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When is Condition treated as Warranty?

We are all consumers in one way or the other. We buy electronic items or similar devices and ask for warranty periods. We purchase goods for our consumption or for the production of other goods through which we may derive benefits and this happens many a times when we get attracted to the claims made by the sellers in respect to their goods.

Sometimes, it happens that it is because of such claims that we decline towards these goods is spite of other competing brands in the market. At other times, we buy certain goods because it carries certain insurances such as fitness etc. Such claims are referred as Conditions or Warranties.

In some cases, it is even possible that even warranty is sold separately. But the question is whether the law say about it? Besides, as a measure of consumer protection, Sale of Goods Act, 1930, assumes that every contract of sale of goods (unless agreed to between the parties) to be subject to certain stipulation.[1]These stipulations are termed as ‘implied conditions and warranties.

A representation which forms a part of the contract of sale and affects the contract is called a ‘stipulation’ which may either be a condition or a warranty. Though condition and warranty denote the promise made by the seller while purchasing a particular item, the Sale of Goods Act recognizes them separately as both of them differ in their very nature.

Condition[2]- If a stipulation is such that it affects the very essence of the contract, then it is Condition or it goes to the root of the contract and the breach of the same would allow the buyer towards non -fulfilment of contract as a whole, as a result the innocent party may repudiate the contract and claim damages. Conditions are the primary element as defined under section 12(2) of Sale of Goods Act, 1930.

In the case of Baldry v Marshall[3], the defendant was a motor car dealer, the plaintiff consulted him for a car in order to use it for touring purpose. The defendant suggested a type of Bugatti car, later on it was found that particular car was inappropriate, and the plaintiff wanted to reject the contract. It was therefore held that since suitability of the contract was a condition to the contract, therefore the plaintiff is entitled to reject the contract and have a refund of the price.

Warranty[4]- Section 12 (3) defines warranty as a secondary element, whose breach will not lead to repudiation of the contract, but the innocent party can claim damages for breach. If the promise is such that it is collateral to the main purpose of the contract, then that is warranty. It refers to the stipulation which is attached to the main contract and the failure of the same does not allow the buyer to avoid the contract.

In the case of Harrison v Knowles and Foster[5], the plaintiff bought two small ships from the defendant that the dead weight capacity of each ship was 460 tons, but the capacity in fact, turned out to be 360 tons. It was therefore held that the capacity of the ship was the warranty so the plaintiff is entitled to sue the defendant for the same.

Now, whether a stipulation in a contract of sale is a condition or a warranty is dependent on the construction of each case. From the above definitions, the researcher has tried to imply that the stipulation which goes to the root of the main contract is a ‘Condition’ whereas a stipulation which is collateral i.e. is of lesser importance, to the main contract is ‘Warranty’.

Now, there are certain situations when condition is treated as a warranty. As a result of this, the buyer loses the right to reject the goods and can only claim the damages for the breach of the condition.

Historical Background
During the era of Chandragupta, the trade practices were prevalent. There was a long process to ensure proper trade practice and thus the entire responsibility came on the state to ensure that the public is protected from the unfair prices and fraudulent activities. Also, there were severe punishments in case of any kind of smuggling and adulteration of goods.

The ancient laws relating to warranties were delicate and precious and it acquired the attention of the most eminent writers of the English law. The concept of warranty was bound upon the people living during that period of time.Warranties were lineal and collateral. Lineal means that when the heir derived title to the land warranted, either from or through ancestor who made the warranty.[6]Collateral means 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[7].

But, later on these collateral warranties were annulled. Warranty in its original form was never known in United States. Other than this, the claiming of damages was practised after the judgement which could be easily recovered. Conditions were treated as warranties only under remedial purposes to the buyer.
Under certain circumstances, when a condition is reduced to the status of warranty then the buyer loses his right to reject the goods in that case and hence condition is treated as warranty. In short, it is s treated only under remedial purposes.

The sole purpose for the evolution of the concept of condition being treated as warranty is to ensure the right of the buyer so that he can claim damages for the breach of the warranty. The Indian Contracts Act, could not explicitly differentiate the terms ‘conditions and warranty’, therefore the Sale of Goods Act provided the same.

Nature And Scope Of Section 13 Of Sale Of Goods Act, 1930

Section 13[8]of Sale of Goods Act, 1930 talks about the situations when condition is treated as warranty. As a result, the buyer loses his right to reject the goods but he is entitled to claim damages from the seller.

This shall happen in the following cases:
Waiver by the buyer- Section 13(1)[9]when a contract of sale is subject to any condition to be fulfilled by the seller, the buyer has the right to: waive the condition precedent or treat that condition precedent as a breach of warranty because these conditions are for the benefits of the buyer, therefore the buyer has the right to waive it. In that case, the buyer can only recover the damages and once the buyer exercises this option, he cannot compel the seller for its fulfilment.

In the case of City and Industrial Development Corp. of Maharashtra Ltd v. Nagpur Steel and Alloys Ltd,[10]the seller supplied oversized goods to the buyer and the buyer was fully aware about it so instead of rejecting it, he paid the amount of 58 goods out of 60, and all this amounted to waiver by the buyer of his right to make the seller liable to pay the balance price.

Non-severability of contract- According to section 13(2)[11], when the buyer has accepted the goods or a part of goods which are not severable, the breach of the condition on the part of the seller will be considered as breach of warranty, unless any contrary term of contract is present, and the buyer can no longer repudiate the contract, but he is entitled to claim damages from the seller. As per section 42[12].
A buyer is deemed to have accepted the goods under 3 conditions:
  1. When he intimates to the seller that he has accepted them, or
  2. When the goods have been delivered to him and he does an act in relation to them which is according to the ownership of the seller or
  3. When after the lapse of a reasonable time, he retains the goods without informing the seller that he has rejected them.
But if the contract is severable, and the buyer has accepted part of the goods, he still can exercise his right to reject the remaining goods. In the case of Hardy and Co. v. Hillerner and Fowler[13]the seller sold wheat to the buyer, when the wheat was unloaded at the destination port, the buyer resold and dispatched a portion of it to the sub purchaser and later discovered that the wheat was not according to the contract quality and then the buyer sent the notice to the seller for rejection of the contract. It was therefore, held that since the transfer of the possession to the sub purchaser was inconsistent with the ownership of the seller and hence that barred an end to buyer’s right of rejection and the buyer could not reject the goods.

Excused by law due to impossibility- According to Section 13(3)[14]when any contract of sale is excused under the law due to impossibility of act, then the conditions can still be treated as warranty. The impossible acts are defined under section 56 of Indian Contract Act.[15]This section mentions that any agreement to do an impossible act is void.Condition is reduced to warranty only under remedial purpose because goods cannot be recovered once it is sold to another party.

Critical Analysis
As far as now, the researcher has got to know that any representation which the buyer makes for his goods, so that the seller purchases it is known as Stimulation. Now, if this stimulation is essential for that main contract, then it is termed as condition and if it is collateral to the main contract, then it is warranty.

For example, if one goes to buy clothes and the seller says that this particular cloth will keep you cool, but actually that particular cloth is made up of synthetic, then will keep you warm therefore, this stimulation is not in accordance with what the buyer says. Now, if that particular cloth, gives out its colour on washing, then it is termed as warranty. Neither did the buyer told about it, nor did the seller ask about it.

If this condition is breached, then would result into breach of contract by the buyer and if the warranty is breached, then it is dependent on the buyer to breach the contract or can ask for compensation. But if the buyer wants, he can treat the conditions as warranties but not vice versa. The conditions when a condition is treated as a warranty are as follows-

Voluntary waiver by the buyer- The researcher has tried to explain this with the help of an example, if suppose, the seller gives the buyer 20 rupees dairy milk chocolates but the seller has asked for 10 rupees dairy milk chocolates, this was initially a ‘condition’ then the buyer keeps those 20 rupees chocolates but asks for the money back. Then is turned into warranty as the buyer has voluntarily given up his right.

Acceptance of goods by the buyer- If the goods are separable, and the buyer accepts those goods or he accepts a part of goods, then the buyer has treated the conditions as warranties.
Excused by law due to impossibility.

Impact Of The Grey Areas Of Section 13 Of Sale Of Goods Act, 1930

When conditions are treated as warranties, then the buyer cannot repudiate the contract, i.e., he cannot return back the goods or products, only the option that is left for him is to claim money from the buyer in return to those goods/products. The buyer loses the right to return the goods and his only remedy is to claim damages.

The breach of warranty cannot be treated as breach of condition but a breach of contract maybe treated as breach of warranty. Section 13 of Sale of goods act has created more troubles than solution to the trade relations between the buyer and the seller.

To better explain the impact of the grey area of section 13, we have to see it with the help of an example,

The buyer goes to the seller and says that he wants a sport car. This was a condition made by the buyer and later on the buyer finds out that the car is not a sport car and fills to operate. The buyer can then go to the seller and say to repair that car and will not return the car and will now treat that condition as a warranty. The buyer can claim performances and can sue for damages but does not repudiates the contract.

A warranty in a sale of goods is neither negotiable nor assignable, and it does not run with the goods. It is a personal indemnity, and the liability of the indemnitor cannot be extended to third parties and therefore a sub -buyer cannot recover on a warranty given by, or imposed by law on the original seller, for there is no privity of contract between them.[16]

End-Notes:
  1. http://egyankosh.ac.in/bitstream/123456789/13421/1/Unit-17.pdf
  2. Section 12(2) Sale of Goods Act, 1930
  3. Baldry v Marshall [1925] 1 KB 260
  4. Sale of Goods Act, 1930
  5. Harrison v. Knowles, CV F 03-5122 REC WMW HC, [Docs. 39, 41, 42]
  6. Oxford dictionary,3rd edition.
  7. Oxford dictionary,3rd edition.
  8. Section 13, sale of goods act, 1930
  9. Sale of goods act, 1930
  10. City and Industrial Development Corp. of Maharashtra Ltd v. Nagpur Steel and Alloys LtdAIR 1992 Bom 55, 1993 (1) MhLj 193
  11. Sale of goods act, 1930
  12. Sale of goods act, 1930
  13. Hardy and Co. v. Hillerner and Fowler (1923) 14 LI.L.Rep.106
  14. Sale of goods act, 1930
  15. Indian contract act, 1872
  16. 5Nelson v. Armour Packing Co., 76 Ark. 352; Smith v. Williams, 117 Ga. 782; Zuckerman v. Solomon, 73 Ill. 130; Walrus Mfg. Co. v. McMehcn, 39 Okla. 667, 51 L. R. A. (N. S.) 1111; Post v. Burnham, 83 Fed. 79, 27 C. C. A. 455.

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