from the terms of
the contract. There are several kinds of implied Conditions and implied Warranties.

Implied Conditions: These relate to the following:

 Title (Section 14 A),

 Sale by Description (Section 15),
 Sale by Sample (Section 17),
 Sale by Sample and Description (Section 15),
 Condition for fitness and quality [Section 16 (i)],
 Condition as to merchantability [Section 16(2)],
 Condition as to wholesomeness, and
 Condition implied by custom.

 (i)       Implied Condition as to title (Section 14 A): “In the case of sale, it is implied that
the seller has the right to sell the goods as he is the rightful owner/authorized agent. In the
case of an agreement to sell, the seller has the right to sell the goods at the time of sale.”
This term ensures that the buyer can terminate the contract if the seller does not have the
rightful ownership or authority to sell the goods.

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
Illustration 1: Mona bought a second hand Stereo from Shyam, a dealer. After a
few months the police took the Stereo away as it was a stolen one. Mona has the
right to recover the entire price of the Stereo from Shyam because Shyam did not
have the right to sell the Stereo. 

Illustration 2: Vivek buys a stolen watch from Suresh without knowing this fact.
By the time Vivek realizes that the watch he bought was a stolen one, Suresh
compensated the true owner of the watch for the theft and paid him the required
amount to get the legal ownership of the watch. Now, Vivek cannot terminate the
contract on the ground of breach of implied condition

Case Law 3:

Rowland v. Divall:

Rowland bought a second hand car from Divall, a car dealer. After a few months,
the police took the car away as it was a stolen one. The Court observed that it was
a breach of condition as to title as Divall had no right to sell the car. It was held
that Rowland could recover full price of the car from Divall.

Case Law 4:

Niblett v. Confectioners’ Material Co.: Niblett bought 3000 tins of condensed

milk from Confectioners’ Material Co. Out of the entire lot, only 1000 tins were
labeled as ‘Nissly Brand’. Naveen, another manufacturer of the milk under the
brand name of ‘Nestle’, claimed that this was an infringement of his trademark.
Consequently, Niblett had to remove all labels from the tins and was forced to sell
them at a loss. The Court held that the seller had breached the implied condition
that he had a right to sell.

 Implied Condition in a sale by description:  Where there is a contract of sale of goods

by description, there is an implied condition that the goods shall correspond with the
description.

When a descriptive word or phrase is used in a contract of sale to describe the product, it
creates an implied condition that the goods will be like the description.  For example, a sale
of ‘seedless pears’ signifies that the fruit will have no seeds. If it turns out to be a fruit with
seeds, the buyer reserves the right to reject the contract.

 Case Law 5:

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
 Moore & Co. v. Landaver & Co.:

A sold to B, 3000 tins of Australian fruits, which were agreed to be kept in cases
each containing 30 tins. A delivered the substantial portion of the fruits in cases
containing 24 tins. It was held that the method of packing was a part of the
description. Therefore, B was entitled to reject all the goods.

Thus, if it is ascertained that the sale is by description, then the goods must correspond
with the description. If they do not correspond, the buyer may reject them and the seller
cannot take the defense by saying that they will serve the buyer’s purpose.

Case Law 6:

Andrews Bros. V. Singer & Co.:

Singer contracted to supply ‘new Singer Cars’ to Andrews. However, one of the
cars supplied under the contract was not at all new and had already run a
considerable mileage. The Court observed that it was a breach of condition on the
part of the seller and Andrews could return the car to Singer.

Meaning of the term “sale by description”- It is interesting to note that the term “sale by
description” has not been defined in the Sale of Goods Act, 1930. Some common sense
conclusions can however, be drawn so as to understand what amounts to a description in a
sale. Such a description may be expressly spoken or written in words. It can be found in the
given documents or technical specifications supplied along with the product.  Goods
described by a particular trade name as commonly used to denote certain characteristics
must have those characteristics. For example, the term Darjeeling Tea implies that the tea
must meet the standards of being from Darjeeling. At times, the description about packing
of goods is also considered as a description essential to be adhered for sale.

Implied Condition in sale by sample:  Where a sample of the ordered product is

provided to the buyer, and the parties treat the sample as of a standard quality for the sale,
there is a condition that the goods will conform to the sample. Such sale is termed as a ‘sale
by sample’.

In the case of a contract for sale by sample, there is an implied condition:

 that the major part of the product shall correspond with the sample in quality;
 that the buyer shall have the opportunity of comparing the major part of the product
with the sample;
 that the goods shall be free from any defect, making them unmerchantable, which
would not be apparent from reasonable examination of the samples.

Case Law 7:

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
E & S Ruben Ltd. V. Fair Bros.:

Ruben agreed to buy some rubber material from Fair Bros. The sample of the
rubber was shown to Ruben. On receiving the material, Ruben found that the
measurement of the rubber material was different from that of the sample. The
Court observed that the measurement of the rubber was part of its quality. It was
held that the goods did not correspond to the sample. 

Case Law 8:

Lorymer v. Smith:

Two parcels of wheat were sold by sample. The buyer went to examine the bulk a
week later. One parcel was shown to him but the seller refused to show the other
parcel, which apparently was not there in the warehouse. In this case, the buyer
was not given reasonable opportunity to test the bulk with the sample. The Court
held that the buyer was entitled to reject the contract of sale. 

  Implied Condition in a sale by sample as well as by description:  When the sale is

by sample as well as by description, it is not sufficient that the bulk of the goods correspond
with the sample only and not with the description. Thus, the bulk of goods should
correspond with both, the sample as well as the description.

 Case Law 9:

Azemar v. Carella:

Azemar agreed to sell Carella some cotton, which was described as ‘Long Staple
Cotton’. The sample was also shown to Carella. Azemar delivered the cotton which
was exactly as the quality of the sample. Later, Carella discovered that it was not
‘Long Staple Cotton’, but only ‘Western Madras Cotton’. The Court held that the
buyer could reject the goods as they did not correspond with the description given
by the seller although they did correspond with the sample. 

Implied Condition as to Fitness or Quality:  Usually, there is no implied condition that

the goods supplied by the seller should be fit for the particular purpose of the buyer. The
rule ‘Caveat emptor’ applies instead. This means that while purchasing the goods, it is the
responsibility of the buyer to check whether the goods he is buying are fit for his purpose. 
However, in the following situations, the responsibility as to fitness of goods is on the seller:

 the buyer makes known to the seller the particular purpose for which the goods are
required,
  the buyer relies on the expertise and judgment of the seller, and

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
 the seller’s business is to deliver and supply such goods whether he is the
manufacturer or producer or not.

It is important that the specific purpose for which the goods can or are to be used should be
made known to the seller. 

 Illustration: Sheela ordered paper for packaging of paintings. The paper was

supplied accordingly. However, the buyer found that the paper was not strong
enough for packing paintings and wanted to return the paper to the supplier. Can
Sheela return the paper?

Answer: Sheela cannot return the paper because she did not specify that she had
required the paper for packaging of expensive paintings.

Although, the purpose of the use for which the goods are meant should be expressly stated
by the buyer, there can be situations when it is implied that the seller was aware about the
purpose for which the buyer bought the goods.

Illustration: Suman went to Ajanta Chemist, and asked for a hot water bottle
from him. The Chemist gave a bottle to her telling that it was meant for hot water,
but not boiling water. After a few days, while using that bottle, Suman got injured
as the bottle burst. It was found that the bottle was not fit to be used as hot water
bottle. The Court observed that the buyer’s purpose was clear when she asked for
a hot water bottle. Thus the implied condition that the product should be fit for the
purpose of the buyer was not met in this case.

When a buyer relies upon the skill and judgment of the seller there is an implied condition
that the goods should be fit for that purpose.

Case Law 10:

Dr. Baretto v. T.T. Pruce:

Mr. Pruce bought a set of false teeth from Dr. Baretto, a dentist. But the set was
not fit for Mr. Pruce’s mouth, so he rejected the set of teeth and claimed a refund
of price. It was held that Mr. Pruce was entitled to do so as the only purpose for
which he wanted the set of teeth was not fulfilled. 

Implied Condition as to Merchantability:  Where goods are bought by description from

a seller who deals in goods of that description (he may or may not be the manufacturer or
producer), there is an implied condition that the goods shall be of merchantable quality.

The condition of merchantability is applicable in the following circumstances:

1. The goods are sold to the buyer by description.

2. The seller actually sells such goods.

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
Illustration:  Raman, the owner of a stationery shop sells a house to Reena. Here,
no condition of Merchantability applies because Raman is not a property dealer.
Reena should be aware that Raman could not be held liable, in case the property
purchased by her is not a valid sale.     

  Case Law 11:

Morelli v. Fitch & Gibbons:

Morelli bought from a dealer, Fitch & Gibbons, a bottle of wine. While opening its
cork in the normal manner, the bottle broke off and injured Mr. Morelli’s hands.
Morelli was entitled to claim damages because the bottle was not of merchantable
quality.

If a buyer examines the goods before purchasing them, and the defects are evident, then
the condition of Merchantability does not apply to the extent of such defects.

However, if some defects are noticed later as they were not evident but latent, then the
condition of Merchantability would apply, even if the buyer had inspected the goods
properly.

 Important:-

1. The implied condition as to merchantable quality applies to all goods whether or not
they are sold under a patent or a trade name.
2. The implied condition as to merchantable quality applies to goods, whether or not
the buyer relies on the skill and judgement of the seller.

 Implied Condition as to wholesomeness: The condition of fitness of merchantability in

case of goods requires that the goods should be wholesome, i.e., fit for the purpose of
consumption. This condition is a part of the condition as to merchantability. It is applicable
in cases of eatables, i.e., foodstuffs and other goods, which are used for human
consumption. As per this condition, goods sold must be fit for human consumption.

 Case Law 12:

Frost v. Aylesbury Dairy Col Ltd.:

Frost bought milk from Aylesbury, a dairy owner. The milk was contaminated with
germs of typhoid fever. Frost’s wife on taking the milk became infected and died of
it. The Dairy owner was held liable and had to pay damages as he had breached
the condition of wholesomeness.

Implied Condition implied by Custom [Section 16(3)]: “An implied condition as to

quality or fitness for a particular purpose may be attached by the usage of trade. In
commercial exchanges, evidence of custom is attached in the case of incidences in written
contracts in matters of which they are silent.”

Case Law 13:

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 Business Law (Law 207)
Md Sazzad Hossain
(Collected from Delhi University)
Grant v. Australian Knitting Mills:

Grant bought underwear from the Knitting Mills. He examined them before the
purchase. Later on, it turned out that the underwear were harmful for his skin
because of the presence of hidden sulphites in the underwear. These could not
have been revealed by ordinary examination. The Court held that the implied
condition of merchantability is applicable in this case.

Implied Warranties [Section 14(b), 14(c), and 16(3)]: Whenever a product is sold, it

is assumed that there are certain Warranties that are given by the seller. It is a warranty
which the law implies into the contract of sale. It can be stated that it is the stipulation,
which has not been included in the contract of sale in express words. However, the law
presumes that the parties have included it into their contract. It can also be noted that an
implied warranty is read into every contract of sale unless they are expressly excluded by
the express agreement of the parties. These may also be excluded by the course of dealings
between the parties or by usage of trade [Section 62]. It may be noted that sometimes
there is conflict between the express and the implied warranties. In such cases, the express
terms shall prevail and the implied terms shall not be considered.

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