Conditions & Warranties

Learning outcome
• Illustrate the meaning and types of
various conditions and warranties in a
contract of sale.
• Explain the consequences of
breaching the conditions and
warranties by parties of contract of
sale.
 What is Condition??
A condition is a stipulation(Prerequisite)
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)]
In addition the aggrieved party may claim for
damages for loss suffered.
 What is Warranty??
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)].
 Case
P goes to the horse dealer and says “I want a
horse which can run at a speed of 30 km/hr”. The
dealer points out a horse and says “It will suit you”.
After the sale, P finds that the horse can run only
at speed of 20 km/hr. This is Breach of What?
a) Condition
b) Warranty
State reasons
 Solution
• Decision: Breach of Condition
• Explanation: Breach of main purpose of
contract. P can repudiate the contract,
return the horse and get back the price.
 Example
If P says to R that I want a good horse. R shows
him a horse and says, “ This is a good horse and it
can run at a speed of 30 kilometers per hour” and
P buys the horse and finds later on that it can run
at a speed of 20 kilometers per hour only. This is
Breach of What?
a) Condition
b) Warranty
State reasons.
 Distinction between condition and
Warranty
Basis Condition Warranty
Difference as to Essential to the main Collateral to the
value purpose of the main purpose of the
contract contract
Difference as to Aggrieved party can Can claim damages
breach repudiate the only
contract
Difference as to Breach of condition Breach of warranty
treatment may be treated as a cannot be treated as
breach of warranty a breach of
condition
 Express conditions
• The conditions which are agreed upon between
the parties in express words, either written or
oral are express conditions.
 Implied Conditions
1. Condition as to title-

• It is a presumption that seller is the true

owner of goods.
• Seller’s right to sell the goods is termed
as condition as to title.
 Example
Case : Rowland Vs Divall

R bought a car from D and used it for 4

months. D has no title. Later on R had to
hand it over to true owner. So R could
cancel the contract and recover the price
 Implied Conditions
2. Sale by description-

• When the goods are sold by describing their qualities & the
buyer relies on that description that is known as ‘sale by
description’.
• The goods shall correspond with description.
Sec (15)

For example
A sale of Seedless Grapes, signifies that the fruit will
have no seeds. If it turns that the fruit is with seeds the
buyer can reject the goods.

Note: Packing of goods may sometimes be part of the

description
 Case
Moore & Co v. Landauver & Co

M sold to L 300 Tins of Australian Apple by

describing that they will be packed in containers
containing 30 tins each. M delivered a
substantial portion in containers containing 24
tins in each. Is it a Breach of condition?
 Solution
Decision: Yes, It is breach of Condition

Explanation- It was held that, L could reject all the

tins as the goods were not packed according to the
description given in the contract as the method in
which the fruit was packed was an essential part of
the description.
 Implied Conditions
3. Condition in sale by sample- implied
condition is that
a) The goods must correspond with sample in
quality.
b) The buyer shall have a reasonable
opportunity of comparing the bulk with
the sample.
c) The goods shall be free from any hidden
defect. (latent defect)
Section (17).
 Case
In a contract for sale of brandy by
sample, brandy colored with a dye was
supplied.
Is buyer bound by contract of sale?
a) Yes
b) No
 Solution
• Decision: No
• Explanation: Held, the buyer was not
bound to the contract even though the
goods supplied were equal to sample, as
the defects were no apparent on
reasonable examination of sample. (mody
v Gregson).
 Implied Conditions
4. Implied condition as to quality or fitness-

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,
there is an implied condition that the goods shall be
reasonably fit for such purpose.
Section 16(1)
 Implied Conditions
Eg-
B went to S, a chemist and demanded a hot water bottle
from him, S gave a bottle to him telling that it was meant
for hot water, but not boiling water. After few days while
using the bottle B's wife got injured as the bottle burst
out, it was found that the bottle was not fit to be used as
hot water bottle.
Decision- The court held that the buyer's purpose was clear
when he demanded a bottle for hot water bottle, thus the
implied condition as to fitness is not met in this case.
Section 16(1)
 Implied Conditions
5. Implied condition of merchantable quality-
There is an implied condition that the goods
supplied shall be of merchantable quality.
 Merchantable means that the goods must be fit for
the ordinary purpose for which such goods are
used.

 Merchantable quality means goods must be in

saleable condition

 Where goods are bought by description from a seller

who deals in goods of that description, there is
implied condition that the goods must be of
merchantable quality
 Example
The buyer ordered for the best quality of 'toor dal'.
The dal was loaded in rain and by the time it reached
the destination, it became damages by moisture.
Judgement:
It was held that since the damaged toor dal could not be
sold as that of best quality as it was no longer of
merchantable quality. The buyer can repudiate the contract.
Section 16 (2)
 Case
A radio set was sold to a layman. The set
was defective. It did not work inspite of
repairs. Can the Buyer claim the refund.

R.S. Thakur Vs HE. Corpn, AIR(1971)

 Solution
Decision: Yes, the Buyer could return the set
and claim the refund.
Explanation- It was held that the goods are
not of merchantable quality. Act- Sec 16(2)
 Implied Conditions
6. Conditions implied by trade custom/usage –
There is an implied condition as to the quality or
fitness for the particular purpose may be annexed
by the usage of trade/custom."
 P asked for a hot water bottle of L, a
retail chemist. He was supplied one
which burst after a few days use and
injured P’s wife.
Judgement:
Held L was liable for breach of implied
condition

Please note- Here both conditions are applicable

 Implied Conditions
7. Condition as to Wholesomeness(Nutritious)-
It applies to contract of sale of eatables & provision
(necessities).
• Goods shall be wholesome. (should be in a
condition to consume)

Eg- C bought bun containing stone, which broke C’s

teeth. So he can repudiate the contract and claim
damages
 Implied Conditions
8.) Condition in a sale by sample as well
as description.
News
 Implied Warranties
1. Implied warranty of quiet possession-

There is an implied warranty that the buyer

shall have and enjoy possession of goods. If
he is disturbed, he can claim for damages.
 Implied Warranties
2. Implied warranty against
encumbrances
There is an implied warranty that the goods
sold shall be free from any charge or
encumbrances in favour of any third party.
 Case
A, the owner of the watch, pledges it with B. After a
week, A obtains possession of the watch from B for
some implied purpose and sells it to C. B approaches C
and tell him about the pledge. C has to make payment of
pledge amount to B.
Is C entitled to claim compensation from A??
 Solution
Decision: Yes ,
Explanation: As there is breach of warranty
of freedom from encumbrances
 Implied Warranties
3. Warranty of disclosing dangerous nature
of goods-
4. Warranty to disclose dangerous nature
of goods
(The seller must warn the buyer of the
probable danger)
 Doctrine of Caveat Emptor-
• Caveat Emptor means LET THE BUYER
BEWARE. It implies that the buyer should
buy the goods by making use of his skill &
judgment.
• If the goods turn out to be defective or do not
suit his purpose or he depends upon his own
skills, he cannot blame anybody except
himself.
 Eg.
• There was a sale by sample by a woolen
manufacturer of cloth to merchant, who was also
a tailor. The cloth was required for making
liveries But the fact was not made known to the
seller. On account of the latent defect in the
cloth, liveries could not be made out of it. But
there was nothing to show that it was unfit for
other purposes.
Judgement
• Held the buyer was without remedy due to non-
communication of the purpose for which the
cloth was required
 Exceptions to the doctrine of caveat
emptor
1. Where buyer relies on seller’s skill & judgment
2. Where purpose is known to the seller
3. Merchantable quality (should be saleable)
4. Usage of trade/custome (purpose is implied by
goods)
5. Where seller makes fraudulent representation.
(latent defect in the goods)
6. Where the goods are bought by sample
7. Where the goods are bought by description
8. Sale under a patent or trade name
 MCQ
Q. In breach of warranty, the buyer can-
A. claim for damages
B. Repudiate the contract
C. Return goods
D. Refuse to pay the price
 MCQ
When does the property in the goods pass to the
buyer in case of contract for the sale of specific or
ascertained goods:
a) When the contract for sale is made
b) When the parties to the contract intend it to
be transferred
c) When the price is paid for the goods
d) When the delivery of goods has been made
 MCQ
Q. What is the implied condition on the part
of seller in a contract of Sale?
A. Has right to sell the goods
B. Will have right to sell the goods
C. Will acquire the goods
D. None of the above
 MCQs
In the Contract of Sale, there is an implied warranty that:
a) Seller has a right to sell the goods
b) The buyer has the right to have and enjoy the quiet
possession of goods only.
c) The goods shall be free from any charge or
encumbrance
d) The buyer has the right to have and enjoy the quiet
possession of goods and that the goods shall be
free from any charge or encumbrance
 MCQ
In which of the following cases property in the goods does not pass to
the buyer when the goods are delivered to the buyer on approval or “on
sale or return” or other similar terms:
a) When the buyer signifies his approval or acceptance to the
seller as to goods
b) When the buyer retains the goods without giving a notice of
rejection and upon expiry of reasonable time
c) When buyer gives a notice of rejection to the seller
d) When buyer does any other act adopting the transaction
 MCQ
A contracts to sell B a piece of silk. B thinks that
it is Indian silk. A knows that B thinks so and
further knows that it is not Indian silk. A does not
correct B’s impression. B afterward discovers
that it is not an Indian silk. Can he cancel the
contract?
a) Yes
b) No