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52.

Conditions And Warranties

A representation which is subsequently made part of the contract ceases to be a representation


and becomes something more, viz., a promise that such a thing is or shall be. Anson, Contract,
15th ed., 1920,p. 182.

The question then arises whether this representation, which has ceased to be a mere
representation, and has become a term of the contract, is a condition or is a warranty.

A "warranty" is defined in the Sale of Goods Act (Ont. s. 2; U. K. s. 62) as meaning:

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. An earlier definition is that of
Lord Abinger in Chanter v. Hopkins, 1838, 4M. & W. 399, at p. 404:

A warranty is an express or implied statement of something which the party undertakes shall be
part of a contract; and, though part of the contract, yet collateral to the express object of it. A
"condition" is not defined in the statute. A condition is a term which is "of the essence" of the
contract or, in other words, which is " regarded by the parties as a vital term going to the root of
the contract."

Anson, op. cit., pp. 183, 186.

A valuable note as to the terms "condition" and "warranty," with quotations from many sources, is
contained in Chalmers, Sate of Goods, 7th ed. 1910, pp. 191 ff.

In Wallis v. Pratt, in a judgment which was approved by the House of Lords, ([1911] A.C. 394),
Fletcher Moulton L.J. said ([1910] 2 K.B. 1003, at p. 1012):

A party to a contract who has performed, or is ready and willing to perform, his obligations under
that concract is enabled to the performance by the other contracting part of all the obligations
which rest upon him. But from a very early period of our law it has been recognized that such
obligations are not all of equal importance. There are some which go so directly to the substance
of the contract or, in other words, are so essential to its very nature that their non-performance
may fairly be consi-derel by the other party as a substantial failure to perform the contract at all.
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 substance of the contract, Both classes are equally
obligations under the contract, and the breach of any one of them entitles the other party to
damages. But in the case of the former class he has the alternative of treating the contract as
being completely broken by the non-performance and (if he takes the proper steps) he can refuse
to perform any of the obligations resting upon himself and sue the other party for a total failure to
perform the contract. Although the decisions are fairly consistent in recognizing this distinction
between the two classes of obligations under a contract there has not been a similar consistency
in the nomenclature applied to them. I do not, however, propose to discuss this matter, because
later usage has consecrated the term "condition" to describe an obligation of the former class and
"warranty" to describe an obligation of the latter class.

The Sale of Goods Act (Ont. s. 13; U.K. s. 11) provides: 13 - (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, depends in each case on the
construction of the contract. A stipulation may be a condition, though called a warranty in the
contract.

In Bentsen v. Taylor, [1893] 2 Q.B. 274, at p. 281, Bowen L.J. said:

Of course it is often very difficult to decide as a matter of construction whether a representation


which contains a promise, or which can only be explained on the ground that it is in itself a
substantive part of the contract, amounts to a condition precedent, or is only a warranty. There is
no way of deciding that question except by looking at the contract in the light of the surrounding
circumstances, and then making up one's mind whether the intention of the parties, as gathered
from the instrument itself, will best be carried out by treating the promise as a warranty sounding
only in damages, or as a condition precedent by the failure to perform which the other party is
relieved of his liability. In order to decide this question of construction, one of the first things you
would look to is, to what extent the accuracy of the statement - the truth of what is promised -
would be likely to affect the substance and foundation of the adventure which the contract is
intended to carry out.

Examples of conditions:

Behn v. Burness, 1863, 3 B. & S. 751, 6 R.C. 492 (vessel "now in the port of Amsterdam").

Varley v. Whipp, [1900] 1 Q.B. 513 (reaping machine described as new the previous year and as
having been used to cut only 50 or 60 acres) ; as to this case see 56.

Fisher, Reeves & Co. v. Armour & Co., [1920] 3 K.B. 614 (goods "ex store Rotterdam").

Examples of warranties:

New Hamburg Mfg. Co. v. Webb, 1911, 23 O.L.R. 44 (" rebuilt" engine).

Cameron v. McIntyre, 1915, 35 O.L.R. 206, 26 D.L.R, 638 (promise to give a written warranty that
horse sound).

Hart-Parr Co. v. Wells, 1918, 47 Can. S.C.R. 344, 43 D.L.R. 686, affirming 11 Sask. L.R. 132. 40
D.L.R. 169 (warranty of good material and certain horse-power capacity) .

Case Threshing Machine Co. v. Mitten, 1919, 59 Can. S.C.R. 118, 49 D.L.R. 30, reversing l2
Sask. L.R. 1, 44 D.L.R. 40 (warranty excluded by terms of contract).

In the United Kingdom the definition of warranty already quoted (Ont. s. 2; U. K. s. 62) applies
only toEngland and Ireland; and the Sale of Goods Act U. K. s. 62) provides. As regards
Scotland, a breach of warranty shall be deemed to be a failure to performa material part of the
contra 2t. The statute further provides (U. K s. 11 (2) ) :

11. - (2) In Scotland, failure by the seller to perform any material part of a contract of sale is a
breach of contract, which entitles the buyer either within a reasonable time After delivery to reject
the goods and treat the contract as repudiated, or to retain the goods and treat the failure to
perform such material part, as a breach which may give rise to a claim for compensation or
damages.
In the United States the use of the terms "condition" and " warranty" is different from their use in
the Sales of Goods Act. In the latter statute the terms indicate two kinds of stipulations or
promises - the performance of a condition being essential, and its breach therefore giving rise to
the right to repudiate the contract, the performance of a warranty not being essential, and its
breach therefore merely giving rise to a claim for damages. In the Uniform Sales Act, on the other
hand, this distinction is obliterated, both kinds of promises being designated warranties, and the
right to rescind the-contract and reject the goods being allowed for breach of warranty. The term
"condition" is apparently used in the narrower sense of a term by which the obligation of either of
the parties is made subject to the happening of a contingency or event, and not as including a
promise, the performance of which is essential. See 54, where the relevant provisions of the
Uniform Sales Act are quoted.

WARRANTY
A promise about a product made by either a manufacturer or a seller. A statement or
agreement by a seller of property which is a part of the contract of sale. The truth of the
statement is necessary to the validity of the contract.

his word has several significations, as it is applied to the conveyance and sale of lands, to
the sale of goods, and to the contract of insurance.

The ancient law relating to warranties of land was full of subtleties and intricacies; it
occupied the attention of the most eminent writers on the English law, and it was declared
by Lord Coke, that the learning of warranties was one of the most curious and cunning
learnings of the law; but it is now of little use even in England. The warranty was a
covenant real, whereby the grantor of an estate of freehold, and his heirs, were bound to
warrant the title; and either upon voucher, or judgment in, a writ of warrantia chartae, to
yield other lands to the value of those from which there had been an eviction by
paramount title the heir of the warrantor was bound only on condition that he had, as
assets, other lands of equal value by descent.

Warranties were lineal and collateral.

Lineal, when the heir derived title to the land warranted, either from or through the
ancestor who made the warranty.

Collateral warranty was when the heir's title was not derived from the warranting
ancestor, and yet it barred the heir from claiming the land by any collateral title, upon the
presumption that he might thereafter have assets by descent from or through the ancestor;
and it imposed upon him the obligation of giving the warrantee other lands, in case of
eviction, provided he had assets.

The statute of 4 Anne, annulled these collateral warrantees, which bid become a great
grievance. Warranty in its original form, it is presumed, has never been known in the
United States. The more plain and pliable form of a covenant has been adopted in its
place and this covenant, like all other covenants, has always been held to sound in
damages which after judgment may be recovered out of the personal or real estate, as in
other cases.

Warranties in relation, to the sale of personal chattels are of two kinds, express or
implied.

An express warranty is one by which the warrantor covenants or undertakes to insure that
the thing which is the subject of the. contract, is or is not as there mentioned; as, that a
horse is sound; that he is not five years old.

An implied warranty is one which, not being expressly made, the law implies by the fact
of the sale; for example, the seller is, understood to warrant the title of goods be sells,
when they are in his possession at the time of the sale; but if they are not then in his
possession, the rule of caveat emptor applies, and the buyer purchases at his risk.

In general there is no implied warranty of the quality of the goods sold.

In the contract of insurance, there are certain warranties which are inducements to the
insurer to enter into it. A warranty of this kind is a stipulation or agreement on the part of
the insured, in the nature of a condition precedent. It may be affirmative; as where the
insured undertakes for the truth of some positive allegation: as, that the thing insured is
neutral property: or, it may be promissory; as, that the ship shall sail on or before a given
day

Warranties are also express or implied. An express warranty is a particular stipulation


introduced into the written contract, by the agreement of the parties; an implied warranty
is an agreement which necessarily results from the nature of the contract: as, that the ship
shall be seaworthy when she sails on the voyage insured.

The warranty being in the nature of a condition precedent, it is to be performed by the


insured, before he can demand the performance of the contract on the part of the insurer.

Chapter IV. Conditions And Warranties. Section 17. Definition Of Warranty

A warranty is denned as the collateral agreement, that is annexed to the agreement transferring
theproperty right in the thing sold, by which warranty, the seller vouches for, either expressly or
impliedly, the title, the condition and the quality of the subject matter of the sale. An express
warranty is an express or positive declaration or assertion made by the seller, relating to some
fact respecting the thing sold, which statement may be taken by the buyer as true, and one on
which there is an obligation on which he may hold the vendor. A representation is the statement
that precedes the agreement of sale, on which the contract of sale is founded, and if the
representation is relied on, it is the inducement of the contract. A false representation may, if it
amounts to fraud, give the injured party the right to rescind the contract itself, or hold the other
party in damages for its breach.

A warranty is likewise to be distinguished from condition. If there is a condition which forms the
basis of the contract, and the condition be broken, the contract is at an end. A breach of warranty
does not bring the contract to an end; it merely gives a right in damages for the breach.

A warranty may arise without the vendor of goods using the word warranty, no particular words
are necessary to bind the vendor, but any language used from which a warranty might be inferred
is sufficient.1

1 Stone vs. Denny, 4 Metc. (Mass.), 151.

The warranty need not be in writing. The decision as to whether a warranty exists or not may be
one of law or fact. Where it is a question of fact, as to whether or not the representation is made,
then the solution of the question in a law suit, is one for the jury,2 under instructions from the
court, but where the facts are not in dispute or the statement is a written one, the question is one
for the court.3

Warranty n. a written statement of good quality of merchandise, clear title to real estate, or that
a fact stated in a contract is true. An "express warranty" is a definite written statement and
"implied warranty" is based on the circumstances surrounding the sale or the creation of the
contract.

WARRANTY, contracts. This word has several significations, as it is applied to the conveyance
and sale of lands, to the sale of goods, and to the contract of insurance.
2.-1. The ancient law relating to warranties of land was full of subtleties and intricacies; it
occupied the attention of the most eminent writers on the English law, and it was declared by
Lord Coke, that the learning of warranties was one of the most curious and cunning learnings of
the law; but it is now of little use even in England. The warranty was a covenant real, whereby the
grantor of an estate of freehold, and his heirs, were bound to warrant the title; and either upon
voucher, or judgment in, a writ of warrantia chartae, to yield other lands to the value of those from
which there had been an eviction by paramount title Co. Litt. 365; Touchst.; 181 Bac. Ab. h.t.; the
heir of the warrantor was bound only on condition that he had, as assets, other lands of equal
value by descent.
3. Warranties were lineal and collateral.
4. Lineal, when the heir derived title to the land warranted, either from or through the ancestor
who made the warranty.
5. Collateral warranty was when the heir's title was not derived from the warranting ancestor,
and yet it barred the heir from claiming the land by any collateral title, upon the presumption that
he might thereafter have assets by descent from or through the ancestor; and it imposed upon
him the obligation of giving the warrantee other lands, in case of eviction, provided he had assets.
2 Bl. Com. 301, 302.
6. The statute of 4 Anne, c. 16, annulled these collateral warrantees, which bid become a
great grievance. Warranty in its original form, it is presumed, has never been known in the United
States. The more plain and pliable form of a covenant has been adopted in its place and this
covenant, like all other covenants, has always been held to sound in damages which after
judgment may be recovered out of the personal or real estate, as in other cases. Vide 4 Kent,
Com. 457; 3 Rawle's R. 67, n.; 2 Wheat. R. 45; 9 Serg. & Rawle, 268; 11 Serg. & Rawle, 109; 4
Dall. Rep. 442; 2 Saund. 38, n. 5.
7.-2. Warranties in relation, to the sale of personal chattels are of two kinds, express or
implied.
8. An express warranty is one by which the warrantor covenants or undertakes to insure that
the thing which is the subject of the. contract, is or is not as there mentioned; as, that a horse is
sound; that he is not five years old.
9. An implied warranty is one which, not being expressly made, the law implies by the fact of
the sale; for example, the seller is, understood to warrant the title of goods be sells, when they
are in his possession at the time of the sale; Ld. Raym. 593; 1 Salk.. 210; but if they are not then
in his possession, the rule of caveat emptor applies, and the buyer purchases at his risk. Cro.
Jac. 197.
10. In general there is no implied warranty of the quality of the goods sold. 2 Kent, Com. 374;
Co. Litt. 102, a; 2 Black Comm. 452; Bac. Abr. Action on the case E; 2 Com. Contr. 263; Dougl.
20; 2 East, 31 4; Id. 448, n.; Ross on Vend. c. 6; 1 Johns. R. 274; 4 Conn. R. 428; 1 Dall. Rep.
91; 10 Mass. R. 197; 20 Johns. Rep., 196; 3 Yeates, R. 262; 1 Pet. Rep. 317; 12 Serg. & Rawle,
181; 1 Hard. Kent. Rep. 531; 1 Murphy, Rep. 138; 2 Id. 245; 4 Haywood's Term. R. 227; 2
Caines' Rep. 48. The rule of the civil law was, that a fair price implied a warranty of title; Dig. 21,
2, 1; this rule, has been adopted in Louisiana; Code, art. 247 7; and in South Carolina. 1 Bay, R.
324; 2 Bay, R. 380 1 Const. R. 182; 2 Const. R. 353. Vide Harr. Dig. Sale, II. 8; 12 East, R. 452.
11.-3. In the contract of insurance, there are certain warranties which are inducements to the
insurer to enter into it. A warranty of this kind is a stipulation or agreement on the part of the
insured, in the nature of a condition precedent. It may be affirmative; as where the insured
undertakes for the truth of some positive allegation: as, that the thing insured is neutral property:
or, it may be promissory; as, that the ship shall sail on or before a given day. 6 N. S. 53.
12. Warranties are also express or implied. An express warranty is a particular stipulation
introduced into the written contract, by the agreement of the parties; an implied warranty is an
agreement which necessarily results from the nature of the contract: as, that the ship shall be
seaworthy when she sails on the voyage insured.
13. The warranty being in the nature of a condition precedent, it is to be performed by the
insured, before he can demand the performance of the contract on the part of the insurer. Marsh.
Inst. B. 1, c. 9. See, generally, Bouv. Inst. Index, h.t.

WARRANTY, VOUCHER TO, practice. A warranty is a contract real, annexed to lands and
tenements, whereby a man is bound to defend such lands and tenements from another person;
and in case of eviction by title paramount, to give him lands of equal value.
2. Voucher to warranty is the calling of such warrantor into court by the party warranted, (when
tenant in a real action brought for recovery of such lands,) to defend the suit for him; Co. Litt. 101,
b; Com. Dig. Voucher, A 1; Booth, 43 2 Saund. 32, n. 1; and the time of such voucher is after the
demandant has counted. It lies in most real and mixed actions, but not in personal. Where the
voucher has been made and allowed by the court, the vouchee either voluntarily appears, or
there issues a judicial writ (called a summons ad warrantizandum,) commanding the sheriff to
summon him. Where he, either voluntarily or in obedience to this writ, appears and offers to
warrant the land to the tenant, it is called entering into the warranty; after which he is considered
as tenant in the action, in the place of the original tenant. The demandant then counts against him
de novo, the vouchee pleads to the new count, and the cause proceeds to issue. 2 Inst. 241 a; 2
Saund. 32, n. 1; Booth, 46.
3. Voucher of warranty is, in the present rarity of real actions, unknown in practice. Steph.
Plead. 85.
Classification of terms in insurance contracts

You will recall that in the general law of contract terms are often classified into condition and
warranties , in the general law of contract a warranty is a term concerning a minor part of the
agreement only , If it is broken , the injured party has a right to claim damages but not , In
general , to treat the contract as repudiated.

A condition , on the other hand is a term that relates to an important aspect of the
agreement : it ' goes to the root ' . if such a term is broken the victim has a right , not only to
claim damages , but also to avoid the contract.

You also recall that the words ' condition ' and ' warranty ' , though they used in insurance ,
do not have the same meaning as in the general law of contract. In particular , a warranty in
insurance is not a minor term of the contract , but one of the greatest importance.

Of course , the term of an insurance contract cover all sorts of things including , for example :
payment of the premium , rights of cancellation and application of arbitration in the event of a
dispute . these provisions may be described as ' condition ' or even ' warranties ' in the
contract . however we are concerned mainly with terms that impose obligation on the insured
i.e. those that require the insured to do something ( or not do something ) as their part of the
bargain.

Warranties:

We begin by looking at terms that are described as warranties , these are the most important
terms in an insurance contract and bring about the most drastic effects if they are broken.

Nature of warranties:

Until fairly recently , a warranty in an insurance contract was commonly described as a term
which , if broken , allowed the insurers to repudiate the contract as a whole , in this respect it
was regarded as being similar in effect to what is described as a condition in the general law of
contract .

The house of lords held that a breach of warranty terminated cover automatically from the
date of the breach and , to all intents and purposes , terminated the insurance policy ,
although the house of lords did not state that this rule applies to non-marine insurance , it has
been assumed that it does in subsequent cases.

a warranty is essentially a promise made by the insured relating to the facts or to something
which they agree to do . a warranty may relate to past or present facts ( i.e. be a promise that
something was so or is so ) , or it may be a continuing warranty , in which the insured
promises that a state of affairs will continue to exit or that they will continue to do something .
for example a warranty may require that no work be carried out at a greater height than
twelve meters , or that an intruder alarm is to be kept in good working order and regularly
tested.

Exact compliance:
A warranty must be exactly complied with , if its broken , cover terminate , even if the breach
did not cause or have any connection with a loss , and even if the breach has been remedied
by the time a loss occurs , As stated above , termination arises from the date of the breach . If
warranty has regard to past or present facts , cover ( and effectively the contract ) will
terminate ab initio ( from the beginning ) , since by definition the breach will exist from the
start of the contract.

Condition:

Rather confusingly , warranties themselves have sometimes been described as types of


conditions , however , here we mainly use the word to describe terms , other than warranties ,
that impose an obligation on the insured , condition can also classified in various ways.

Condition precedent to the contract:

You should note that a condition precedent to the contract is not , as is sometimes suggested ,
a condition that must be met before the contract ( as apposed to the cover ) can come into
effect - by definition , a non-existent contract cannot have any terms or condition . in this
sense , all terms and conditions are ' subsequent ' to a contract.

A condition precedent to the contract is one which states , in one form of words or another ,
that the policy as a whole will become void , or cover will not attach. If the insured fails to
comply with the term in question. For example , a life insurance policy may contain a condition
that cover will not come into effect until the premium is paid . If such a term is not complied
with the insurance contract will become void ab initio , that is , the contract will be cancelled
retrospectively and the insurer will be deemed never to have been no risk.

A condition precedent may also impose a continuing obligation on the insured . for example
motor policies usually contain a clause that requires the insured to maintain the vehicle in a
roadworthy condition at all times . Conditions of this sort have much the same effect as
continuing warranties , and some writers have suggested that there is no difference and the
two terms refer to exactly the same thing.

Condition precedent to liability: The expression condition precedent to liability ( or recovery )


is used to describe a term that allows the insurers to avoid liability for a particular loss if the
term is broken , but not avoid the contract as a whole. If a further loss occurs the insurer
must pay , provided the insured in this case complies with the condition, claims conditions ,
such these requiring the insured to give prompt notice of a loss , or not admit liability ,
provide examples of this category of condition.

warranty
Definitions (3)
1. General: Legally binding assurance (which may or may not be in writing) that
a good or service is, among other things, (1) fit for use as represented,
(2) free from defective material and workmanship, (3) meets statutory and/or
other specifications. A warranty describes the conditions under,
and period during, which the producer or vendor will repair, replace, or other
compensate for, the defective item without cost to the buyer or user. Often it
also delineates the rights and obligations of both parties in case of a claim or
dispute.
2. Contracting: Expressed or implied undertaking that a
certain fact regarding the subject matter of a contract is, or will be, true. Unlike
conditions (the central points), warranties are deemed incidental points, and
a breach of warranty is usually not a valid reason for voiding a contract but it
entitles the aggrieved partyto damages. See also innominate
term and intermediate term.
3. Insurance: Written pledge by the insured party that a specified condition exists or
does not exist. Breach of warranty entitles the insurer to treat the insurance contract
as void even if the actual loss is unaffected by the breach.

Research Methodology
Area: Conditions in a contract
Topic: Conditions: Implied and Express
Research Methodology: I would be doing my research from data collected from secondary sources which will
include materials available on the internet and books, magazines and journals available in the library. The research
will be deductive in nature and the footnoting style will be as per the established standard of the University.

Chapterisation:
¢ The first chapter consists of the introduction where I have given a brief history of the Sale of Goods Act and the
relevant sections regarding the different types of conditions. Then I have gone on to give the cases where the term
condition had first been used followed by the different types of conditions and how they are understood in the
modern day law.
¢ In my second chapter I have gone to explain conditions in detail and the different classification of conditions. I
have also related terms with conditions.
¢ My third chapter is the main crux of my term paper in which I have explained implied conditions, how they
originated, how the courts perceived implied conditions and the evolution of law relating to these types of
conditions and the modern day position of implied conditions.
¢ My fourth chapter consists of the problems which may arise when the court interprets implied conditions. Due to
lack of material regarding this point I have focused my chapter on a particular case which highlights this problem
very clearly.
¢ My last chapter is my conclusion in which I have summed up my term paper.

Objectives:
1. To understand the origin and meaning of the word condition.
2. To understand the different types of conditions.
3. To understand and study cases on contracts in which different types of conditions have been used.

Research Questions:
1. What are express and implied conditions?
2. What is the role of the courts in interpreting implied conditions?
3. What are the problems that may arise during the process of interpretation?

(Chapter I) Introduction
The Act
Sale of Goods Act is one of very old mercantile law. Sale of Goods is one of the special types of Contract. Initially,
this was part of Indian Contract Act itself in chapter VII (sections 76 to 123). Later these sections in Contract Act
were deleted, and separate Sale of Goods Act was passed in 1930.The Sale of Goods Act is complimentary to
Contract Act. Basic provisions of Contract Act apply to contract of Sale of Goods also.

The use of the word condition appears to have originated in the 17th century . The Sale of Goods Act, 1930 defines
the term condition in section 12(2) . According to this definition a condition can be defined as a stipulation which is
so vital to the contract that its complete and exact performance by one party is something precedent to the
obligation of the other party to perform his part.

Conditions and Warranties


Opening para of section 16 makes it clear that there is no implied warranty or condition as to quality of fitness of
goods for any particular purpose, except those specified in Sale of Goods Act or any other law. - - This is the basic
principle of caveat emptor' i.e. buyer be aware. However, there are certain stipulations which are essential for main
purpose of the contract of sale of goods. These go the root of contract and non-fulfilment will mean loss of
foundation of contract. These are termed as 'conditions'. Other stipulations, which are not essential are termed as
'warranty'. These are collateral to contract of sale of goods. Contract cannot be avoided for breach of warranty, but
aggrieved party can claim damages. - - A breach of condition can be treated as breach of warranty, but vice versa
is not permissible.

A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a
warranty. [section 12(1)]. 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. [section 12(2)]. 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. [section 12(3)]. 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. [section 12(4)].

Where a particular stipulation in contract is a condition or warranty depends on the interpretation of terms of
contract. Mere stating 'Conditions of Contract' in agreement does not mean all stipulations mentioned are
'conditions' within meaning of section 12(2).

Express Conditions
Conditions that are agreed to by the parties, are commonly referred to as express conditions. Express conditions
are usually denoted by language such as "if", "on condition that", "provided that", "I the even that", and "subject to"
to make an event a condition. But usually in a dispute it is the court which decides whether an agreement makes an
even a condition by the process of interpretation.

Implied Conditions
If an agreement does not make an event a condition then the court may supply a term that does so. Such
conditions will be referred to as "implied" conditions, since a court uses the process of implication to determine
whether to supply a term that makes an event a condition and what term to supply. The distinction between
express and implied conditions is of practical importance because the rule of strict compliance is limited to express
conditions.

(Chapter II) - Conditions: Meaning and Types


Condition generally refers to promises and the duties they generate. It is usually an event of significance but this is
not always the case as the parties if they so wish can even make an insignificant event a condition. Condition can
be defined as some operative fact Almost any event can be a condition and whether a stipulation is a condition or
not can be decided only after looking at the contract in the light of the surrounding circumstances and then
deciding on the intention of the parties. In present day contracts all conditions refer to some operative fact which
has not yet occurred but which must occur so as to prevent frustration of the contract.

When a term will be a condition?


The leading textbooks on contract state that a term will be a condition if it satisfied one of the following four tests ,
namely
(a) if statute provides that it is a condition;
(b) if a binding authority requires a court to hold that it is a condition; if every breach, or
(c) if the consequences of every breach, goes to the root of the contract; or,
(d) If the parties have agreed that it is to be treated as a condition.

The first three of these tests involve well established principles, but the fourth yet remains to be clearly established.

Express agreement by the parties that one of them shall be able to terminate the contract on the happening of a
breach of a particular term by the, other does not automatically entitle the other party to the full benefits which
flow from that term being a condition. The express agreement gives an option to bring the contract to an end on
the breach of that term, but such an option is no different to an option to bring a contract to, an end on the
happening of any defined event; the fact that the event prescribed is a breach is immaterial. There is an option, but
the option does not affect the nature of the event upon which that option is exercisable. The, textbooks; ,therefore,
are misleading in so far as they suggest ,that a term is a condition where there is agreement by the parties that its
breach is to give rise to the innocent party being able to act as though the term breached were a condition,
because the court has the right to investigate whether it is the substance of the agreement that the term is a true
condition, or merely the form. If it is just the form, then the term will in nominate and the, quantum of damages will
depend upon whether the breach was repudiatory at common law.

Classification
Conditions can be classified into two broad categories:
1. Express conditions
2. Implied conditions

Express condition is a condition which has been expressly stated in the terms of the contract failure of which will
allow one party to either repudiate the contract in whole or claim for damages. Implied conditions are those which
have not been expressly stated but which the law presumes to be so inherently a part of the contract that it need
not be laid down in clear and written terms but are to be understood by the parties.

(Chapter III) - Implied Conditions


Implication of terms
In certain instances, the parties to a contract may have been content to express only the most important terms of
their agreement, leaving the remaining details to be understood. The court will then be asked to imply a term or
terms to remedy the deficiency. More often, however, a subsequent disagreement reveals that there are
contingencies for which the parties have not provided in their express contract. The question is then whether the
court can imply a term to cover the contingency which has unexpectedly emerged.

Intention or meaning in a contract may be manifested or conveyed either expressly or impliedly and it is
fundamental that that which is plainly or necessarily implied in the language of a contract is as much a part of it as
that which is expressed. What the function of the law is in such cases is to supply in contracts what is presumed to
have been inadvertently omitted or to have been deemed perfectly obvious by the parties, the parties being
supposed to have made those stipulations which as honest, fair, and just men they ought to have made . Once it is
determined what the implied provisions are, they are read into the contract, and the rights of the parties are to be
adjudged as though such provisions were expressed. Implied promises always exist where equity and justice
require the party to do or to refrain from doing the thing in question. The courts are justly prudent , careful, and
cautious in implying rights, obligation, promises, or covenants, lest they make the contract speak where it was
intended to be silent or make it contrary to what, as may be gathered from all the terms and the tenor of the
contract, was the intention of the parties. Accordingly, where a contract is reduced to writing, it is generally held, in
the absence of mistake or fraud, that the written contract includes or embodies the whole agreement of the parties
and all material provisions, and that, therefore , no agreement of the parties and all material provision, and that,
therefore, no additional agreements, obligations, or warranties can be implied, if there is to be any implication, it
must result from the language employed in the instrument or be indispensable to carry the intention of the parties
into effect. Terms should be implied in a contract, not because they are reasonable, but because they are
necessarily involved in the contractual relationship so that the parties must have intended them and have only
failed to express them because of sheer inadvertence or because they are too obvious to need expression. No
implied obligation can exist under a contract upon a point which apparently shows that it was not in the minds of
the parties.

It is only where the expressed contract is silent on a particular point that an implied obligation in such respect can
arise. Express stipulations cannot, in general, be set aside or varied by implied promises. In such cases the maxim
"expressio unius est exclusion alterius" applies which means, "express mention of one thing implies the exclusion
of the others".
Implied terms can further be categorized under two headings:
1. Terms implied in fact.
2. Terms implied in law.
To understand these two categories we must first see their historical evolution.

Historical Evolution of Implied Terms:


Prior to the House of Lords decision in Liverpool City Council v Irwin case, the concept of the implied term was but
sparingly utilized. At that time implied terms were used only in cases of necessity. In the Liverpool City Council case
a new dimension was brought in. it created a new category of implied terms altogether which was not based upon
the established criterion of necessity but, rather, upon the much broader rationale of public policy. This was a
radical development, for reasonableness could now be accommodated, and that the strict requirement of giving
effect only to the presumed intention of the parties could now be dispensed with where it conflicted with such
broader public policy considerations. Terms implied in fact was the older category and the terms implied in law are
the newer category.

Terms implied in Fact


Implied terms used to fall into this category only before the Liverpool City Council case. In this category terms were
implied only where it was necessary to give effect to the presumed intention of both parties to the contract. At that
time the test of reasonableness was not followed and the main emphasis of the courts was on the classical notion of
freedom of contract .

However, difficulties arose with regard to ascertaining whether implication ought to be effected. Two tests arose for
deciding this, namely
(a) Business efficacy test.
(b) Officious Bystander test.
The first test was formulated in The Moorock and the second test was formulated by MacKinnon L.J. in Shirlaw v
Southern Foundries.

The Business Efficacy Test


According to this test a term will be implied if it is necessary, in the business sense, to give efficacy to the contact.
It was Bowen L.J. who had laid down this test in his judgment as follows,

"now, an implied warranty, or, as it is called a covenant in law, as distinguished from an express contract or express
warranty, really is in all cases founded on the presumed intention of the parties, and upon reason. The implication
which the law draws from what must obviously have been the intention of the parties, the law draws with the object
of giving efficacy to the transaction and preventing such a failure of consideration as cannot have been within the
contemplation of either side; and I believe if one were to take all the case, and they are many, of implied warranties
or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention
of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at
all event it should have, in business transactions such as this, what the law desires to effect by the implication is to
give such business efficacy to the transactions must have been intended at all event by both parties who are
businessmen; not to impose on one side all the chance of failure, but to make each party promise in law as much,
at all event as it must have been in the contemplation of both parties that he should be responsible for in respect of
those perils or chance."

As can be seen from the judgment that the main purpose of Bowen.L.J was that a gap in the contract should not
undermine the underlying business purpose the parties originally intended. Thus, the central idea was that the
courts should fulfill contractual obligations.

Then in the case of Hamlyn & Co. v Wood & Co. where both Lord Esher M.R. as well as Bowen L.J had occasion to
consider again the topic of implied terms in general and the "business efficacy" test enunciated in The Moorock as
already stated above. In this case the court had stated that it had no right to imply in a written contract any such
stipulation, unless, on considering the term of the contact in a reasonable and business manner, an implication
necessarily arises that the parties must have intended that the suggested stipulation should exist. Thus, this case
too reiterated what had been held in The Moorock.

The Officious Bystander test


This is the other main test for "terms implied in fact", and is encompassed within the following word from the
judgment of MacKinnon L.J in the court of Appeal decision of Shirlaw v Southern Foundries,

"if I may quote from an essay I wrote some years ago, I then said: prima facie that which in any contract is left to be
implied and need not be expressed is something so obvious that it goes without saying so that, if, while the parties
were making their bargain, an officious bystander were to suggest some express provision for it in their agreement,
they would testily suppress him with a common "oh, of course!"

Obvious inference from agreement


A term which, has not been expressed may also be implied if it was so obviously a stipulation in the agreement that
the parties must have intended if to form part of their contract. A term will not, however, thus be implied unless the
court is satisfied that both parties would; as reasonable men, have agreed to it had it been suggested to them. The
knowledge or ignorance of each party of the matter to be implied, or of the facts on which the implication is based
is therefore a relevant factor. Further, since "the general presumption is that the parties have expressed every
material term which they intended should govern their contract, whether oral or in writing, the 'court will only imply
a term if it is one which must necessarily have been intended by them , and in particular will be reluctant to make
any implication "where the parties have entered into a carefully drafted, written contract containing detailed terms
agreed between them".

Relationship Between the tests


If we compare the two tests it can be said that the officious bystander test is more specific than the business
efficacy test which is classified as encompassing "generalities". The business efficacy test is the more general
statement of principle which thus serves as the basic theoretical guideline. The 'officious bystander' test on the
other hand provides the practical mode for affecting the general principle'. There is really no difference between
the "business efficacy" test on the one hand and the "officious bystander" test on the other. However, one point
which would be worthwhile to note would be that apart from the broader problems relating to subjectivity, these
tests are but broad guidelines at best. The two tests are not only compatible with each other but also that they are
to be integrated in the process of practical application-with the latter providing the more specific or concrete
criterion of ultimate application.

Thus, it can be seen that earlier the main function of implied term was to provide for a fair result in exceptional
circumstance where the express term of the contract could not. The idea of freedom of contract had a very strong
binding hold as the court did not generally prefer to go out of the contractual consensus. It were these two tests
which had broadened the idea as well as the application of implied term. Another possibility is that both these tests
reflected the way the judges perceived their capacity to understand the worldview of the litigants themselves.

Terms Implied in Law


The implication of a term is a matter of law for the court, and whether or not a term is implied is usually said to
depend upon the intention of the parties as collected from the words of the agreement and the surrounding
circumstances. In many classes of contract, however, implied terms have become standardized, and, it is somewhat
artificial to attribute such terms to the unexpressed intention of the parties. The court is, in fact, laying down a
general rule of law that, in all contracts of a defined type-for example, sale of goods, landlord and tenant,
employment, the carriage of goods by land or sea-certain terms will be implied, unless the implication of such a
term would be contrary, to the express words of the agreement. Such implications do not depend on the intentions
of the parties, actual or presumed, but on more general considerations.

Either the "business efficacy" test or "officious bystander" test would, in such a context be inappropriate, since
wider considerations (presumably, of public policy) would apply. This second (and broader category) of "terms
implied by law" only applied where terms are implied as general legal incidents in all contracts of a particular
category.

Thus, the basic difference between terms implied in fact and terms implied in law is that the first is a narrower test
based on either the 'business efficacy' criterion or 'officious bystander' criterion for 'terms implied in fact' in order to
give effect to the presumed intention of the parties and secondly a broader test based on 'reasonableness' (having
regard to public policy considerations) for terms 'implied in law'. Where terms cannot be implied on the first and
narrower basis, the latter category offers a wider scope for such a implication.

When a term ought not to be implied?


A term ought not to be implied unless it is in all the circumstances reasonable, But this does not mean that a term
will be implied merely because in all the circumstances it would be reasonable to do so or because it would improve
the contract or make its carrying out more convenient. The touchstone is always necessity and not merely
reasonableness. The term to be implied must also be capable of being formulated with sufficient clarity and
precision. A term will not be implied if it would be inconsistent with the express wording of the contract.

Terms when implied from usage or custom


If there is an invariable, certain and general usage or custom of any particular trade or place, the law will imply, on
the part of one who contracts or employs another to contract for him upon a matter to which such usage or custom
has reference a promise for the benefit of the other party in conformity with such usage or custom; provided there
is no inconsistency between the usage and the terms of the contract. To be binding, however, the usage must be
certain and reasonable and not contrary to law; and it must also be something more than a mere trade practice.
But when such, usage is proved it,wil1 form the basis of the contract between the parties These usages are
incorporated on the presumption that the parties did not mean to express in writing the whole of the contract by
which they intended to be bound, but a contract with reference to those known usages.
However, A custom or usage can only be incorporated into a contract if there is nothing in the express or
necessarily implied terms of the contract to prevent such inclusion, and It can only be incorporated if it is not
inconsistent with the tenor of the contract as a whole.

(Chapter IV) - The Jhonstone case


The facts of this case were Dr Johnstone took his employing hospital to court alleging that his employment
contract breached the hospital's duty to him to provide a healthy and safe workplace. The doctor was working from
40 hours Monday to Friday and then a further 48 hours on weekends.

Outcome: The Court rejected the Hospital's defence. It had been argued that 'if you can't stand the heat - get out of
the kitchen. The Court instead stated: It is a matter of grave concern that junior doctors should be required to work
such long hours without proper rest that not only their health may be put at risk but their patients as well.

This was a three judge bench with one judge Leggatt L.J. dissenting from the majority opinion.

An express term allowing the employer to require the employee to work 88 hours was qualified by a term implied
on health grounds. This obviously raised the question of the interrelationship between express and implied terms.

Stuart-Smith L.J. observed that the duty was implied by law, not just a Moorcock implication. The case may
therefore be an overriding duty case, but another possibility is that a specific express term can be qualified by an
implied general term .

Express and Implied Terms


The link between express and implied terms within the same contract was the major issue in the Johnstone case.
When faced with two conflicting terms, one express and the other implied, Stuart-Smith L.J chose the one which
appeared to him correct on "principle" presumably, whether the term which prevailed was express or implied would
make no difference, regard being had to the merits of the case. It so happened that in the instant case, the term
which prevailed was implied.

In response to the defendant counsels argument that an express term must prevail over an implied term, Stuart-
Smith L.J. responded thus:
"but this is not an implication that arises because it is necessary to give business efficacy to the contract [i.e. a
term implied in fact] ; it arises by implication of law."
The statement just quoted would seem to suggest that a term implied in law can "trump" even an express term of
contract, precisely because of its status. This would, in turn, appear to suggest that because a term implied in law is
premised on broader public policy grounds, it ought to supersede even a (contrary) express term of the contract.

Thus, this is contrary to the conventional principles. In addition this particular interpretation has put a premium on
careful drafting . Leggatt L.J. adopted the most straightforward approach, realizing the incompatibility of the
express term on the one hand and the term sought to be implied on the other , he gave primacy (according to
conventional principles) to the express term, and thus delivered a dissenting judgment and unlike Stuart L.J Leggatt
L.J. placed no emphasis on whether or not a term was implied in law. Quoting his words

"although it is a canon of construction that the terms of a contract will be construed, as far as possible, so as to be
compatible with each other, it is axiomatic that the scope of an express term cannot be cut down by an implied
term; and the it is a true of term implied by law as it is of terms which depend on the intentions of the parties (i.e
terms implied in fact)". It is no wonder that the Johnstone case was overruled subsequently by the Queens Bench .
It was held that "….certain terms will be implied, unless the implication of such a term would be contrary to the
express words of the agreement." Thus, the previous position was retained by the court.

Thus, the Johnstone case is an excellent example which shows the difficulties which the court faces when it wants
to do justice and thus gives an overzealous utilization of implied terms thereby overriding the express terms itself.
When there is a conflict between express and implied terms it is the former which should have an overriding effect
as it was the express intentions of the parties themselves. An implied term on the other hand is a product of the
courts interpretation.

(Chapter V) - Conclusion
The doctrine of express and implied terms have evolved a lot through the ages and have now attained a much
more broader and wider encompassing position. The concept of express and implied terms shows how the
conventional outlook towards contracts have changed, how the main emphasis was on freedom of contract but
slowly there was a decline in this concept and the concept of implied terms started having a stronger hold in the
interpreting process. Earlier the main function of the implied term was to provide for a fair result in exceptional
circumstance where the express terms of the contract could not and how the courts have started taking a more
active role in ensuring justice to the parties by preventing one party to take advantage of another either due to
omissions, errors or superior drafting skills. The doctrine of implied terms is one of the most flexible. However, the
concept of implied terms can lead to ambiguity especially when there has been an overzealous utilization of implied
terms as has happened in the Johnstone case. Cases such as these show the element of uncertainty which may
arise while practical application of implied terms is being done. Thus, the concept of implied terms though greatly
beneficial in nature should be developed carefully in a simple and methodical manner so as to prevent unnecessary
confusion and constraint.