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A STUDY OF
CONDITION AND WARRANTY
UNDER THE SALE OF GOODS ACT, 1930

CONTRACT - II

Name of the Student ... Niraj Bidawatka

Roll No. ........................ 184
Division ........................ D
Class ............................. S. Y. LL.B. (Batch of 2018-21)
College Name ............... Jitendra Chauhan College of Law
Faculty In charge .......... Prof. Dr. Chhaya J. Shah; and
Prof. Poorva Dighe
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ACKNOWLEDGEMENT
I would like to express my deep-felt gratitude to my faculty-in-charge Prof.
Dr. Chhaya Shah and Prof. Poorva Dighe, who explained the entire syllabus
of “Contract- II” very lucidly in their scholarly and interesting lectures. This
helped me in understanding the finer points along with the entire framework of
the subject. I was able to finish this assignment only due to their timely and
efficient guidance.

It is also essential to mention that this assignment would not have been possible
without the blessings and encouragement of our Learned Principal Prof. Mrs.
Priya J. Shah, who ensured that the students get proper infrastructure such as
access to the professional version of the Manupatra website and such other
websites, for conducting their research work.

This assignment helped me in doing a lot of research and helped me in gaining

and assimilating a lot of knowledge and skill about the subject. The entire
exercise of creating and submitting this assignment was very satisfying and at
the same time very productive.

July 25, 2021

Mumbai Niraj Bidawatka
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TABLE OF CONTENTS

1. Introduction 4
2. Explanation of Condition and Warranty in a Gist 4
3. Condition And Warranty as Defined in the Act 5
4. Conditions 5
Types of Conditions 6
Types of Implied Conditions 6
5. Warranties 7
Types of Warranties 8
Types of Implied Warranties 8
6. Whether a Stipulation is a Condition or a Guarantee 9
7. Stipulations as to Time 9
8. Stipulations as to Payment 10
9. Consequences of the Breach of a Condition or a Warranty 10
10. Options to the Buyer on Breach of Condition by the Seller 10
11. Doctrine of Caveat Emptor 11
Essentials of the Doctrine of Caveat Emptor 12
Exceptions to the Doctrine of Caveat Emptor 12
12. Conclusion 13
13. Bibliography 13
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A STUDY OF
CONDITION AND WARRANTY
UNDER THE SALE OF GOODS ACT, 1930
INTRODUCTION
Conditions and Warranties are defined in The Sale of Goods Act, 1930. Earlier, before
the enactment of The Indian Sale of Goods Act, 1930, the contracts pertaining to sales of
movable property were governed by the Indian Contract Act, 1872. The enactment of The
Indian Sale of Goods Act, 1930 led to the repeal of sections 76 to 123 of the Indian Contract
Act, 1872, which pertained to contracts involving sale of movable property. The Indian Sale of
Goods Act, 1930 came into force on 1st July, 1930.1 The act was amended on 23 September
1963, and thereby renamed as The Sale of Goods Act, 1930. In this paper, we shall discuss
about the difference between Conditions and Warranties of a contract pertaining to sale of
movable goods.

EXPLANATION OF CONDITION AND WARRANTY IN A GIST

In a contract of sale there may be various terms or stipulations. Such stipulations may
be either conditions or warranties. If a stipulation forms the very basis of the contract, or as
stated in Sec 12(2), is essential to the main purpose of the contract, it is called a condition. On
the other hand, if the stipulation is not essential to the main purpose of the contract but is
only of secondary importance, or as Sec 12(3) puts it, is collateral to the main purpose of the
contract, it is called a warranty.

For example, a lady orders for a red saree, it being agreed between her and the seller
that it will be sent by a registered parcel on or before 10th January, and that she will pay the
price by 15th January, the day of her marriage. In this illustration, the stipulations regarding
the colour of the saree as well as the date of supply are essential to the main purpose of
the contract and are “conditions”, whereas stipulations regarding the time of payment of the
price and the mode of despatch of the goods are not essential to the main purpose of the
contract but are only collateral, they are warranties.

1
Section 1(3) of The Sale of Goods Act, 1930
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CONDITION AND WARRANTY AS DEFINED IN THE ACT

Condition and Warranty are defined under Section 12 of the Sale of Goods Act, 1930.

According to the section 12(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.”

According to the section 12(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.”

Conditions

A condition is a stipulation –

- Which is essential to the main purpose of the contract

- The breach of which gives the aggrieved party a right to terminate the contract, reject
the goods and recover the price

Thus, non-fulfilment of a condition upsets the contract.

Example

‘A’, the buyer told ‘B’, a car dealer that he wants to buy a car for the purpose of touring.
B suggested a Maruti Car to A for the same purpose. After buying the car, A realized that the
car is not suitable for the purpose. Now, here A has the right to return the car to B and receive
the refund for the same.

In this example there was a condition that the car should be suitable for touring purpose.
But later on, the buyer realized that this condition was not fulfilled/breached. Hence, buyer has
the right to terminate the contract and can recover the amount from the car dealer.
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TYPES OF CONDITIONS

a) Express Conditions

These are conditions which are expressly incorporated/ mentioned by the parties in the contract.
It can be oral or written.

b) Implied Conditions

These are such conditions which are automatically incorporated or are applicable by operation
of law or by the conduct and/or behaviour of the parties.

TYPES OF IMPLIED CONDITIONS

1) Condition as to title/ ownership: Seller has the right to sell the goods when seller
has the title/ownership of the goods. If seller is selling the goods which are stolen then
that means seller has no right/title/ownership of the goods. Hence, buyer can cancel the
contract, return the goods and can recover the price of the goods. In Rowland v. Divali,2
the plaintiff bought a motor car from the defendant and used it for several months. After
some months, it appeared that the defendant had no title to it, and the plaintiff was
compelled to surrender it to the true owner. It was held that, notwithstanding that the
plaintiff had used the car for some time, the consideration had totally failed and he was
entitled to recover the purchase money

2) Condition as to sale by description: The implied condition is that if seller is

selling the goods by giving/ stating the description to the buyer then the goods must
correspond with the description.

3) Condition as to sale by sample: The implied condition is that if seller is selling

the goods by giving sample to the buyer first then buyer must be supplied with goods
corresponding with the sample.

4) Condition as to sale by sample as well as by description: In such cases, the

implied condition is that the goods shall not merely be according to the sample but must

2
(1923) 2 K. B. 500
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also correspond with the description. In Azemar v. Casella,3 there was a sale of “Long
Staple Salem cotton” equal to the sample. The contract also provided that if the goods
were of inferior quality, a reasonable allowance would be made to the buyer. When the
goods were delivered, it was discovered that the cotton was not Long Staple Salem
cotton but “Western Madras Cotton”. The court held that despite the allowance clause
in the contract, the buyer was entitled to reject the cotton

5) Condition as to quality and fitness: As a normal rule buyer is responsible to

examine the goods and see whether it’s suitable for him or not. But when buyer
specifically informs the seller about the purpose and relies on the skills and judgement
of the seller so, in this case seller is responsible to provide quality product to the buyer.
If seller cheats with buyer then there will be a breach of implied condition as to quality
and fitness.

6) Condition as to merchantability: There should be no defects in the goods

supplied.

7) Condition as to wholesomeness – The goods supplied should not be adulterated

or goods should be suitable for consumption.

Warranties

A warranty is a stipulation –

- Which is not essential to the main purpose of the contract

- The breach of which, gives the aggrieved party a right to claim for damages but not the
right to reject the goods
- Even if there is breach of warranty, the main contract can be completed
- Breach of warranty can’t be treated as breach of condition

Example

A (buyer) told B (shop keeper) that he wants to buy a good watch. B showed him a
watch saying that it is made in Thailand. A buys the watch and later on realized that watch is

3
1867 2 CP 431
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made in China and not Thailand. There is breach of warranty because the stipulation made by
the seller was not correct.

In this example, the main purpose was to buy a good watch by A. And there was a
warranty/ assurance by the shop keeper to buyer that watch, which is made in Thailand, is of a
good quality. Since A’s requirement was of a good quality watch, hence B recommended to
“A” that he can buy the same. But, the claim of the seller is proved to be wrong later on as the
watch was made in China not Thailand. So, here buyer gets the right to claim for the damages
only and can’t reject the goods.

TYPES OF WARRANTIES

a) Express Warranties

These are expressly incorporated/ mentioned by the parties in the contract. It can be oral or
written.

b) Implied Warranties

These are such warranties which are automatically incorporated or are applicable by operation
of law or by the conduct and/or behaviour of the parties.

An implied warranty is a lot like an assumption. For example, when you buy a new
car from a car dealer, the implied warranty is that the car works. When you order a burger
at a restaurant, it comes with the implied warranty that it is edible.

TYPES OF IMPLIED WARRANTIES

1) Implied warranty of quiet (undisturbed) possession of goods: Once the

goods are sold to buyer then there should be no disturbance by the seller or any third
party to the buyer.

2) Implied warranty to disclose the dangerous nature of the goods: In case of

selling goods of dangerous nature to the buyer, there is an implied warranty that seller
should disclose all relevant information to the buyer. If seller fails to do the same, then
seller will be liable to pay for the damages to the buyer. Examples of dangerous goods
are Disinfectants, chemicals, etc.
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3) Implied warranty as to quality and fitness: An implied warranty as to the

quality or the fitness for a particular purpose should be made know to the buyer in
advance. For example, any damage to goods which can happen should be made known
to the buyer in advance, otherwise it will be considered breach of warranty.

4) Implied warranty as to free from liability/ loan charges: The goods which
are being sold by the seller to buyer should be free from loan/ liability. For e.g., “A”
took loan from bank for Rs. 1,00,000 by pledging the bike with bank. There was a loan
going on and A sold the bike to C, here in this case there is an implied warranty that A
can’t sell the bike to C as the bike is not free from liability/ loan. So, C has the right to
recover the damages from A.

WHETHER A STIPULATION IS A CONDITION OR A GUARANTEE

There is no hard and fast rule as to which stipulation is a condition and which one is a
warranty. Whether a particular stipulation is a condition or not, is gathered from a construction
of the contract as a whole. The Court is not to be guided by the terminology of the parties.
In fact, section 12(4) expressly clarifies that a stipulation may be a “condition,” though called
a “warranty” in the contract.

It must be remembered that an offer of a thing totally different from what was agreed
to, is not a breach of one term of the contract, but a total failure to perform the contract. As was
remarked by Lord Abinger in an English case, “If a man offers to buy peas of another, and he
sends him beans, he does not perform his contract; but that is not a warranty; the contract is to
sell peas, and if he sends him anything else in their stead, it is a non-performance of it. [Chanter
v. Hopkins4]

STIPULATIONS AS TO TIME

If the time of the performance of the contract is of the essence of the contract and the
promisor makes a delay in the performance of the contract, the contract is voidable at the
option of the promisee. On the other hand, if the time of performance is not of the essence of
the contract, the delayed performance by the promisor entitles the promisee to claim damages
only for the loss incurred by him.

4
(1838) 4 M & W 404
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STIPULATIONS AS TO PAYMENT

If the buyer makes a delay in the payment of the price, the seller cannot avoid the
contract on that account, but he can only claim compensation for the same.

Consequences of the
Breach of a Condition or a Warranty
Since a Condition is a stipulation essential to the main purpose of the contract its breach
by one party entitles the other to treat the contract as repudiated. For example, if the seller
makes a breach of condition, the buyer may reject the goods. Similarly, if the breach is made
by the buyer, the seller may treat it as a breach of contract and not perform his own part of the
obligation. Thus, if a lady orders a red saree asking the seller to deliver it by 15 th January so
that she can wear it on the occasion of her wedding, which was to be held on 16th January, but
the seller supplies a black saree instead of a red one or supplies the saree on 18th January, there
is a breach of condition, the lady can treat the contract as repudiated, she can reject the goods
and sue the seller for improper performance.

On the other hand, a warranty is a stipulation collateral to the main purpose of the
contract, its breach is not considered to be serious. The breach of a warranty by one party
entitles the other only to claim damages rather than avoiding the contract. Thus, for example,
the buyer agrees to pay the price in advance by 15th December and goods are to be delivered
on 15th January, but the buyer makes the payment late, say on 25th December, the seller’s
remedy in such a case is to claim compensation, because according to Section 11, the time of
payment of price is generally deemed to be a warranty.

OPTIONS TO THE BUYER ON BREACH OF CONDITION BY THE SELLER

When there is a breach of condition by the seller, the buyer may:

1) Treat the contract as repudiated:

Ordinarily the buyer’s remedy on a breach of condition by
the seller, is treating the contract as repudiated and
rejecting the goods.
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2) Waive the condition:

Instead of repudiating the contract and rejecting the goods,
the However, if the buyer so likes, he may give up his right
of rejecting the goods and waive the condition. In such a
case, the condition is deemed to be non-existent. When the
buyer waives the condition, he accepts the goods without
bringing any action against the seller.

3) Treat the breach of condition as a breach of

warranty:
Another option open to the buyer is to treat the breach of
condition as a breach of warranty. In such a case, he
accepts the goods instead of rejecting them and can claim
damages as if there was a breach of warranty only.

Although on a breach of condition by the seller the buyer has a right to reject the goods,
but he is not bound to exercise this right. He can instead, have recourse to a smaller remedy of
claiming compensation by treating the breach of condition as a breach of warranty. For example
A agrees to supply B 1000 bags of first quality wheat, at the rate of rupees 100 per bag but
supplies only second quality wheat the price of which is rupees 90 per bag. There is a breach
of condition by the seller and the buyer can reject the goods, but if the buyer so likes, he may
treat it as a breach of warranty, accept the second quality wheat and claim compensation at the
rate of rupees 10 per bag.

Doctrine of Caveat Emptor

The Buyer is Responsible for his acts

Here, caveat means beware and emptor means buyer. Thus, Caveat Emptor means “buyer
beware.” This concept says that let the buyer beware of the risks or dangers, which means
buyer is responsible for any wrong selection made by him while buying something. The Seller
is not responsible or bound to disclose any defect in the goods i.e., the buyer is liable for his
acts.
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Essentials of the Doctrine of Caveat Emptor:

1) It is the duty of the buyer to thoroughly examine the goods

2) Buyer cannot blame anyone if goods turn out to be defective or do not serve
his purpose

3) Seller is under no obligation to reveal defects

4) There is no implied undertaking by the seller that he shall supply the goods
which will suit the buyer’s purpose

EXCEPTIONS TO THE DOCTRINE OF CAVEAT EMPTOR

Under certain cases, the buyer is not responsible for the actions taken. Only the seller will be
responsible in the below mentioned cases:

1) Buyer relies on the seller’s judgement regarding the quality: Where buyer
has made known the particular purpose to the seller and relies on him for the purchase.
So, in this case if any issue arises regarding the goods, then seller will be held
responsible for the same.

2) Sale as per sample: Section 17 provides that the bulk of goods shall correspond with
the sample in quality and that the buyer shall have a reasonable opportunity of
comparing the bulk with the sample. Moreover, the goods shall be free from any defect,
rendering them unmerchantable, which would not be apparent on reasonable
examination of the sample.

3) Sale as per the description: Section 16(2) provides that where the 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

4) Sale by both sample as well as description: As per section 15, the implied
condition that the bulk of the goods should corresponds with the sample of the goods
as well as with the description.
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5) Sale by fraud or misrepresentation

6) Goods must be free from adulteration: Seller will be responsible in case

adulterated goods are supplied to the buyer

7) Goods must be of merchantable quality: There should be no defects and the

goods should be fit for the purpose they are bought for. Example: Cold drinks or
chocolates- If seal of the cold drink selling in the market is opened or wrapper of the
chocolate is damaged. Then these goods will not be called as goods of merchantable
quality.

Conclusion
As can be seen from the above discussion, Conditions and Warranties have to be deduced
according to the provisions of the Act. Whether a particular stipulation is a condition or not, is
gathered from a construction of the contract as a whole. The Court is not to be guided by the
terminology of the parties. In fact, section 12(4) expressly clarifies that a stipulation may be a
“condition,” though called a “warranty” in the contract. Therefore, the facts of the cases in
accordance with the settled law have to be weighed in for determining whether the stipulation
is a condition or a warranty and accordingly thereof, the question has to be determined as to
whether the breach of contract is worthy of repudiation or liable for damages.

* * *

BIBLIOGRAPHY

Statutes The Sale of Goods Act, 1960

The Indian Contract Act, 1872
The Indian Sale of Goods (Amendment) Act, 1963

Books Pollock & Mulla - The Sale of Goods Act

Law of Sale of Goods - By Avtar Singh

Caselaws Chanter v. Hopkins, (1838) 4 M & W 404

Rowland v. Divali, (1923) 2 K. B. 500
Azemar v. Casella, 1867 2 CP 431