CONDITIONS

&
WARRANTY
 INTRODUCTION
Condition = essential to the contract, breach -repudiate the contract

Warranty = collateral to the contract, breach – sue for damages

Contract of Sale – Sale & Agreement to Sell have terms or stipulations like
quality, price, mode of delivery, time & place which may be

Major = Conditions (Basis of a contract)

Minor = Warranty (Secondary)
Conditions {(Sec 12(2)} = stipulation essential to the main
purpose of the contract, breach which gives the aggrieved
party to repudiate the contract and also action for damages for
the loss suffered.

Warranty {(Sec 12(3)} = stipulation collateral to the main

purpose of the contract, breach of which gives the aggrieved
party a right to sue for damages and can not avoid the contract
itself.
 Example
Test for stipulation : If any stipulation is such that breach
would seriously damage the interest of the buyer – it is a
condition if not a warranty.

1. A contracts with B to sell him an Apple I phone along with an I pod

which is provided free.
In the Contract the I phone is a vital matter for B, hence it’s a
condition while the I pod is of lesser significance therefore a warranty.

2. A agrees to sell B an old car for Rs 2.00 lakh. He also agrees to get
the car service but does not do so.
B can claim the service charges.
He is not entitled to repudiate the contract as that was only a
breach
 Distinction between Condition and Warranty
Basis Condition Warranty
1. Relation with Condition is stipulation which is Warranty is a stipulation
main purpose. essential to the main purpose of which is only subsidiary or
the contract. collateral to the main purpose
of the contract.

2. Nature of right Breach of condition gives the Breach of warranty gives the
to aggrieved party. aggrieved party the right to aggrieved party right to claim
repudiate the contract and also damages.
claim damages.

3. Treatment of Breach of conditions may be Breach of warranty can not

breach treated as a breach of warranty be treated as a breach of
condition.
 A Breach of condition can be treated as a Breach
of Warranty if the Buyer chooses
- Voluntary Waiver by Buyer
- Acceptance of Goods by Buyer
1. Voluntary Waiver by Buyer
On a breach of the conditions by the seller, the
buyer can repudiate the contract and reject the goods.
The Buyer can choose to waive the condition and
treat it as breach of warranty and accept the goods and
sue the seller only for damages for breach of warranty.
Example
A agrees to supply 10 bags of 5 kgs Basmati rice @ Rs 1,000/= per
bag but supplies Sona Masoori @ Rs 250/= per bag.
There is a breach of condition and the buyer can reject the goods.
If the buyer so chooses he may treat it as breach of warranty, accept
the Sona Masoori and claim damages of Rs 100/= per bag.
 A Breach of condition can be treated as a Breach
of Warranty if the Buyer chooses
- Voluntary Waiver by Buyer
- Acceptance of Goods by Buyer
2. Acceptance of Goods by Buyer
When a Buyer accepts the goods and subsequently
comes to know the breach of conditions, he CAN NOT
reject them, but can only maintain an action for
damages.
The Law compulsorily treats the breach of condition
as a breach of warranty.
Example
A manufacturer was supplied 100 oversized nuts and bolts. He
utilized 80 of them and paid to the supplier for the 80 items. He later realized
that they were oversized. The manufacturer had accepted the goods and can
not reject the balance but can claim damages.
 What is Acceptance ? (Sec 42)
Buyer is has accepted the goods if;
intimated the seller he has accepted the goods
when the buyer has sold/pledged the goods which he should not do.
he retains the goods without informing the seller

Buyer is deemed to have accepted the goods;

- When he intimates the seller that he has accepted
them OR
- When he does anything which is in inconsistent
with the ownership of seller Ex consumes, sells, pledges,
resells OR

- When after a lapse of reasonable time he retains

the goods without intimating the seller, that he has
rejected them. The Buyer can reject the goods and inform
the seller, he need not return the rejected goods.
 Acceptance of Part Goods.
IF the Buyer has accepted part goods ;
- the goods are inseparable – treat as a warranty and accept the goods
- the goods are separable – repudiate the contract.

If the Buyer has accepted part of the Goods

- The Contract is inseparable, he will have to treat
the breach of condition as warranty and accept the
remaining part.
Inseparable contracts = price of goods of different qualities is fixed
and the price would not be determined as per bag or unit.

- If the Contract is separable, he can repudiate the

contract for the remaining part of goods.
 Express & Implied Conditions and Warranties
Conditions and Warranties may be express and implied.
- Express then both the parties agree
- implied – when the law presumes their existence o the contract.

Conditions and Warranties may be

- Express – at the will of the parties they are
inserted into the contracts.
- Implied - When the law presumes their
existence in the contract though these have not been
put in the contract in express words.
 Implied Conditions and Warranties
Warranties may be implied when the law presumes their existence o the
contract.

As to Title
In a Sale by Description
In a Sale by Sample
In a Sale by Sample as well as by description
Implied Conditions
As to quality or fitness
As to merchantability

Warranty of quiet possession

Warranty of free from encumbrances
Implied Warranties
Warranty of disclosing dangerous nature of goods
 Implied Conditions
Conditions as to title in a Contract of Sale – an implied condition that in a sale
and an agreement to sell, the seller has right to sell the goods.

1. Conditions as to title
In a Contract of Sale (Sell & Agreement to Sell) the seller has
an implied condition that in case of a sale he has a right to sell the
goods and in an Agreement to sell, he will have a right to sell the goods
at the time when the property is to pass.
If the seller does not own the title of the said good himself
and sells it to the buyer, it is a breach of condition, in which
case the buyer can return the goods to the seller and claim his
money back or refuse to accept the good before delivery or
whenever he learns about the false title of the seller.
Example :
A purchased a Car from B and used for six months. The car was impounded as
it was a stolen car. A sued B for recovery of the price. The Buyer A has to
return the car and can recover the price paid and need not pay for the usage of
car.
 Implied Conditions
Conditions as to description in a Contract of Sale – an implied condition that in a
sale and an agreement o sell the goods shall correspond to the goods described

2. Conditions as to description of the Goods;

In a Contract of Sale (Sell & Agreement to Sell) there is an
implied condition that the goods shall be of the same description
as was agreed upon.
A sale by description includes any sale in which is described by words,
symbols, number, grade, brand etc. Eg Tata Salt, Prestige Pressure Cooker,

Example :
A Buyer took a tractor trailer which was manufactured by sister concern of
Escorts and it was agreed to sell tractor trailer made by Escorts only. The
supplier was ordered to take back the trailer and replace it with the one made of
Escorts or refund the amount paid with 15% interest.
 Implied Conditions
Conditions in a sale by sample – an implied condition that the goods should
correspond to the sample given.

3. Conditions in sale by sample;

- There is an implied condition that the bulk of the
goods should correspond to the sample.
- The buyer should be given a reasonable opportunity
of comparing the bulk with the sample. If it is not allowed
the goods may be rejected.

- The goods shall be free from defects which could not

be detected in the examination of samples.
Example :
i) Two parcels of wheat were sold by sample. The buyer went to examine, only
one parcel was shown and not the other. The Buyer could rescind the
contract.
ii) A cloth was to be supplied as per the sample. The sample had defects which
the buyer on examination was unable to identify. The Buyer could reject the
goods.
 Implied Conditions
Conditions in a sale by sample as well as description – an implied condition that
the goods should correspond not only to the sample but also description given.

4. Conditions in sale by sample as well as description ;

There is an implied condition that the goods sold should not

only correspond to the sample but to the description also.
The goods may be rejected.

Example :
Nichol agreed to sell to Godts some oil described as “foreign refined rape oil,
warranted only equal to sample.”
Nichol delivered oil equal to the quality of the samples, but which was not
“foreign refined rape oil.”

The goods corresponded with the sample but not with the description.
 Implied Conditions
Conditions as o quality or fitness – there is implied condition that the goods
should be reasonably fit for the buyer purpose.

5. Conditions as to Quality or Fitness ;

The General Rule is “Caveat Emptor” = Let the Buyer be aware

There is an implied condition on the part of seller that the
goods shall be fit for buyer’s purpose when the following
conditions are fulfilled;
◦ - Buyer has to inform the seller the purpose for which
the goods are required.
◦ - Buyer relies on the skill and judgement of the seller
◦ - The seller deals in the goods regularly
 Implied Conditions
Conditions as Merchantability – only in case of sale by description
Merchantability = If goods are purchased they should be capable of being
resold.

6. Conditions as to Merchantability ;

Merchantable quality = if goods are purchased for resale

they must be capable of being sold in the market under the name or
description by which they are sold.
- The sale must be by description
- The seller must be dealer of goods of that description
- The buyer has NOT been given an opportunity to examine
the goods or there is some latent defects.
Example
X brought coal (cooking) for Y a coal dealer. The Coal contained
explosive which exploded and injured X. It was held that coal was not
merchantable quality as it was not fit for cooking. X could claim damages.
 Implied Conditions
Conditions as to Wholesomeness – for eatables and provisions

7. Conditions as to Wholesomeness ;
The implied condition is that the goods should be wholesome
and fit for human consumption.
The goods are for eatable and provisions.

Example
The buyer brought milk and his wife consumed it and contracted
Typhiod and died. The milk was unfit and the buyer was entitled for damages.
 Implied Warranties

Warranty of Quite Possession – Implied warranty that Buyer to have

undisturbed possession

1. Warranty of Quite Possession ;

In a Contract of Sale – there is an implied warranty that the
Buyer shall have and enjoy a quite possession of the goods. It is an
assurance against defective title.
If warranty is broken, the Buyer can hold the seller liable and
claim damages
Example
B a lady purchased a second hand typewriter from A, after repairing
used it for some time.
The lady had to restore the typewriter as it was a stolen one.
She was entitled to recover the cost of the typewriter and the
repairs.
 Implied Warranties

Warranty of Freedom from Encumbrance or Charge – Implied warranty that

Goods sold are free from any encumbrance or charge.

2. Warranty of Freedom from Encumbrance or Charge ;

In a Contract of Sale – there is an implied warranty that the
Goods are free from any encumbrance or charge in favor of any third
party.
It will be a breach of the contract if the seller sells the goods
which are pledged and obtains delivery of goods from the pledgee
(under some pretense) before clearing the debts. Example
A is the owner of goods who has pledged the goods to a Bank B. He
obtains possession of the goods pledged without clearing the debt and sells
it to C.
C does not have any knowledge of the debt and the pledge when
entering into a contract. C discharges the debt of A.
C is entitled to recover the amount from A
 Implied Warranties
Warranty of Disclosing Dangerous Nature of Goods to an Ignorant Buyer –
Implied warranty that if ignorant buyer suffers on account of dangerous nature
of the goods, he is entitled for damages.

3. Warranty of Disclosing Dangerous Nature of Goods;

If ignorant buyer suffers injury because of non disclosure of
dangerous nature of goods known to seller before hand then
buyer can claim damages from the seller.
Example
B brought a tin from A which contained disinfectant powder
bleaching powder. A had to disclose that the tin had to opened with care if not
it would have fumes.
B’s wife opened the tin in the usual way and had an injury.
B could claim damages from A for non disclosure.
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