CONDITIONS & WARRANTIES

Conditions & Warranties

Sec.11- Sec.17

Definitions Sec. 12

Implied (Sec. 14-17) When condition is to be treated Doctrine

as warranty of
Sec. 13 Caveat Emptor
Sec. 16

Implied conditions Implied Warranties

Sec. 14(a), 15, 16, 17 Sec. 14(b) & (c), 11
 Sec. 12 - Definition
12. Condition and warranty.—
(1) A stipulation in a contract of sale with reference to goods which
are the subject thereof may be a condition or a warranty.
(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.
(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 to a right to reject the goods and treat the contract as
repudiated.
(4) Whether a stipulation in a contract of sale is a condition or a
warranty depends in each case on the construction of the contract.
A stipulation may be a condition, though called a warranty in the
contract.
Condition – These are terms and stipulations
which are so basic to the contract that their
breach may seem to be a breach of contract as
a whole. Their breach entitles the innocent
party to repudiate the contract.

Warranty- A term which is not of such vital

importance. Its breach does not lead to
repudiation, but only to damages for breach.
The terminology used by the parties is
irrelevant. Court may assess the relative
importance of the stipulation in dispute in the
light of all the circumstances including the
intention of the parties.
Stipulation means- a requirement which is specified.
Examples-
1) A wants to purchase a horse for horse race. Seller informs A that
the horse can run upto a speed of 50 Km/h. This stipulation forms
the very basis of contract of sell. It is called a condition.
2) Seller says – the horse is quiet and calm. But after purchase, it
turns out that the horse is vicious. This is breach of warranty.

3) A asks to B sell his watch. B says – I assure that the watch is in

excellent condition. This requirement is called warranty. It is a
stipulation which is collateral or additional and subordinate to the
main objective of sale.
 Baldry v. Marshall (1925)
A car is purchased specially for purpose of tours
for longer distances. Car turns out to be unfit
for touring.
Held- suitability of car for touring purposes was
a condition.
 Harrison v. Foster (1917)
P purchased two small ships from D. D said each
had capacity of 460 tonnes. But P later found
it had lesser capacity. Held- it was a breach of
warranty & not a breach of condition.
IMPLIED CONDITIONS- Sec. 14(a), 15, 16 & 17
Sec. 14(a)- In sale, seller has a right to sell the
goods.
In agreement to sell, the seller will have right to
sell the goods when property is to be passed.
Sec. 15- Sale by description
- Goods should correspond to the description
- Bulk should correspond with the sample &
description
Sale by description
- When goods are described eg. Kashmiri
apples, Nagpur oranges
- Goods should correspond to the description
- Bulk should correspond with the sample &
description
Sale by sample- Sec.17-
(1) A contract of sale is a contract for sale by sample where there is a
term in the contract, express or implied, to that effect.
(2) In the case of a contract for sale by sample there is an implied
condition—
(a) that the bulk shall correspond with the sample in quality;
(b) that the buyer shall have a reasonable opportunity of comparing
the bulk with the sample;
(c) that the goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on reasonable
examination of the sample.
*Merchantable quality means- goods are fit for the purpose for which
they have been purchased.
Mody v Gregson 1868
Sale of brandy by sample. Brandy was coloured
with a dye.
Though bulk corresponded with sample, buyer
can reject the goods.
 Implied warranties
• Sec. 14 (b)- an implied warranty that the buyer shall have and enjoy quiet
possession of the goods;
• Sec. 14(c)-an implied warranty that the goods shall be free from any
charge or encumbrance in favour of any third party not declared or known
to the buyer before or at the time when the contract is made.
Eg. A pledges his car with C for a loan of 2 Lakh and promises to give its
possession next day. A, sells them to B, who purchases them in good faith.
B may ask A to either clear the loan or he himself may pay the money and
then file a suit against A for recovery of money with interest.
Sec. 11- Stipulations as to time.—Unless a different intention appears from
the terms of the contract, stipulations as to time of payment arc not
deemed to be of the essence of a contract of sale. Whether any other
Stipulation as to time is of the essence of the contract or not depends on
the terms of the contract.
When condition is treated as warranty
Sec. 13- Buyer has the option to treat condition as
warranty-
- When condition is breached- buyer may waive it
or can treat the breach of condition as a breach
of warranty and elect to repudiate the contract.
- If buyer has accepted the goods, breach of
condition will be treated as breach of warranty
and gods can’t be rejected and contract can’t be
repudiated.
- Conditions and warranties not fulfilled by reason
of impossibility will not get affected.
 DOCTRINE OF CAVEAT EMPTOR
Sec. -16
Meaning- Let the buyer beware
- It is for the buyer to satisfy himself that the goods which he is
purchasing are of the quality which he requires, or if he is
buying them for a specific purpose, that they fit for that
purpose. It is based on the presumption that the buyer is
relying on his own skill and judgment, when he purchases
something.
- Rule under Sec. 16 SOGA- There is no implied warranty or
condition as to the quality or fitness for any particular
purpose of goods supplied under a contract of sale.
- Means seller is not bound by law to supply goods which are fit
for any particular purpose or possess any particular quality
- When goods are in existence at the time of
contract and buyer has the opportunity of
inspecting them, it is presumed he is acting on
his own judgment and could not afterwards
hold the seller responsible if the article turned
out to be unfit for his article turned out to be
unfit for his purpose or not of merchantable
quality.
 Common law exceptions to Caveat
Emptor
1. When buyer trusts the judgment or skill of
manufacturer/ dealer that goods will be reasonably fit
for the purpose. Here buyer trusts upon seller’s
judgment and not upon his own.
2. Where manufacturer supplied goods, buyer doesn’t
have the opportunity of inspecting it, it is implied that
seller will supply a merchantable good. Here, even if
the defect is latent, seller’s duty is absolute. It does
not depend upon any question of negligence, nor is it
limited to making good such defects as are discovered
by care and skill.
 Wallice V Russell 1902
Plaintiff went to purchase crabs. He had all
opportunities to examine them. Seller
believed that crabs were fresh. Plaintiff
purchased and consumed them and fell sick.

Held- Seller is not liable. It is upto the buyer to

check the fitness and quality of goods.
 16. Implied conditions as to quality or fitness.—
Subject to the provisions of this Act and of any
other law for the time being in force, there is no implied warranty or
condition as to the quality or fitness for any particular purpose of goods
supplied under a contract of sale, except as follows:—

(1) Where 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 or judgment, and the goods are of
a description which it is in the course of the seller’s business to supply
(whether he is the manufacturer or producer or not), there is an implied
condition that the goods shall be reasonably fit for such purpose:

Provided that, in the case of a contract for the sale of a specified article under
its patent or other trade name, there is no implied condition as to its
fitness for any particular purpose.
2) Where goods are bought by description from a seller who deals in
goods of that description (whether he is the manufacturer or
producer or not), there is an implied condition that the goods shall
be of merchantable quality:
Provided that, if the buyer has examined the goods, there shall be no
implied condition as regards defects which such examination ought
to have revealed.

(3) An implied warranty or condition as to quality or fitness for a

particular purpose may be annexed by the usage of trade.

(4) An express warranty or condition does not negative a warranty or

condition implied by this Act unless inconsistent therewith.
 Exceptions to Caveat Emptor U/s. 16
1. When buyer makes known to the seller the
particular purpose for which gods are
required such that buyer relies on seller’s skill
or judgment and goods are of a description
which it is in seller’s business to supply.
There is an implied condition that goods shall be
reasonably fit for such purpose.
Exception- Contract for sale of specific article
under its patent/trademark
 Grant V Australian Knitting Mills Ltd.
1936
A retail dealer in woollen clothes who sells pants
must know they are required for the particular
purpose.
Held- buyer was dependent on seller’s and
wisdom
2. Goods bought by description from seller who
deals in goods of that description-
There is implied condition that goods shall be of
merchantable quality, that is, commercially
saleable whose quality meets the purpose for
which goods have been purchased.
- Not applicable when buyer has examined the
goods and defect is apparent upon such
examination
3. Usage of trade- an implied warranty or condition
as to quality or fitness for a particular purpose
may be annexed by usage of trade.

Intention of parties must b be in the light of existing

circumstances. If the transaction is connected
with a particular trade, custom and usage of that
trade must be considered as a part of the
background against which parties contracted.
 Jones v Bowden 1813
• Sale of goods by auction. It was a trade usage
to disclose any sea damage in such cases
• Held- This had the effect of creating a
warranty that goods so sold without any such
declaration were free from sea damage
4. Express terms do not necessarily displace
implied terms-
Biggie v Parkinson 1862
A warranty that provisions sold should pass the
inspection of East India Co. was held to not
exclude the implied warranty of
merchantableness.