In order to complete this doctrinal project different literary sources were taken into consideration that comprises of scholarly articles, journals, books, research papers, Court judgements. Along with that some blogs and websites were referred in order to do this project. Some of the prominent sources which were referred are as follows:
- Mulla The Sale of Goods Act & The Indian Partnership Act, 11th edition– This book provides a comprehensive and detailed analysis of the Sale of Goods Act and the Indian Partnership Act. The book covers all the important topics related to these two acts, such as formation of contracts, performance of contracts, rights and obligations of buyers and sellers, dissolution of partnerships, and distribution of assets. The author has also included case law and judicial decisions to support the arguments and interpretations presented in the book.
- Benjamins sale of goods act, 8th edition– This Book provides an in-depth analysis of the concept of conditions and warranties in the Sale of Goods Act 1979. It includes all the updates on recent case law and legislative changes.
- Article titled as ‘Concept of codition and warranty under sale of goods act’– This article was published on ipleaders.com and provides a comprehensive review of the legal concepts of conditions and warranties under the Sale of Goods Act 1930 in India. The article explains the difference between conditions and warranties, and discusses the various tests and factors that are used to determine whether a term is a condition or a warranty.
- Article titled as ‘Difference between Condition and Warranty’– This article was published on legalpathshala.com and it provides an in-depth analysis of the legal concepts of condition and warranty in the context of the Sale of Goods Act. The article explains the difference between the two concepts, highlighting the legal significance of each and the implications of a breach of either.
STATEMENT OF PROBLEM
Conditions and Warranties both the concepts are very ambiguous in nature. It is“important for both buyers and sellers to understand the difference between conditions and warranties and to be aware of the various implied conditions and warranties that apply to the sale of goods.”
Both the parties in a contract of sale must have certainty about condition and warranties. Lack of clarity can be challenging for parties to negotiate contracts and resolve disputes in a straightforward manner
The objectives of study for this project are:
- To understand the concept of condition and warranty
- To understand different types of condition and warranty.
- To understand basic difference between condition and warranty.
- To understand when condition is warranty.
This project aims to answer the following questions
- What are conditions and warranties?
- What are the different types of condition and warranty?
- Difference between condition and warranty?
- When a condition is considered as warranty?
This project has been made using the doctrinal method of research. Various primary sources such as statutes and judgments as well as secondary sources like legal textbooks, journal articles, commentary articles and case digests were accessed to make this project. The information thus collected was thoroughly studied and critically analyzed.
The concepts of “Condition” and “Warranty” are defined in the contract of sale to establish the remedies that either party can seek in the event of a breach by either party.
The concepts of “Condition” and “Warranty” are crucial in commercial transactions and have far-reaching consequences for both buyers and sellers. These terms refer to the commitments made by sellers with regard to the excellence and functionality of the items they sell, and they have a crucial role in deciding the legal rights and obligations of the parties engaged in the transaction.
A “Condition” is an element of a contract of sale that pertains to the attributes, performance, or quality of the products being sold. It is a crucial component of the contract, and if it is not fulfilled, the buyer may have the right to decline the goods and end the contract. For example, if a purchaser buys a car with a condition that it must be safe for road use, and the car is discovered to have a significant mechanical defect that renders it dangerous to operate, the buyer may be allowed to reject the vehicle and pursue compensation from the seller.
A “Warranty” is another component of a sales contract that concerns the assurances made by the seller regarding the standard, performance, or traits of the products being sold. Unlike a condition, a warranty is not regarded as an essential element of the contract, and a violation of the warranty does not give the buyer the right to decline the goods or terminate the contract. Instead, the buyer may have the option to claim damages from the seller. For example, if a buyer purchases a television with a two-year warranty, and the television stops working after only one year, the buyer may have the right to seek redress from the seller.
The differentiation between conditions and warranties carries significant importance as it decides the legal remedies available to the parties in case of a breach. If a condition is violated, the buyer can refuse the goods and end the contract. On the other hand, a breach of warranty only permits the buyer to claim compensation. Hence, it is imperative for both buyers and sellers to comprehend the distinction between conditions and warranties when engaging in a contract of sale.
The term condition is described under section 12(2) of the sale of goods act 1930 as “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”. A condition is the foundation of the entire contract and essential to carrying it out. The aggrieved party has the right to treat the contract as repudiated if the conditions are broken. In other words, the buyer has the choice to revoke the contract or refuse to take the items if the seller doesn’t comply with a requirement. The buyer can file a claim to recover the price or can claim damages for the breach of contract if he has already paid the price to the seller. For instance, X is interested in buying a car from Y that has a top speed of 150 km/h. The Car is suitable for you Y said. Based on this X buys the Car. Eventually, Y discovers that the Car’s top speed is only 100 km/h. This is a breach of condition as the requirement of the buyer is not fulfilled.
Condition can be classified into two types. First, expressed conditions which are decided by the parties themselves and second Implied conditions which are annexed by law.
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Implied condition is of the following type
- – This means that the seller has the authority to sell the products only if he is the actual owner, has legal possession of the goods, or acts as the title holder’s agent. It is a violation of the condition if the seller sells the item to the buyer without actually owning it.
Property in goods remains with the owner and it is returned to him even if it is sold by a person who has defected title
CASE- Rowland Vs Divall[1]
There was a sale of a second hand motor car between the parties where after six months of use buyer found that the car was stolen it was decided by the court that the property must be returned to the actual owner .
- – There is an implied condition in the contract of sale that the goods must match the description. The buyer has the choice of accepting or rejecting goods that do not match the product description.
CASE- Wallis vs Pratt[2]
There was a sale by sample of seeds described as common englishsainfoin seed under the contract. The seller gave no warranty expressed or implied as to grow description or there matter neither the sample nor the bulk was common English sainfoin. But it was giant English sainfoin which was discovered after the seed were sown and grown a crop. The buyer in this was allowed to recover the damages for the breach of condition.
Shepherd vs Kane[3]
In this case a ship was sold with the description of a “copper fastened vessel” without any allowance for defects. However, it was later discovered that the ship was only partially copper fastened. The court ruled that the buyer had the right to reject the goods because they did not meet the described specifications. In simpler terms, the ship was sold as fully copper fastened but was only partially so, and the buyer had the right to reject it as it did not match the description provided.
- – In a contract when there is a sale by sample there is an implied condition by the seller that the bulk shall correspond with the sample .
The goods must be of merchantable quality and the buyer must have the reasonable opportunity to examine goods.[4] If the buyer is not given the opportunity to inspect the goods before purchasing, he has the right to reject the goods.
CASE- Lorymer vs Smith [5]
A agreed to sell two parcels of wheat by sample, one parcel containing 700 bushels and the other containing 1,400 bushels. The buyer was permitted to inspect the smaller parcel but was denied inspection of the larger parcel by the seller. The court ruled that the buyer had the right to reject all of the wheat, as he has not given the opportunity to inspect the entire amount that was being sold.
A warranty is an additional provision in a contract, which is not directly related to the essential purpose of the contract. If there is a breach of warranty, the affected party does not have the right to repudiate the contract entirely. Unlike a condition, a breach of warranty does not give the buyer the right to terminate the contract or refuse to take delivery of the goods. Instead, the buyer can only seek compensation for the losses suffered due to the breach of warranty. In simpler terms, a warranty is an ancillary term in a contract, and a breach of it only entitles the aggrieved party to claim damages, whereas the essential terms or conditions of a contract are fundamental elements, and their breach can lead to the repudiation of the contract.
Expressed Warranty– When parties to a contract agree on warranties and include them in the contract, they are referred to as expressed warranties. These are explicit statements that detail the quality, performance, or characteristics of the goods being sold. Expressed warranties can be in writing or verbal, as long as they are included in the terms of the contract. The inclusion of expressed warranties in a contract can provide assurances to the buyer and build trust between the parties. If there is a breach of an expressed warranty, the buyer can seek compensation for any losses suffered due to the breach.
Implied Warranty– Implied warranties are warranties that are assumed to be included in the contract of sale, even though they are not specifically stated. These warranties are automatically implied by law, and they provide certain guarantees to the buyer regarding the quality, performance, and fitness for purpose of the goods being sold.
Section 14(2) outlines an implied warranty that the buyer has the right to enjoy uninterrupted possession of the goods purchased. This means that if the buyer is later disturbed or prevented from possessing the goods, they have the right to take legal action against the seller for breaching this warranty. In simpler terms, the buyer has the right to possess the goods without any interference or disturbance, and if this right is violated, the seller is responsible for any resulting damages.
Case- Niblett vs Confectioners Material[6]
In Niblett v Confectioners Material, the plaintiff purchased 1,000 tins of condensed milk from the defendant which had a label of ‘Nissly’. Nestle informed the plaintiff that they would take legal action to prevent the sale of these tins as the label was too similar to their own label for condensed milk. As a result, the plaintiff agreed not to sell the tins and brought a legal action against the sellers. The court ruled that the sellers did not have the legal right to sell the goods and, therefore, the plaintiff was entitled to cancel the contract
Singh vs Saggar[7]
The seller sold a property that was already leased to someone else, without informing the buyer. The buyer took possession of the property, but the leaseholder later sued the buyer for possession. The court ruled that the buyer had the right to sue the seller for breaking the warranty of undisturbed possession. This means that the seller guaranteed that the buyer would be able to possess the property without any interference, and the buyer could seek compensation for any loss suffered as a result of this breach.
Warranty as to freedom from Encumbrances
According to Section 14(3) of some relevant law or regulation, there is an implicit warranty that the goods being sold will not have any outstanding charges or encumbrances in favor of a third party that the buyer is unaware of. However, if it can be proven that the buyer was aware of this fact at the time of entering into the contract, they will not be entitled to make any claims based on this warranty. Essentially, the seller is responsible for ensuring that the goods are free from any unknown charges or encumbrances, but if the buyer knew about them, they cannot hold the seller responsible for any resulting issues.
Evans vs Edmonds[8]
The purchaser of a house discovered that the property was already subject to a mortgage that the seller had not disclosed. The court found that the seller had breached the warranty of freedom from encumbrances, and the buyer was entitled to damages for any loss suffered as a result of this breach. Essentially, the seller had a responsibility to inform the buyer of any encumbrances on the property, and failing to do so constituted a breach of warranty.
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962)[9]
This case established the principle of conditions and warranties in contracts. This principle defines a warranty as a term in a contract that is not critical to the contract’s performance. In case of a breach of warranty, the buyer is entitled to seek damages, but they cannot terminate the contract. This principle is not directly related to the warranty of freedom from encumbrances, but it has broader implications for the legal treatment of warranties in contracts.
Implied warranty to disclose Dangerous nature of the goods sold
The seller has a responsibility to disclose any potential danger associated with the goods they are selling, especially if the goods are inherently or likely to be dangerous. If the seller fails to inform the buyer of such risks, it constitutes a breach of warranty, and the seller will be held accountable for any resulting harm. Ultimately, it is the seller’s responsibility to provide the buyer with full and accurate information about the potential hazards of the goods they are purchasing.
Henningsen vs Bloomfield Motors, Inc[10]
In this case a car manufacturer was found liable for injuries suffered by a consumer due to a defect in the car’s steering mechanism. The court ruled that the manufacturer had violated the implied warranty of merchantability by not disclosing the danger associated with the defective steering mechanism. As a result, the court held the manufacturer responsible for the harm caused to the consumer. This case set an important precedent for manufacturers to disclose any known dangers associated with their products, as part of their obligation to ensure that their products are fit for use.
In contract law, a condition“is a term of a contract that is fundamental to the agreement between the parties. A warranty, on the other hand, is a term of a contract that is less essential than a condition but is still an important part of the agreement. A warranty may be breached if it is not performed to the agreed-upon standard, but the breach will not necessarily give rise to a right to terminate the contract.”
In the sale of goods context, “conditions can be considered as warranties when they are included in the contract and are intended to form part of the basis of the bargain. This means that the parties to the contract have agreed that certain conditions must be met in order for the contract to be performed. If those conditions are not met, the contract may be terminated.”
For example, if a buyer purchases a car from a seller and the contract specifies that the car must be in good working condition, this may be considered a condition of the contract. If the car is delivered but does not work properly, the buyer may have the right to terminate the contract and seek damages.
In summary, conditions can be considered as warranties in the sale of goods context when they are essential terms of the contract and form the basis of the agreement between the parties. If a condition is breached, the non-breaching party may have the right to terminate the contract and seek damages.
Conditions and warranties are crucial terms in contracts that determine the rights and obligations of the parties involved. Although they are both significant, they differ in several ways. Conditions and warranties have distinct roles in contracts, and understanding these differences is crucial for the parties involved in the contract.
Conditions are fundamental terms in a contract, while warranties are secondary terms. Thus, conditions have a more significant impact on the contract than warranties. If a condition is breached, the non-breaching party has the right to terminate the contract and claim damages. In contrast, if a warranty is breached, the non-breaching party can only claim damages, but cannot terminate the contract.
Another “important difference between conditions and warranties is the time of their effect. Conditions are effective from the time the contract is formed, while warranties become effective only after the contract is formed.”
The remedies available to the non-breaching party also differ depending on whether a condition or a warranty has been breached. In case of a breach of a condition, the non-breaching party has the option to terminate the contract or continue with it and claim damages. However, in case of a breach of a warranty, the non-breaching party can only claim damages but is not entitled to terminate the contract.
Moreover, there is a difference in the impact of a breach of condition and a breach of warranty on the buyer’s entitlement. If there is a breach of condition, the buyer can reject the goods and recover the purchase price. However, in case of a breach of warranty, the buyer can only recover the difference between the actual value of the goods and their value if they had been as warranted.
To conclude, while conditions and warranties are significant terms in contracts, they vary in their significance, when they take effect, the nature of their promises, the remedies available to the non-breaching party, and their impact on the price. Knowledge of these distinctions is crucial for creating and interpreting contracts and resolving any conflicts that may emerge between the contracting parties.
In this doctrinal project we tried to understand the meaning of conditions and warranty and what are its different types. We have also analysed the difference between conditions and warranties in contract law, especially in relation to the sale of goods. Conditions are indispensable terms that are mandatory for the contract to be fulfilled, while warranties are less significant but still have a significant impact on the agreement. Violating a condition may permit the party affected to terminate the contract and seek compensation, whereas violating a warranty may only give rise to a claim for damages. Therefore, it is important to make it clear which provisions of the contract are conditions and which are warranties to ensure that both parties comprehend their responsibilities and the potential repercussions of breaching the contract.
Books
Websites
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[1][1923] 2 KB 500.
[2][1911] UKHL 620.
[3][1821]5b&Ald.240.
[4]Godley v Perry, (1960) 1 All ER 36 : [1960] 1 WLR 9.
[5][1976] AC 18.
[6][1921]AII ER Rep 459.
[7][2015] UKSC 50.
[8][1973] AC 153.
[9][1962] 2 QB 26.
[10]32 NJ 358, 161 A2d 69 (1960).
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