Business Law - Conditions & Warranties

Chapter 2: The Sale of Goods Act, 1930

UNIT – 2: CONDITIONS & WARRANTIES

After studying this unit, you would be able to understand-

1. to know the Stipulation as to time

2. To understand and identify conditions and warranties in a contract of Sale

3. To know the implied conditions and warranties.

4. To understand doctrine of ‘caveat emptor’.

INTRODUCTION

At the time of selling the goods, a seller usually makes certain statements or representations with a view to induce the intending buyer to purchase the goods. Such representations are generally about the nature and quality of goods, and about their fitness for buyer’s purpose.

When these statements or representations do not form a part of the contract of sale, they are not relevant and have no legal effects on the contract. But when these form part of the contract of sale and the buyer relies upon them, they are relevant and have legal effects on the contract of sale.

A representation which forms a part of the contract of sale and affects the contract, is called a stipulation. However, every stipulation is not of equal importance. Some of these may be very vital while others may be of somewhat lesser significance. The more significant stipulations contained in a contract of sale of goods have been called as “Conditions”, while the less significant stipulation have been given the name “Warranties”.

Condition and warranty (Section 12): A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. [Sub-section (1)]

“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”. [Sub-section (2)]

SUMMARY

While entering into a contract of sale, certain stipulations are put by both the parties i.e. the buyer and the seller. These stipulations with reference to goods may be ‘conditions’ or ‘warranties’ depending upon the construction of the contract. A stipulation essential to the main purpose of the contract is a ‘condition’ whereas collateral stipulations are called warranties. Breach of a ‘condition’ gives right to repudiate the contract and to claim damages whereas Breach of a ‘Warranty’ gives right to claim damages only. Every contract of sales have certain conditions and warranties implied by law. Besides, the parties may provide for ‘conditions’ and ‘warranties’ by an express agreement.

Regarding implied condition or warranty as to the quality of fitness for any particular purpose of goods supplied, the rule is ‘let the buyer beware’ i.e., the seller is under no duty to reveal unflattering truths about the goods sold, but this rule has certain exceptions.