Welcome to Contract law II

Law of Sale of goods 2.1 (Conditions & warranties)

Maxime Chevalier (Lecturer, JGLS)

LL.M. International Arbitration (Stockholm University)
M.A Common law (Université de Paris V – Descartes)
Subjects of this class

What is the distinction between conditions & warranties

What is the legal effect attached to them

Waiver of condition/warranties

How to determine the warranties & conditions of the SOG

Caveat emptor and its exceptions

Matters at the very essence of the contract

Time : not unless provided by the contract

Conditions & Warranties

This class deals with the essentiel characteristics/elements of the SOG contract under parties’
intention

Why party A entered in this SOG? What was important for this party? What
does it matter that the performance of the contract is different?
 Time as an essential characteristic of the SOG?

Contract Act 1872

55. Effect of failure to perform at fixed time, in contract in which time is essential.—
When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or
before specified times, and fails to do any such thing at or before the specified time, the contract, or so much
of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties
was that time should be of the essence of the contract.

Effect of such failure when time is not essential.

—If it was not the intention of the parties that time should be of the essence of the contract, the contract does
not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled
to compensation from the promisor for any loss occasioned to him by such failure.
SOG Act
S. 11. Stipulations as to time.-
Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not
deemed to be of the essence of a contract or sale. Whether any other stipulation as to time is of the essence
of the contract or not depends on the terms of the contract.

Time for payment is presumed as not “essential” in a SOG

…the failure by the buyer to pay the price in time would not as a rule entitle the
seller to treat the contract as repudiated… [Martindale v Smith]
 If a party wants to argue that the contract became voidable, it needs to show that time was
important according to parties’ agreement

Such intention is to be gathered from

(i) the language used on the contract,

(ii) nature of the goods sold,
(iii) conduct of the parties such as extending the date of performance, and
(iv) surrounding circumstances at the time of making of the contract. [Pakharsingh v Kishansingh]

In a contract where the goods were very expensive to manufacture, time of payment was held to be essential
as the contract provided that payment should occur in advance, at different stages [Bunt & Co v HH Shri
Lukhdhiraj of Morvi State]
For other stiulations other than payment (as to time), it can be inferred from
“
parties’ agreement that time was an essential condition

For delivery

“In ordinary commercial contracts for the sale of goods the rule clearly is that time is prima facie
of the essence with respect to delivery” [Hartley v Hymans]

“if A agrees to sell and deliver goods to B on a certain day, he must deliver them on that day. If he fails to
do so B is entitled to put an end to the contract” [Reuter v Sala]
Conditions & Warranties
I- Distinction Conditions & Warranties
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.
 Conditions / Warranties are terms of the contract, they canot be a mere statement.
(terms of contract are express/implid, but are something the parties agree to)

Conditions
“There are some [obligations] which go so directly to the root or substance of the contract, or, in other words,
are so essential to its very nature that their non-performance may fairly be considered by the other party as a
substantial failure to perform the contract at all. Such obligations are called conditions.” [Mulla]

Warranties
On the other hand, there are other obligations which, though they must be performed, are not so vital that a
failure to perform them goes to the root or substance of the contract. These are called warranties
[Bannerman v White]
 Example

If the contract provides that “you must deliver 10kg of juicy tomatoes, packed in a blue bag”

Subject to circumstances, parties’ intention etc, we could consider that

Condition

Warranty
Express terms

How are determined conditions/warranties?

the Court may look at the surrounding facts and
Implied terms circumstances to determine what the parties
intended. [Behn v Burness]
II- REMEDIES

(2) condition… the breach of which gives rise to a right to treat the contract as repudiated.

(3) warranty … 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.

“The remedies of the buyer arising from a breach by the seller of a condition and a breach of a warranty are
different. In both cases the buyer is entitled to damages. But in the case of a breach of a condition he
has the option of another remedy, namely, of treating the contract as repudiated and rejecting the goods
altogether, provided he has not accepted the goods or any part thereof, or, in the case of specific goods, the
property has not passed to him” [Mulla]
III- Condition treated as a warranty
S. 13. When condition to be treated as warranty.-

(1)  Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the
condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating
the contract as repudiated.

(2)  Where a contract of sale is not severable and the buyer has accepted the goods or part thereof 95[***] the
breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a
ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract,
express or implied, to that effect.

(3)  Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law
by reason of impossibility or otherwise.

Choice from aggreived party (1)

Loss of Condition by acceptation of the goods (2)

Decision from the aggrieved party

1. Waiver may be express or implied

2. Decision to treat the Condition as Warranty

“He [the Buyer] may accept the goods and, treating the breach of the condition as a breach merely of a
warranty, set up against the seller the breach of the warranty in diminution of the price, or he may sue the
seller for damages for breach of warranty."

Repudiation (Condition remedy)

The buyer wants to keep the contract/goods
Damages/price reduction (Warranty remedy)
He treats the Condition as a Warranty

Example: Delevery of food in a restaurant, the quality is not conform to contract

condition but , it absolutely needs this food for the service of tonight = he will not
repudiate but ask for compensation
“Where a contract of sale is subject to any condition to be fulfilled by the seller, and the seller commits a
breach of the condition, the buyer may treat the contract as repudiated and refuse to accept the goods. He is
not, however, bound to do so. He may accept the goods and, treating the breach of the condition as a breach
merely of a warranty, set up against the seller the breach of the warranty in diminution of the price, or he may
sue the seller for damages for breach of warranty.” [Mulla]
Loss of the Condition remedy for Warranty

(2)  Where a contract of sale is not severable and the buyer has accepted the goods or part thereof 95[***] the
breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground
for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or
implied, to that effect.

Requirements: Regime:

- Acceptation of the delivery - Condition becomes a Warranty only

- If acceptation of a part only, contract needs to be not
severable

Compensation instead of Repudiation

What is acceptation of the goods?

“The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or
when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the
ownership of the seller, e.g., reselling the goods without examination or, where he uses them, or where, after the
lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them” [Mulla]

- Express acceptation
- Implied acceptation (use, sell, modification, retention of the goods)

! “unless there is a term of the contract, express or implied, to that effect.” (same sub-section)

Parties can provide that acceptation of goods does not affect rights as to Condition
(3)  Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law by
reason of impossibility or otherwise.

Force majeure, Harship etc. If excused by the law, Seller can contest the suit against him
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IV- What are the conditions / warranties provided in the contract?

Conditions/Warranties expressly written in the contract

Conditions/Warranties that are implied even though not written in the contract
 When C & W are implied from the contract

Express conditions/warranties [FROM CONTRACT]

Contract
No written in the contract

Implied conditions & warranties [FROM THE LAW]

Property title etc. Description of the goods Quality/fitness of the goods Sale by Sample

! Caveat emptor
Implied conditions & warranties

1. Property title etc.

2. Description of the goods

3. Quality/fitness of the goods

4. Sample
1. Property title etc.
S. 14. Implied undertaking as to title, etc.-
In a contract of sale, unless the circumstances of the contract are such as to show a different intention there
is—

(a)  an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods
and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the
property is to pass;

(b)  an implied warranty that the buyer shall have and enjoy quiet possession of the goods;

(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.

! There exist implied conditions & warranties from the law, but the parties can exclude them by contract
(a) Implied condition that Seller has the right to sell

The first right to sell derives from the property: the Seller should have property of the goods sold

That selling such good is authorised by the law

Agreement to sale / Sale

The difference is that such right is assessed at the time for Sale

This is a “condition” Remedy is repudiation of the contract

 Example

- If the seller has no title, and the buyer has to give up the goods to the real owner, he is entitled to a
return of the price. In that case the goods were stolen goods [Rowland v Divall]

- A sells to B goods labelled “Nissly brand” and this is proved to be an infringement of N. Company’s trade
mark, it is a breach of the implied condition that A had the right to sell [Niblett v Confectioners’ Materials Co]
 ! EXCEPTION
If the buyer knows the uncertainty about the right to sell, he assumes the risks and cannot invoke this section

- goods seized under a distress warrant are sold by public auction and the buyer knows that they are sold
under a distress, the auctioneer is not liable if the warrant turns out to be invalid and the buyer has to return
the goods

- sale held by the sheriff in execution of the decree [Dorab Ally v Executors Khajah Moheeoodeen]
 (b) Implied warranty as to quiet possession

“(b)  an implied warranty that the buyer shall have and enjoy quiet possession of the goods;”

“In every contract of sale, unless the circumstances of the contract are such as show a different condition, there is
an implied warranty that the buyer shall have and enjoy quiet possession of the goods. If there is a breach of this
warranty, the seller is liable to the buyer in damages.” [Mulla]

“Breach of the warranty of quiet possession is not confined to physical interference with the
buyer’s possession of the goods”
 Example:

- Where a claim was made by the patentee of a patent affecting the goods, the Court of Appeal held that a breach
had occurred. [Microbeads AC v Vinhurst Road Markings Ltd]

- If someone sold you goods. Before, these goods have injured X. X has a claim against/over these goods. You
might get affected by the claim = breach of your quiet possession

- The buyer’s possession may be disturbed subsequent to transfer of a good title to the goods by the seller himself or
by the lawful action of third party or by a patent granted after the time when the property passes
 (c) Implied warranty as to charge & incumbrance

(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.

“the warranty set out in section 14 (c) will be broken by the mere existence of a charge or incumbrance over the
goods and the breach does not depend upon an actual assertion of there or incumbrance by claim or demand on
the part of a third. [P&M]

Mortages, Deed of trust, Lien, Charge etc…

 2. Implied Condition for sale by description

S. 15. Sale by description.-

Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall
correspond with the description; and, if the sale is by sample as well as by description, it is not sufficient that the
bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

Sale based on the description Condition that goods correspond with description

Condition that they correspond with sample +

Sample + description description

It’s a CONDITION = repudiation in case of breach

!
It is a condition which goes to the root of the contract and the breach of it entitles the buyer to reject the
goods whether the buyer is able to inspect them or not [Jones v Just]

If you contract to sell peas, you cannot oblige a party to take beans. If the description of the article
tendered is different in any respect, it is not the article bargained for, and the other party is not
bound to take it [Bowes v Shand]
What is a Sale by description

The term “Sale of Goods by description” applies to all cases—unascertained goods, future goods
and also specific goods—where the purchaser has not seen the goods but is relying on the
description alone. [Varley v Whipp]

”The expression “description” usually means a particular class or kind of goods (e.g., Fair Bengal Cotton,
Java Sugar) but it also includes any statement which may be essential to the identity of the goods as
contracted for i.e., the quality or fitness, place of shipment, time of dispatch or delivery, time of shipment,
mode of packing.” [Mulla]

There is a reliance from the Buyer on the description of the goods

- A sale in a shop could become a sale by description so long as it is sold not merely as the specific thing but as a thing
corresponding to a description e.g., woollen undergarments or a hot water bottle [Grant v Australian Knitting Mills Ltd]
3. Implied conditions & warranty as to quality/fitness of the goods
S. 16. Implied conditions as to quality of 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.
PRINCIPLE

Caveat Emptor: no implied warranty or condition as to the quality or fitness for any particular purpose

EXCEPTIONS

(1) Special purpose of the goods made known to the Seller [Purpose]

(2) Marchentale quality of goods bought by description [Quality]

(3) Usage of trade [Purpose + Quality]

 The principle: Caveat emptor
caveat emptor qui ignorare non debuit quod jus alienum emit, meaning “let a purchaser beware; who ought not to be
ignorant that he is purchasing the rights of another”

“Upon sale of goods, the general rule with regard to their nature or quality is caveat emptor, so that in
the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not
covered by some condition or warranty, expressed or implied.

It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the
bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained
an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond the
mere fact of sale from which a warranty may be implied.” [Mulla]

No warranty/condition as to condition/special purpose of the goods if a party did not ask for t in the
! contract
(1) First exception: special purpose made known to
Buyer
(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.

Conditions Effect
- (a) Special purpose made known to the Seller
Implied condition that the goods
- (b) Reliance on the Seller’s skills should be fit for such purpose
- (c) Description which is in the course of the seller’s
business to supply
(a) Special purpose made known to the Seller

Expressely or impliedly

It should be made known expressly if the goods may be used for a multitude of purposes, for then the
buyer should inform the seller of the particular purpose for which he requires the goods. [Priest v Last]

Cases

- If a fishmonger sells oysters he must know that they are required for the particular purpose
of being eaten [Wallis v Russell]

- If a retail dealer in woollen goods sells underpants he must know that they are required for particular purpose
of being worn next to the skin. [Grant v Australian Knitting Mills]
- A goes to a milk dealer and buys milk for family use. The milk supplied contains typhoid germs, in
consequence whereof A’s wife is infected and dies. Here the purpose for which the milk was supplied was
sufficiently made known by the buyer to the seller by its description. There was therefore an implied
condition that the milk was reasonably fit for human consumption. The milk, not being so fit, the milk dealer
is liable in damages for a breach of warranty. [Frost v Aylesbury Dairy Co]
(b) Reliance on the Seller’s skills

“…so as to show that the buyer relies on the seller’s skill or judgment…”

Where the special purpose for which the goods are ordered is disclosed to the seller, and the order is accepted
in the terms in which it is given, such an acceptance is sufficient to show that the buyer has relied on the
seller’s skill and judgment without any further evidence on the point [Manchester Liners, Ltd v Rea Ltd]

But this condition is not satisfied if the buyer intervenes in the selection of the goods

“It is obvious that if the buyer himself selects the articles, there is no implied condition as to
fitness.” [Brown v Edgington]
(c) Description which is in the course of the seller’s business to supply

“the goods must be of a description which it is in the course of the seller’s business to supply, as where bread is
bought from a baker, milk from a milk dealer, coal from a dealer in coal, and copper for sheathing vessels from a
copper manufacturer.” [Mulla]

Condition not satisfied if the description / purpose expected from the good is not something
within the usual business of the Seller

Ex: a car manufacturer sells you food

Exception where Sub section (2) does no apply

Specific goods sold under patent / trade name

Ex: Iphone, Mac Book, SamsungGalaxy, Adidas sneakers [Subject to Consumer law for
consumer buyers]

Because the Buyer knows / can know all the characteristics of these goods before buying them
(2) Second exception: Marchentale quality of goods bought by description
(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.

Conditions Effect
- Goods bought by description - Implied condition: merchantable quality
- Goods dealt with by Seller

EXCEPTION

- Buyer has examined the goods - No implied condition of

- Defects which such examination ought to have revealed mechantable quality
What is sold by description
A thing is sold by description, though it is specific, so long as it is sold not merely as a specific thing but
as a thing corresponding to a description [Grant v Australian Knitting Mills]

The goods are sold by reference to a description (ex picture, statements about the product etc.)

What is mechantable quality?

The phrase “merchantable quality” would mean that the article is of such quality and in such condition that a
reasonable man, acting reasonably, would accept it under the circumstances of the case in performance of his
offer to buy that article, whether he buys it for his own use or to sell again [Bristol Tramways Co v Fiat Motors
Ltd]

The buyer, in other words, is entitled to receive a saleable article answering the description in the contract
[Randall v Newson]

Ex: The Car you bought is working well but is a bit scratched, then it will not be saleable
 Distinction with “particular purpose”

Ex: it can be of mechantable quality but not fit for the purpose the buyer bought it

Example

- if a person orders motor horns from a manufacturer of horns, and the horns supplied are scratched and
damaged owing to bad packing, he is entitled to reject them as unmerchantable [Jackson v Rotax Motor and
Cycle Co]
- A sale of a bottle of “Stone’s Ginger Wine” at a public house is a sale of goods by description, and if the
bottle breaks while opening with a corkscrew by reason of a defect in the bottle and injures the buyer, there is
a breach of condition as to merchantable quality, and the buyer is entitled to damages [Morelli v Fitch and
Gibbons]
EXCEPTION to this condition due to lack of examination from Seller

“…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.”

What is examination?

A mere opportunity of examining is not sufficient. At the same time if the buyer does examine the goods, though
cursorily, and he has had an opportunity of examining the goods more fully if he desired to do so, that amounts to
an examination within the meaning of this section. [Mulla]

It needs to be defect that would have been revealed by an examination

It does not apply if the examination would not have been sufficient to reveal the defect,
! e.g the hidden presence of sulphites in the underwear
(3) Third exception: usages of the trade
S. 16. Implied conditions as to quality of fitness.-
(3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by
the usage of trade."

An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of
trade. It may similarly be excluded by the usage of trade [Cointat v Myham]

Depends of each industry

Condition or/and Warranty

Example:

In case of Peter Darlington Partners Ltd v Gosho Co Ltd, where a contract for the sale of
canary seed was held subject to the custom of the trade that for impurities in the seed, the buyer
would get a rebate on the price, but would not reject the goods.
 Express/Implied conditions & warranty
S. 16. Implied conditions as to quality of fitness.-
(4) An express warranty or condition does not negative a warranty or condition implied by this Act unless
inconsistent therewith.

Sub-section (4): Implied warranty or condition may co-exist with express warranty or condition.—
Thus, an implied condition as to fitness for a particular purpose or as to merchantable quality, may be
superadded to express conditions contained in the contract, such as a condition that the car shall be
reasonably fit as a touring car [Baldry v Marshall]
 4. Implied condition in sale by sample

S. 17. Sale by sample.-

(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.
What is a sale by sample?

You need to have an express term reference to a sample in the contract

“The goods shall be equal in quality to the sample”

It’s not a sell by sample if in an open market, the seller whos a sample in order to present the goods [Hill v Smith]
Conditions pertaining to sale by sample

Conditions that

Goods should correspond with the sample in terms of quality

Buyer has a reasonable opportunity of comparing the bulk with the sample

Goods free from any defect, rendering them unmerchantable, which would not be apparent on
reasonable examination of the sample

Comparison of the goods with the sample

Buyer can refuse the goods and repudiate the contract if he is not entitled to compare the
goods with the sample

“If such opportunity is not given, the buyer may refuse to take the goods. Where A contracted to sell by sample two
parcels of wheat, one containing 700 bushels and the other 1,400 and he is allowed inspection of the smaller parcel
but is refused inspection of the larger parcel, it was held that the buyer was entitled to refuse to take any of the
wheat.” [Lorymer v Smith]
 If ony a par tof the goods correspond to the sample, tue buyer is allowed to either:

Accept all the goods and claim damages for the part that does not correspond
(waiving condition for warranty)

Reject all the goods (using his right pertaining to condition)

He cannot accept a part of the goods only, unless the contract is severable

If the buyer could have detected the default of the goods during the comparison
! with the sample, then he looses his right to condition !
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