LESSON-2

CONDITIONS AND WARRANTIES

1
CONDITIONS AND WARRANTIES
Contracts for the sale of goods include either conditions or
warranties, sometimes both. They are not contractually obligatory. Parties,
on the other hand, frequently include them to explain what they anticipate of
one another. Conditions are regarded as more crucial conditions in the
contract's creation. Warranties are not as important. A condition must be
satisfied before proceeding with another action. A warranty, on the other
hand, is simply an assurance that the information provided by the customer
to the seller is accurate. A contract of sale cannot be performed unless all of
the conditions are met

No definition given in the SOG for conditions further it specify the

legal consequences of the breach of conditions as well as warranty .

2
P S Atiyah-The Sale of Goods (1982)

In his book "The Sale of Goods (1982)," Patrick Selim Atiyah recognises that the
usage of the word "collateral" in the definition of the warranty provides the
appearance that the term warranty is still outside of the contract, which it is. He
pointed out that this language, "lead warranty," is a term in a contract that isn't so
crucial that it gets to the heart of the matter. Hence, it becomes minor term to the
primary objective of the contract.

The above explanation shows that whether a term is a condition or a

warranty depends on the construction of the contract. Hence, as pointed out by
Atiyah, determining the terms, conditions, and warranties by the parties to the
contract would not be conclusive IN Sales of Goods Act in UK. It will depend on the
intention of the parties at the time of entering the contract. The said explanation
applies to the section 12(2) of SOG SL

3
However as per section 12(3) following two occasions the buyer compelled to treat
the breach of conditions by the seller as if it is breach of warranty and claim
damages only.

a. Where a contract of sale is not severable, and the buyer has

accepted the goods or part there of

b. where the contract is for specific goods, the property in which

has passed to the buyer

As per section 12(2)“ Whether a stipulation in a contract of sale is a condition, the

breach of which may give rise to a right to treat the contract as repudiated, or a
warranty, the breach of which may give rise to a claim for damages, but not to a
right to reject the goods and treat the contract as repudiated,…”

4
SGO SECTION 59(1) GIVES THE DEFINITION FOR WARRANTY;

“Warranty ” means an agreement with reference to goods which are the

subject of a contract of sale, but collateral to the main purpose of such
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.

5
WARRANTIES

There are two types of warranties, namely

(1) Express Warranties, and
(2) Implied Warranties

Express Warranties

This a warranty which has been expressly agreed upon by both the parties at the time
of contract of sale. It is open to both parties to include in their contract any number
of express warranties.

Implied Warranties

Implied warranties is a warranty which the law implies into the contract of sale.In
other words, it is the stipulation which has not been included in the contract of sale in
express words, but the law presumes that the parties have incorporated it into their
contract.The implied warranties are read into every contract of sale unless they are
expressly excluded by the express agreement of the parties.
6
HARRISON V. KNOWLES AND FOSTER, (1917) 2 KB 606

For instance, in Harrison v Knowles and Foster, the plaintiffs bought two
small ships from the defendant that the dead weight capacity of each ship
was 460 tons. The capacity was, in fact, only 360 tons. The court held that
the capacity of ships was a warranty so the plaintiff can sue for that. It
was held that the representation about the capacity of the ships was not a
condition but a warranty only, and therefore A could not reject the ships.

7
TYPES OF CONDITIONS

The two types of conditions are

(1) Express conditions, and
(2) Implied Conditions.
Express conditions
Express conditions is a condition, which has been expressly agreed upon by both the
parties at the time of the contract of sale.It is open to both the parties to include in
their contract any number of express conditions.
Implied Conditions.
It is a condition which the law implies into the contract of sale.
In other words, it is the stipulation which has been included in the contract of sale
in express words. But the law presumes that the parties have been incorporated it
into their contract. The implied conditions are read into every contract of sale
unless they are expressly excluded by the parties.
8
IMPLIED CONDITIONS AND WARRANTIES
IED CONDITIONS AND WARRANTIES

When a buyer specifies (verbally or in writing) that he needs the goods by

a certain date throughout the contracting process, the buyer has implied
that the date is a condition of the contract. On the other hand, if a buyer
agrees to purchase a red saree for her wedding, which will take place on a
date specified by the seller, the time is an implied condition of the
contract.
Even if the buyer doesn’t mention the date of delivery (but has mentioned
the date of the wedding or occasion), it is implied on the part of the seller
that the garment is to be delivered before the mentioned date of the
wedding.In this situation, the seller is required to supply the item before
the wedding day because if it is delivered after the wedding date, the item
would be useless to the buyer and they can refuse to accept it since the
contract's condition has not been met.
9
 IMPLIED CONDITIONS AND WARRANTIES

Through the operation of sections 13, 14, 15, and 16 of the Sale of
Goods Ordinance, no: 11 of 1896, a number of conditions and
warranties are implied in a contract of sale. These range from sale
by Title, description, fitness for the purpose, merchantable quality,
and sale by sample.

10
1. IMPLIED CONDITIONS AS TO TITLE - SECTION 13

There is an implied condition that the seller has the right to sell the goods
(seller has a valid title to the goods) [Section 13(a)], that is In the case of
agreement to sell he will have the right to sell at the time of property is pass.

In the English case of Rowland vs. Divall (1923) 2 KB 500, Rowland

bought a motor-car from Divall and used it for four months. Divall had no
title to the car, and consequently Rowland had to surrender it to the true
owner. Rowland sued to recover the total purchase money he had paid to
Divall. The Court held that Rowland was entitled to recover in full,
notwithstanding that he had used the car for four months.

11
IMPLIED WARRANTIES - SECTION 13

As per section 13(b)There is an implied warranty that the buyer to have

and enjoy quiet possession of the goods.

As per section 13(c) There is an implied warranty that the goods shall be
free from any charge or encumbarancess (hindarances) in favour of third
party.

12
2. IMPLIED CONDITIONS RELATING TO SALE BY DESCRIPTION -
SECTION 14:

Where there is a sale of goods by description, the goods sold must

correspond with the description. Where there is a sale of goods by showing a
sample as well as by description, the goods sold must correspond both with
the sample and the description. Goods are sold by description when they are
described in the contract and the buyer contracts in reliance of that
description.

13
MOORE & CO V. LANDANER & CO (1912)

The English case of Moore & Co v. Landaner & Co (1912) 2 KB 519

illustrated this rule. In this case, M sold L 3,100 cases of Australian
canned fruits and the cases were to contain thirty tins each. M delivered
the total quantity, but about half the cases contained twenty-four tins and
the remainder thirty tins. L rejected the goods. There was no difference in
market value between goods packed as twenty-four tins and goods
packed as thirty tins to the case. The Court, however, upheld the buyer’s
right to reject the whole consignment because the goods delivered did not
correspond with the description of those ordered.

14
BEALE vs. TAYLOR [1967]
In the case Beale v. Taylor [1967] 1 WLR 1193; [1967] 3 All ER
253, A private seller (Taylor) posted a 1961 Triumph Herald for sale. The
advertising stated, "White, 1961 Herald Convertible..." The claimant
(Beale) inspected and examined the vehicle. A "1200" disc was also
discovered on the back of the car. The claimant assumed the automobile
was a 1961 model and purchased it. The automobile was subsequently
determined to be an amalgamation of two Triumph Heralds, the front and
back of which had been put together. The 1961 model accounted for only
half of the car. The car was discovered to be made up of the back half of a
1961 model, i.e., the Triumph Herald 1200 attached to the front half of an
earlier model (Triumph Herald 948). Additionally, it was discovered that
the car was unsafe and un roadworthy. Beale filed a lawsuit to claim
damages for his loss. The Court decided that the vendor was liable because
the vehicle did not correspond to the description.

15
3. IMPLIED CONDITIONS AS TO QUALITY OR FITNESS – SECTION
15:

A general norm about the quality or fitness of an item is that each

buyer must satisfy himself with the quality or fitness of the goods he is
purchasing. If he decides to buy something, he must check it to ensure that it
is of high quality. The buyer has a choice. If he agrees to buy, he must check
the products to ensure that he is purchasing high-quality goods. This is
shown by the Latin maxim caveat emptor, which has become a legal
obligation and meaning "the buyer must be aware.“

However, exception to the rule exists in section 15

16
 reasonably fit for that purpose

a. Section 15(1) – When the buyer, expressly or by implication, makes

known to the seller the particular purpose for which the goods are required,
so as to show that the buyer relies on the seller’s skill and judgment, and the
goods are of a description which it is in the course of the seller’s business to
supply, then the goods sold must be reasonably fit for that purpose. The
purpose for which the goods are required need not, however, be expressly
made known to the seller if it can be readily gathered from a description of
the goods.

The goods are of a description was explained in the case of Jayasena v.

Colombo Electric Tramways (1945} 46 NLR
This exception applies only to goods supplied by the seller in the course of a
business, and it excludes private sales

17
FROST v. AYLESBURY DAIRY CO LTD [1905] 1 KB 608

This scenario articulated in the case Frost v Aylesbury Dairy Co Ltd [1905]
1 KB 608, A a milk dealer, supplied F with milk which was consumed by
F and his family. The milk contained germs of typhoid fever and F’s wife
was infected thereby and died. The court held that the purpose for which
the milk was supplied was sufficiently made known to A by its
description, and as the milk was not reasonably fit for human
consumption, A had committed a breach of the condition of selling the
milk and was therefore liable in damages to F for the loss he had
suffered.

18
 GRANT v. AUSTRALIAN KNITTING MILLS
[1935]

Pl study the case, Grant v Australian Knitting Mills [1935] UKPC 62, [1936]
AC 85; [1935] UKPCHCA 1, (1935) 54 CLR 49 (21 October 1935), Privy
Council (on appeal from Australia).

In this case, woolen underwear purchased from a retailer contained an

excess of Sulphite. The user of the underwear contracted a skin ailment after
he wore them. It was held that he was entitled to damages because there was
a breach of an implied condition that the garments were reasonably fit for
use.

19
 Merchantable quality

b. As per section 15(2) The next exception for the rule is that thereis no
warranty or condition as to quality or fitness. However, when goods are
bought by description from a seller who deals in goods of that description
(whether he be a manufacturer or not), the goods must be of a merchantable
quality. However, if the buyer has examined the goods, there will be no
implied condition as regards defects which such examination ought to have
revealed.

Goods are not of merchantable quality if in the state in which they are sold,
i. They have defects unfitting them for their ordinary use or
ii. Their condition is such that no one, with knowledge of their true
condition, would have taken them but rather rejected them.

In such cases they are not merchantable.

20
MERCHANTABLE QUALITY OF GOODS

There is actually no definition of merchantable quality under the

SOG. This means that when considering whether or not goods are
merchantable, considerations are subjective. A combination of description,
purpose, condition, and price are likely to be considered when determining
merchantability.

Merchantability expect that the goods shall be free from latent defects, that
is, the defects which are not discoverable on reasonable examination of the
sample. When the goods delivered are defective, the buyer can reject the
goods if the defect was not discoverable by reasonable examination of the
sample.

21
FIT FOR THE PURPOSE’

In the English case of Wren v Holt (1703) 1 KB 610, a customer went to a

restaurant and ordered some beer to drink. The beer given to him had been
contaminated with arsenic and because of this the customer fell ill. He sued
the owner of the restaurant for having supplied goods (beer) that was not ‘fit
for the purpose’ and was also ‘not merchantable’ condition. The court
agreed and awarded him damages.

In the case Grant v. Australian Knitting Mills [1935], Lord Wright expresses
that merchantability does not simply mean that a product can be sold in the
market if the appearance is okay.

22
CONDITION

In the case David Jones v. Willis (1934), 52 CLR 110, the plaintiff purchased
a pair of shoes from the defendant. The defendant is the retailer and
distributor of the shoes but not the manufacturer. However, when the
plaintiff wore the shoes to walk down the stairs on the third occasion, the
heel came off. This caused the plaintiff to fall over and be injured. She tried
to sue for damages from the defendant. The court held that there was a
breach of the conditions whereby the shoes were in an unmerchantable
condition and didn’t fit for the purpose as per Section 16(1)(b).

23
 GEORGE WILLS & CO. LTD. V. DAVIDS PTY LTD. (1957)

In the case of George Wills & Co. Ltd. v. Davids Pty Ltd. (1957) 98 CLR 77, Davids
Pty Ltd., a wholesale grocer, purchased 360 cases of beetroot canned in vinegar from
George Wills. Davids intended to resell the beetroot as a retail product. However,
only about a third of the cans were resold within a year. Later, it was found that the
remaining cans had swollen and started to leak. The cans were condemned as unfit
for human consumption. Davids sued George Wills for breach of contract, alleging
that the canned beetroot should have had a longer shelf life and that, having gone bad
after a year, the canned beetroot was not of merchantable quality. The court found
that beetroot canned in vinegar has a normal shelf life of 12 months. The tins of
beetroot supplied to Davids had a normal shelf life for this product, and the court
found that they were of merchantable quality.

24
HENRY KENDALL & SONS V WILLIAM LILLICO AND SONS LTD.
(1969

A good case that provides a description of merchantable quality is Henry Kendall &
Sons v William Lillico and Sons Ltd. (1969) A bought poultry feed from B. When the
feed was used, it killed A’s young birds. However, it was discovered that the feed was
fit for older birds. It was held that the feed was of merchantable quality as it was fit
for other purposes, for example, for older birds and other animals. However, A could
recover damages on the ground that the feed was not fit for his purpose.
In this case, it was said that merchantable quality simply means commercially
saleable. Therefore, not merchantable means goods that are of no use for any purpose
for which they are bought. So, if goods can be used for several purposes, then they
are merchantable if they are suitable for any of those.
As Atiya pointed out that good should remain merchantable for a reasonable length
of time according to the nature of goods and the terms of the contract.

25
PRICE

The description of merchantable quality given in Henry Kendall &

Sons v. William Lillico and Sons Ltd. (1969) includes price. In this case, the
court held that the price paid by the buyer is an important consideration in
determining merchantable quality. In the case of BS Brown & Sons Ltd. v.
Craiks Ltd. (1970), In 1 All ER 823, it was held that goods remain
merchantable if they are sold at a price that is lower than the contract price.

26
DESCRIPTION

THORNETT AND FEHR V BEERS & SON [1919] 1 KB 486,

In Thornett v. Beers & Son (1919), 1 KB 486, B went to T’s warehouse to buy some
glue. The glue was stored in barrels, and every facility was given to B for inspection.
B did not have any of the barrels opened but only looked at the description outside.
He then purchased the glue, but later found that it was defective. The court held that
B could not complain of the defect or breach of merchantable quality because he had
all the time and opportunity to inspect the Correspondence With Description and test
the glue but had chosen not to do so. In such a case, the buyer cannot later complain
that the goods were bad and not what he wanted.

Further study English case Moore & Co v Landaner & Co (1912) 2 KB 519

27
4. SALE OF GOODS BY SAMPLE AND RELATED IMPLIED
CONDITIONS - SECTION 16

Section 16 of the statute deals with sale of goods by sample. The following three rules
will apply where the sale is by sample as per section 16(2).

1. The bulk sold must correspond in quality with the sample shown to
the buyer.

2. The seller must give the buyer a reasonable opportunity to compare

the bulk with the sample.

3. The bulk of the goods supplied must be of merchantable quality

because an inspection of the sample may not reveal any defects.(free from any
defects rendering unmerchantable at the time of examination)

28
 DRUMMOND vs. VAN INGEN [1887]
In the case of Drummond vs. Van Ingen [1887] UKHL J0401-1– A sample of cloth was
approved by the buyer. The seller knew that the buyer was intending to re-sell the
cloth to several tailors as material for tailoring work. The bulk was duly delivered
but were unmerchantable for tailoring purposes. The bulk was of the same quality as
the sample. However, it was held that the defects in this situation could not have been
discovered by inspection of the sample and the buyer was not liable to pay for the
bulk.

In cases like Kearley & Tonge v. Peter (1922), the merchantability of the goods
was assessed based on the evidence provided by a surveyor. This kind of
subjective approach can produce unfairness and result in inconsistent decisions
since the Ordinance fails to provide a clear test or guidelines to be referred to by
the judges when assessing the ‘merchantable quality’.

29
MERCHANTABILITY: At a Glance

Merchantable” is equivalent to “marketable” or “sellable.” Goods are

merchantable when they are of reasonable quality within expected variations
and are fit for sale in usual course of trade, at usual selling price.
Merchantable goods need not be outstanding or superior quality, they need
only be fit for the ordinary purpose for which they are used.

30
MERCHANTABILITY contd…

There exists an implied warranty of merchantability for all items sold,

unless there is some sort of disclaimer with language stipulating the
item is being sold “as is” or “with all faults.” This is not to be confused
with the similar but distinct implied warranty of fitness, which exists to
ensure that an item requested for a particular purpose by a buyer and
supplied by the seller is usable for that purpose. A term merchantable
implied by various statutes to the general effect that the goods are fit for
the purpose for which goods of that kind are commonly bought, taking
into account their description and price.

31
MERCHANTABILITY contd…

However, it should be clear that merchantable quality means more than

mere suitability for sale – it includes condition or quality, defined in
terms of fitness for the usual purpose of the goods, and other relevant
circumstances. Further, Merchantable quality is one of the most
fundamental consumer rights, but it may be excluded by contract or if
the goods were examined by the buyer.

32
MERCHANTABILITY contd…

The phrase ‘merchantable quality’ was included in the SGA of the UK in 1979. In
1987, the UK Law Commission Report on Sale and Supply of Goods suggested a
revision of the phrase, stating that the phrase ‘merchantable quality’ reflects the
trade practises of the 19th century. Later, it was altered, and the phrase
’satisfactory quality" Currently, S. 14 (2) of the SGA of 1979 specifies that
"where the seller sells goods in the course of a business, there is an implied term
that the goods supplied under the contract are of satisfactory quality."
Merchantable quality is also regulated by Article 35 of the Vienna Convention on
the International Sale of Goods (1980).
The SGO of 1896, contrary to the SGA of 1979, still remains static without any
reforms even after a century and two decades since its enactment.

33
PLEASE REFER FOLLOWING MATERIALS

Atiyah, P. S., Adams, J., & MacQueen, H. (2010). Atiyah’s Sale of Goods (12th
Edition). Pearson.
THE SALE OF GOODS LAW OF SRI LANKA by Lakshman Marasinghe

Mercantile credit Ltd v Sirimawathie,1 SLR 346 (1996).

Shell gas v Consumers affairs authority, 2 Sri L.R 212 (2007).

34
35