Page 120 - DMGT407Corporate and Business Laws

Unit 5: Law of Sale of Goods

5.3 Conditions and Warranties (Ss.11-17) Notes

In a contract of sale, parties make certain stipulations, i.e., agree to certain terms. All stipulations
cannot be treated on the same footing. Some may be intended by the parties to be of a fundamental
nature, e.g., quality of the goods to be supplied, the breach of which, therefore, will be regarded
as a breach of the contract. Some may be intended by the parties to be binding, but of a subsidiary
or inferior character, e.g., time of payment, so that a breach of these terms will not put an end to
the contract but will make the party committing the breach liable to damages. The former
stipulations are called ‘conditions’ and the latter ‘warranties’.
Section 12(2) defines a ‘condition’ as 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’. A warranty on the
other hand, is defined by s.12(3) as a ‘stipulation collateral to the main purpose of the contract,
the breach of which gives rise to claim for damages but not to a right to reject the goods and treat
the contract as repudiated’. Thus, the effect of a breach of a condition is to give the aggrieved
party a right to treat the contract repudiated, i.e., if price has been paid, the buyer can claim the
refund of price plus damages for breach. On the other hand, in case of breach of warranty, only
damages can be claimed, i.e., the buyer must accept the goods and claim damages for the breach
of warranty. 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 a contract [s.12(4)].

Example: Kaushal asks a dealer to supply him a shirt which would not shrink after use
and wash. The dealer supplies a shirt which shrinks after use and wash. Kaushal can reject the
shirt or keep the shirt and claim damages. Here the stipulation to supply a shirt which would not
shrink after use and wash is a condition.
Breach of condition to be treated as breach of warranty (s.13): Under certain circumstances a
breach of condition is to be treated as a breach of warranty, i.e., the right to repudiate the
contract is deemed to have been lost.
Express and implied conditions and warranties: Conditions and warranties may be either express
or implied. They are said to the ‘express’ when the terms of the contract expressly, provide for
them. They are said to be ‘implied’ when the law deems their existence in the contract even
without their actually having been put in the contract. However, an implied condition or warranty
may be negative by an express term to the contrary. Section 62 recognises the following two
principles: (i) what is expressed makes what is implied to cease and (ii) custom and agreement
overrule law.
Express condition or warranty: These may be of any kind that the parties may choose to agree
upon, e.g., it may be agreed that delivery of goods shall be made or taken on or before a certain
date. Similarly, in a contract of sale of a car, express warranty as to its soundness may be
incorporated.
Implied conditions and warranties [s.14-17]: Implied conditions and warranties are deemed to
be incorporated by law in every contract of sale of goods unless the terms of the contract show
a contrary intention. The implied conditions: (i) condition as to title (s.14), (ii) sale by description
(s.15), (iii) condition as to quality or fitness for buyer’s purpose [s.16 (1)], (iv) condition as to
merchantable quality [s.16 (2)], (v) condition as to wholesomeness, (vi) implied condition in the
case of sale by sample (s.17), (vii) implied condition in the case of sale by sample as well as
description (s.15).
Condition as to title: Section 14 provides that in a contract of sale unless the circumstances of the
contract are such as to show a different intention there is an implied condition on the part of the
seller that in the case of a sale, he has a right to sell the goods and that in the case of an agreement

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