Conditions and Warranties under the Sale of Goods Act

This article discusses the two concepts of conditions and warranties and how these concepts affect the contract entered between parties after it is formed. The article has a suitable conclusion at the end.

The contract of sale of goods is a special type of contract which has a huge application in business transactions. These special contracts are governed by the Sale of Goods Act which has formed its basis from the Indian Contract Act, 1872. The present article talks about all essential things you need to know about the concept of conditions and warranties in the light of the Sale of Goods Act, 1930.

I. Introduction

Whenever customers buy any goods, it is important to check the warranty period of each goods before buying them. You must ask the seller of your goods about its warranty period to make sure beforehand that even if the product is found to be faulty after its purchase, you can easily get the defective product replaced or repaired.

The terms ‘condition’ and ‘warranty’ are typically inserted in the contract of sale in order to determine the effectual remedies the parties can claim in case of breach of contract by either of the parties. The present article will discuss the manner in which the terms ‘conditions’ and ‘warranties’ are defined, their differences, and legality in the light of the Sale of Goods Act.

Talking about the term ‘condition’, it is known that most contracts of sales incorporate certain provisions that need to be satisfied as demanded in the contract. The fulfilment of the ‘conditions’ is a fundamental precondition on the basis of which the entire sale contract is based upon. On the contrary, the warranty is the written guarantee on the product wherein the seller has already given his commitment to replace or repair in the case the product is of any fault.

Section 11 to Section 17 of the Sale of Goods Act, 1930 envisaged the provision relating to conditions and warranties. The provision also draws a clear demarcation between what is condition and warranty. Section 12 of the act provides the demarcation between the two concepts depends upon the interpretation of the stipulation of time. Also, the interpretation of stipulation should be based on its function rather than the form of the word used.

II. Stipulation as to time

Stipulation as to time represents putting forth a precondition or requirement to be satisfied as a part of an agreement between parties. Sale of Goods Act provides that unless time as a pre-condition is specifically mentioned in the contract, a stipulation as to time isn’t considered as the essence of the contractual agreement.[1] However, any failure of payment on the part of the buyer will not entitle the seller of goods to repudiate the contract.

In the case of Martindale v. Smith[2], the defendant sold the plaintiff a certain sack of oats. As per a written agreement between the parties, the plaintiff had the liberty to leave the sacks on the defendant’s ground for 4-months and was to pay them in 12-weeks. On the expiry of the 12-weeks, the buyer failed to make the payment and asked for additional time, to which the seller clearly refused to grant any extra time. Later, the buyer tendered the price, but the seller refused to accept it and the seller was accordingly held by the court liable to the buyer in trover.

However, it is pertinent to note that if specifically time is laid down as the essential condition of the contract, failure to make payment within the stipulated time will entitle the seller to treat the contract as repudiated and sue the buyer to recover damages.

In the contract of sale, the time is generally taken as the essence of the contract under the below-outlined circumstances:

• When the parties have expressly agreed to treat the time as the essence of the contract.
• When delay in fulfilment of terms and conditions operate as injury.
• When the nature and necessity of the contract agreement require to be construed.

The provision under section 11 of the act leaves the other stipulations as to time on the terms and conditions of the contract and interpretation of the courts.

III. Implied conditions and warranties

Section 14 to section 17 of the Sale of Goods Act, 1930 deals with implied conditions and warranties attached to a subject matter for the contract sale of a good which may or may not be mentioned in the contract entered between the parties. They are briefly discussed as follow:

Implied Conditions

Condition as to Title [Section 14(a)]

Section 14(a) of the Sale of Goods Act 1930 explains the implied condition as to title as ‘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’.[3] This suggests that the seller of the goods has the legal right to sell the goods only if he has the true ownership and title of the goods or he is an agent of the titleholder.

When the seller sells the goods, the implied condition for the goods is its title, i.e. the actual ownership of the good. If the seller doesn’t own the title of the goods himself and sells it to the buyer, it’s a breach of condition. In that case, the buyer can return the goods and claim his money back from the seller or even refuse to accept the goods before their delivery, or whenever he learns about the false title of the seller.

For instance, in the case of Rowland v. Divall[4], the buyer had purchased a car from the seller and was compelled to return it to the true owner of the goods, after having used it for a while. The buyer then sued the seller and claimed the purchase price, since the seller did not receive the consideration as per the condition of the title of ownership.

Sale by Description (Section 15)

Section 15 of the Sale of Goods Act, 1930 explains that when a buyer intends to buy goods by description, the goods must correspond with the description given by the buyer at the time of formation of the contract, failure in which the buyer can refuse to accept the goods.

Sale by Sample (Section 17)

When the goods are sold on the basis of a sample given by the buyer to the seller, while the making of a contract, the following conditions are implied:

• Bulk of goods supplied should correspond with the quality of goods in the sample.
• Buyer shall be given a reasonable opportunity to compare the goods with the sample.
• The good shall be free from any apparent or patent defect on reasonable examination by the buyer.

Sale by sample as well as Description (Section 15)

As per section 15 of the act, when the sale of goods is done by a sample as well as a description, the bulk of the goods should correspond with both, i.e. sample and description provided to the seller in the contract and not only by sample or by description.

Condition as to Quality or Fitness (Section 16)

The doctrine of Caveat Emptor which means ‘let the buyer beware’ is applicable in the case of sale or purchase of goods. The maxim provides that the buyer must take care of the quality and fitness of the goods which he intends to buy and for which he can’t blame the seller for his own wrong choice.

However, the provision mentioned under section 16 of the Sale of Goods Act 1930 states a few conditions which are considered as an implied condition in terms of quality and fitness of the good. These exceptions to the doctrine of caveat emptor are as listed below:

• When the buyer of goods has specifically stated the purpose for his purchase of the goods to the seller, he has relied on the expertise and sound judgment of the seller for the purchase. In this case, there’s an implied condition that the goods shall satisfy the description of the purpose of purchase.
• When the goods are purchased on a description from the seller, there is again an implied condition that the goods will correspond with the description of purchase. However, in case of an easily observable patent defect that is missed by the buyer while examination of goods is not considered as an implied condition.

Implied warranty

Enjoy Possession of the Goods [Section 14(b)]

Section 14(b) of the Sales of Goods Act, 1930 provides that ‘an implied warranty that the buyer shall have and enjoy quiet possession of the goods’[5]. This means that the buyer is entitled to enjoy the quiet possession of the goods bought as an implied warranty, meaning, after receiving the title of ownership from the true owner, goods shouldn’t be disturbed either by the seller or any other person claiming superior title of all the goods. In that case, the buyer is entitled to recover damages and compensation from the seller as a breach of the implied warranty.

Goods are free from any charge or encumbrance in favour of any third party [Section 14(c)]

Section 14(c) of the act says that any charge or encumbrance pending in favour of any third party, which wasn’t declared to the buyer of the goods while entering into a contract of sale, shall be considered as a breach of warranty. In such a case, the buyer is entitled to claim damages and compensation from the seller.

IV. Treating conditions as warranties

Section 13 of the Sales of Goods Act, 1930 provides for three cases in which a breach of conditions will be treated as a breach of warranty. They are as follow:

• When the buyer waives the condition, the condition is considered a breach of warranty.
• A breach of condition would be treated as a breach of warranty where the buyer on his own will treat the breach of condition as a breach of warranty.
• When the contract is indivisible and the buyer has accepted the whole or part of the goods, the condition is treated as a warranty. Consequently, the contract can’t be repudiated but the damages can be claimed.

In the first two above mentioned points, it depends on the buyer whether he would treat the condition as a warranty, but the last point is compulsory and acts as estoppels against the buyer.

V. Conclusion

At the time of selling and buying goods, both the seller and buyer put forth some pre-conditions into the making of the contract which is mostly in regard to the mode of payment, quality, delivery, quantity, and other necessary things. The stipulations mentioned are either considered as a condition or a warranty, which usually differs from case to case. The concepts of both condition and warranty are necessary to be understood as it protects the rights of each party involved in the business transaction, in case there is any breach of contract with reference to the stipulation of time.

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[1] Section 11 of Sales of Goods Act, 1930.

[2] Martindale v. Smith, I Q. B. 389; Page v. Cowasjee Eduljee, L. R. P. C. I27

[3] Section 14 (a) of the Sale of Goods Act, 1930.

[4] Rowland v. Divall [1923] 2 KB 500.

[5] Section 14(b) of the Sales of Goods Act, 1930.

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