Implied Warranties: An Insight

Outline
● Introduction
● Role of warranties under contract
● Types of warranty
- Express
- Implied
● Implied warranties under the Sales of Goods Act
- Section 14 (a)
- Section 14(b)
● Difference b/w Implied condition & Implied warranty
● Types of implied warranties
- Implied Warranty of Fitness
- Implied Warranty of Merchantability.
- Warranty against hidden defects

● Disputes regarding breach of Implied warranties

● Ways of repayment to damages for breach of implied warranties
● Conclusion
● References

Introduction

A warranty, loosely known as a written promise, serves as a formal commitment to the repair
or replacement of the item in case it is not up to the quality standard and fails to function as
intended, it is often provided upon the purchase of a product or before the initiation of a
transaction to assure the buyer’s credibility for the long term. A warranty, as an undertaking
assures the buyer that the transaction will meet the specific requirements in terms of quality.
A warranty is a contractual provision related to the quality, durability, state, performance, and
attributes of a specific product. It is provided and becomes effective following a sales
transaction. A warranty serves as additional information concerning the intended product or
its state.

Role of warranties under contract

A warranty under a contract is on the same lines, which serves as a promise to indemnify the
inflicted party if the assertion is false. Representations and warranties are situated together in
a contract, wherein representations are a set of statements that are deemed to be true and
create a foundation between both parties. Now this foundation is protected by warranty which
guarantees that the inflicted party will be paid damages if anything goes wrong on that very
set of promises. The major reason why warranties are a big deal in a contract is because they
bind both parties with the legal commitment of representing correct facts.

In Bekkevold v. Potts, 1927-173 Minn. 87 (SC), it was observed that “ an implied warranty is
not one of the contractual elements of an agreement. It is not one of the essential elements to
be stated in the contract, nor does its application or effective existence rest or depend upon
the affirmative intention of the parties. It is a child of the law. Because of the acts of the
parties, it is imposed by the law. It arises independently and outside of the contract”
However, a warranty under contract holds secondary importance for its fulfillment, and non-
compliance by the seller only gives the right to claim damages to the buyer and not renounce
the whole contract. It is a requisite collateral to the main purpose of the contract, the breach
of which gives rise to a claim for damages but not a right for the buyer to reject the goods and
treat the contract as terminated. Warranties of various kinds are recognized under the law

Types of warranty

Warranties are broadly categorized into two types:

- Express warranty
As the name suggests, this type of warranty is the one that's explicitly mentioned and written.
Express warranty is mainstream, and people misunderstand this as the only type of warranty.

- Implied warranty

A warranty, which doesn't need to be expressly mentioned arises automatically from a sale or
its circumstances. Under the provisions of law, implied conditions are automatically applied
because they exist without needing to be written or mentioned. This type of warranty is best
suitable in conditions where the buyer observes a fault in the goods and claims his rights to
damage. An implied warranty, instead of being a part of the contract to which it attaches
itself, is the law's contribution to the welfare of the parties beyond the terms of the contract
itself–Hoe v. Sanbron, 21 N. Y. 552(559)

In the event of settling a contract of sale between the buyer & seller, express as well as
implied warranties play a crucial role.

● Implied warranties under the Sales of Goods Act

Sections 14 & 16 of the Sale of Goods Act, of 1930 explain Implied warranties which give it
the crucial edge in a transaction. If the Parties mutually agree to not impose implied
warranties, they should expressly mention its removal.

Let's discuss both sections briefly and understand the implied warranty's status under the
Sales of Goods Act.

- Section 14 (a)
Section 14 (a) discusses the implied condition on the seller to have the right to sell a good
only if he is the true owner and holds the title of the goods or is the authorized agent of the
title holder. It emphasizes the ownership aspect which is a crucial condition because if the
seller does own the good himself, selling it to someone will be a breach of the whole
transaction even if it is not mentioned explicitly. In such a situation, the buyer should return
the goods and claim his money back as soon as he learns about it. This warranty signifies that
the seller possesses the legal authority to sell the goods, and the buyer will obtain clear
ownership rights.

- Section 14(b)
Section 14 (b) of the Act mentions ‘an implied warranty that the buyer shall have and enjoy
quiet possession of the goods’ which means a buyer is entitled to the quiet possession of the
goods purchased as an implied warranty which means the buyer after receiving the title of
ownership from the true owner should not be disturbed either by the seller or any other
person claiming superior title of the goods. In such a case, the buyer is entitled to claim
compensation and damages from the seller as a breach of implied warranty.

Difference b/w implied condition & Warranty

Section 14 (a) talks about implied conditions, whereas Section 14 (b) describes implied
warranty. A condition is of primary importance and leads to termination when breached
whereas implied warranty is of secondary importance and entitles the buyer to claim damages
when breached. However, Implied Condition and Implied Warranty are two sides of the same
coin, and understanding both together is a necessity. It is safe to state that “A condition can
be treated as a warranty on the wish of the buyer but a warranty cannot be treated as a
condition”

Types of Implied Warranties

Section 16 sheds light on the types of implied warranties. In sale transactions, implied
warranties can be of various kinds. The following are some common examples of implied
warranties:

1. Implied Warranty of Fitness

The fitness warranty ensures that a product is specifically guaranteed to serve a particular
purpose, and it falls below the merchantability warranty in terms of significance. To
illustrate, if you inform a salesperson that you require a saw for cutting metal and it
ultimately fails to cut through metal, you have the option to return the item under the fitness
warranty. Under this warranty, the product functions properly but does not align with the
intended use as communicated by the buyer. The fitness warranty is inferred through a
salesperson's endorsement or assurance of a product's suitability for a specific purpose. This
warranty implies that the products being sold are appropriate for a particular purpose,
provided the buyer communicates the intended use to the seller.

2. Implied warranty of merchantability.

The implied warranty of merchantability ensures that products are fit for their intended
purpose and meet the reasonable expectations of a typical buyer. This warranty applies to a
wide range of consumer products, encompassing both new and used items. It presumes that a
product functions as expected for its designated use. This warranty suggests that the products
being sold are suitable for their typical use and adhere to a fundamental standard of quality.

3. Warranty against hidden defects

This warranty implies that the products sold are devoid of concealed flaws that would render
them unsuitable for their intended function. The doctrine of implied warranty should be
extended rather than restricted": Bekkevold v. Potts.

Disputes regarding breach of Implied warranties

The following disputes are among the most common to a breach of warranty or implied
warranty:

Interpretation of the warranty: Disagreements often occur regarding the warranty's

interpretation, including its extent, the circumstances of its applicability, and the
available solutions in the event of a violation.

Proof of damages/breach: The buyer must prove that the seller breached the warranty
and suffered actual damages due to the breach of warranty, which can be challenging
to quantify in some cases.

Limitation of damages: In certain instances, the sales contract might restrict the
damages recoverable by the buyer in the event of a warranty breach, creating a
potentially intricate matter.

Ways of repayment to damages for breach of implied warranties

Repair or replacement: In the case where the quality of goods is not appropriate, the
seller is under an obligation to either fix or replace the goods because of the implied
warranty.

Refund: If the goods cannot be repaired or replaced, the buyer may have the right to
receive a refund of the purchase price.

Damages: The buyer can claim damages due to the breach of implied warranty, which
may encompass compensatory damages (e.g., expenses for repairing or replacing the
goods) and consequential damages (e.g., lost profits or other indirect losses).

In Sha Thilokchand Poosaji v. Crystal and Co, the CJI held that the right of a buyer for
damages for breach of warranty proceeds upon the basis of acceptance of the goods
delivered, and not a rejection thereof. In other words, the right of rejection of goods, and
the right to sue for damages for breach of warranty, are alternative remedies. They are not
cumulative. A buyer can (where goods not answering to the description contracted for are
delivered) waive the condition; accept the goods, and sue for damages for breach of
warranty, and this is the effect of S. 13(1) of the Sale of Goods Act.

Conclusion:
Implied warranties play a crucial role in contracts as well as daily commercial transactions
relating to the sale of goods. The main aim is to ensure the quality, reliability as well and
performance of goods. It assures the buyers a sense of security with a legally binding
commitment to repair/ replace or refund in case the product is not up the par. However, the
buyer and seller need to be aware of their rights and obligations regarding implied warranties.
Consumers should understand how implied warranties protect their interests, while
businesses must be diligent in meeting these standards and, if necessary, disclaim them
explicitly in their contracts.

References

● www.indiankanoon.org
● www.legalservices.com
● www.casemine.com
● www.vedantu.com
● www.lawcornell.edu
● www.toppr.com
● www.ipleaders.com
● https://ibclaw.in/section-16-implied-conditions-as-to-quality-or-fitness/
● www.investopedia.com
● https://www.jimersonfirm.com