Sale of Goods Act, 1930

CONDITIONS AND WARRANTIES

Both Conditions and Warranties are important elements of every contract.
Conditions
The term “Condition” may be defined as a representation made by the seller, which is so
important that, its non-fulfillment defeats the very purpose of the buyer. As a matter of fact, it is
a stipulation, which forms the basis of a contract of sale, i.e., which is essential to the main
purpose of the contract.
According to Section 12(2) - 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.

This implies that a condition forms the essence of a contract of sale. Any breach will therefore
result in damages to the buyer and will give him the right to bring an end to the contract of sale.
The goods can be returned and the buyer has the right to get his money back.
Case Law 1:
Baldry v. Marshall
Baldry consulted the car dealer, and told him that he wanted to purchase a car for the purpose of
touring. The Car dealer, Mr. Marshall suggested that a Bugati car would be fit for the purpose.
Baldry bought the car as he believed the car dealer. However, the car was found to be unsuitable
for touring purposes. The Court ruled that the suitability of the car for the purpose of touring was
a Condition because that was the very purpose for which Baldry has purchased it. Thus, Baldry
could return the car to the dealer and receive the refund for the same.

Warranties
The term “Warranty” may be defined as a representation made by the seller. The non-fulfillment
of a warranty does not defeat the very purpose of the buyer. In fact, it is a stipulation, which is
not essential to the main purpose of the contract of sale, i.e., it is only subsidiary or collateral to
the main purpose.
According to Section 12(3) – “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 the right to reject the
goods and to terminate the contract.” Therefore, a Warranty does affect the contract in some
way but it is not as important as Condition, which results in bringing the contract to an end. If
there is a breach of warranty the buyer cannot end the contract but he does have the right to
claim damages for the loss he suffered because of the breach.

Illustration: Malti goes to a cosmetic shop to buy eyeliner. The shopkeeper states that the
eyeliner was waterproof and would not get washed off, unless it was removed with cotton.
However, later on when Malti used the eyeliner she found that it was not waterproof. Here a
breach of warranty took place and Malti is entitled to claim damages only.

Distinction between Conditions and Warranties

Basis of Distinction Conditions Warranties
1. Essential vs. Collateral It is a stipulation, which is It is in the nature of collateral
very important for the purpose only.
of the contract.
2. In the case of The party can bring the The party can only claim
Breach/Condition/Warranty contract to an end. damages.
3. Basic difference A breach of condition can also A breach of warranty cannot
be considered as a breach of be considered as a breach of
warranty. condition.

BASIS FOR
CONDITION WARRANTY
COMPARISON

Meaning A requirement or event A warranty is an

that should be performed
before the completion of
another action is known
as Condition.
assurance given by the
seller to the buyer about
the state of the product,
that the prescribed facts
are genuine.
 Defined in Section 12 (2) of Indian Section 12 (3) of Indian
Sale of Goods Act, 1930. Sale of Goods Act,
1930.

What is it? It is directly associated It is a subsidiary

with the objective of the provision related to the
contract. object of the contract.

Result of breach Termination of contract. Claim damages for the

breach.

Violation Violation of condition can Violation of warranty

be regarded as a violation does not affect the
of the warranty. condition.

Remedy available to the Repudiate the contract as Claim damages only.

aggrieved party on well as claim damages.
breach

When a Condition can be treated as a Warranty

According to Section 13, “A breach of a Condition can also be considered as a breach of

Warranty in the following cases:

• Where the buyer on his own waives a condition that is an essence of the contract. In such
a situation, the buyer cannot insist on the conditions being a part of the contract of sale.

• Where the buyer chooses to treat the breach of condition as a breach of warranty only and
thereby, only claims damages but does not end the contract.

• Where the buyer has already accepted the goods, whole or in part. In such a situation, the
contract cannot be terminated. The buyer can only claim damages, when he finds that
some conditions have remained unfulfilled.”

EXPRESS AND IMPLIED CONDITIONS / WARRANTIES: A SALE

Conditions and warranties may be express or implied.

Express conditions and warranties are which, are expressly provided in the contract. Implied
conditions and warranties are those which are implied by law or custom; these shall prevail in a
contract of sale unless the parties agree to the contrary.

i) Condition as to title -- In every 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 :

a. In case of a sale, he has a right to sell the goods, and

b. In case of an agreement to sell, he will have a right to sell the goods at the time when the
property is to pass.

The words 'right to sell' contemplate not only that the seller has the title to what he
purports to sell, but also that the seller has the right to pass the property. If the seller's
title turns out to be defective, the buyer may reject the goods.

ii) Condition as to Description -- In a contract of sale by description, there is an implied

condition that the goods shall correspond with the description. The term ' sale by description'
includes the following situation;

a. Where the buyer has not seen the goods and buys them relying on the description given
by the seller.

b. Where the buyer has seen the goods but he relies not on what he has seen but what was
stated to him and the deviation of the goods from the description is not apparent.

c. Packing of goods may sometimes be a part of the description. Where the goods do not
conform to be method of packing described (by the buyer or the seller) in the contract,
the buyer can reject the goods.

iii) Condition as to Quality or Fitness -- Where the buyer, expressly or by implication, makes
known the seller the particular purpose for which 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 (whether or not as the manufacturer of producer), there is an
implied condition that the goods shall be reasonably fit for such purpose. In other words, this
condition of fitness shall apply, if:
 a. The buyer makes known to the seller the particular purpose for which the goods are
required,

b. The buyer relies on the seller's skill or judgment,

c. The goods are of a description which he sellers ordinarily supplies in the course of his
business, and

d. The goods supplied are not reasonably fit for the buyer's purpose.

IV) Condition as to Merchantability -- Where the goods are bought by description from a seller,
who deals in goods of that description (whether or not as the manufacturer or producer) there is
an implied condition that the goods shall be of merchantable quality.

Merchantable quality ordinarily means that the goods should be such as would be commercially
saleable under the description by which they are known in the market at their full value.

v) Condition as to Wholesomeness -- In case of sale of eatable provisions and foodstuff, there is

another implied condition that the goods shall be wholesome. Thus, the provisions or foodstuff
must not only correspond to their description, but must also be merchantable and wholesome. By
'wholesomeness' it means that goods must be for human consumption.

vi) Condition Implied by Custom or Trade Usage: An implied warranty or condition as to quality
or fitness for a particular purpose may be annexed by the usage of trade. In certain sale contracts,
the purpose for which the goods are purchased may be implied from the conduct of the parties or
from the nature or description of the goods. In such cases, the parties enter into the contract with
reference to those known usage. For instance, if a person buys a perambulator or a medicine the
purpose for which it is purchased is implied from the thing itself; the buyer need not disclose the
purpose to the seller.

vii) Conditions in a Sale by Sample: A contract of sale is a contract for sale by sample where
there is a term in the contract, express or implied to that effect. Usually, a sale by sample is
implied when a sample is shown and the parties intend that the goods should be of he kind and
quality as the sample is.

viii) Conditions in a sale by Sample as well as by Description: A vast majority of cases where
samples are shown are sales by sample as well as by description. In a contract for sale by sample
as well as by description, the goods supplied must correspond both with the sample as well as
with the description.

IMPLIED WARRANTIES

A condition becomes a warranty when --

a) The buyer waives the conditions or opts to treat the breach of the condition as a breach of
warranty; or

b) The buyer accepts the goods or a part thereof, or is not in a position to reject the goods.

i. Implied Warranty of Quiet Possession -- In every contract of sale, unless there is a

contrary intention, there is implied warranties that the buyer's shall have and enjoy quiet
possession of the goods. If the buyer's right to possession and enjoyment of the goods is
in any way disturbed as consequences of the seller's defective title, the buyer may sue the
seller for damages for breach of this warranty.

ii. Implied Warranty of Freedom from Encumbrances -- The buyer is entitled to a further
warranty that the goods shall be free from any charge or encumbrance in favor of any
third party not declared or known to buyer before or at the time when the contract is
made. If the buyer is required to discharge the amount of the encumbrance it shall be a
breach of this warranty and the buyer shall be entitled to damages for the same.

MEANING AND EXCEPTION TO THE DOCTRINE OF CAVEAT EMPTOR

The doctrine of Caveat Emptor is important in the context of the buyer, because the buyer must
carefully examine the goods that he purchases.

Meaning of the Doctrine of Caveat Emptor [Section 16]: The term ‘Caveat Emptor’ means
‘let the buyer beware.’ The doctrine of caveat emptor has been given in the first paragraph of
Section 16 and runs as follows “Subject to the provisions of this Act and any other law for the
time being in force, there is no implied warranty or condition as to the quality or fitness for any
particular purpose of goods supplied under a contract of sale”.
This implies that it is not part of the seller’s duty to show the defects of the goods which he
offers for sale, rather it is the duty of the buyer to ensure himself about the quality as well as the
suitability of goods.

The buyer must take care of his own purpose while purchasing the goods, i.e., it is his duty to
purchase the goods of his requirement. As such, the buyer must take care while purchasing the
goods. In case, the buyer makes a wrong choice of the goods, he cannot blame the seller if the
goods turn out to be defective or do not serve his purpose. The seller is not supposed to know the
particular purpose for which the buyer is purchasing the goods.

Exception to rule of caveat emptor

Caveat emptor is a combination of two Latin words. Caveat means caution or warning or beware;
and Emptor means the buyer, the purchaser. Caveat emptor means: Let the purchaser beware. It
is a disclaimer of liability for buyer’s disappointment. It is one of the settled maxims, applying to
a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing
purchased, which is obvious or which might have been known by proper diligence.

EXCEPTIONS TO THE RULE OF CAVEAT EMPTOR

The following are some of the exemptions to doctrine of Caveat Emptor.

1. Implied Condition regarding Quality or Fitness

When the seller is aware of the purpose for which the buyer requires the product and when the
buyer relies on the judgment and skill of the seller, there is an implied condition that the product
purchased serves the purpose for which it was bought. When the goods are sold under a trade
name or patent mark, this condition does not apply.

2. Sale of Goods by Description

When the buyer purchases products from the seller who sells such class of goods, there is an
implied condition that the product is of merchantable quality.

3. Usage of Trade
Proof of reasonable usage or custom of trade may also establish an implied condition with regard
to quality or fitness of goods for a particular purpose.

4. Consent by Fraud

The doctrine of Caveat Emptor shall not apply to all those purchases, which have been made by a
buyer under a contract where the seller obtained his consent by fraud. A seller, who is guilty of
fraud, shall have no protection of the doctrine of caveat emptor.

5. Sale under a Patent or Trade name

In the case of a contract of sale of specified goods under its patent or trade name, there is an
implied condition that the product is fairly fit for any specific purpose.

6. Sale by Sample

When a buyer, having satisfied with the quality of the sample offered by the seller, purchases in
bulk, the Doctrine of Caveat Emptor will not apply when he finds defects in the bulk or if the
bulk does not correspond with the product sample offered to him. The Doctrine of Caveat
Emptor will not apply if the buyer did not have a chance to verify the bulk with the sample, of if
there is any hidden damaged product.

7. Misrepresentation

Where the seller has made a false representation relating to the goods and the buyer has relied
upon it, the doctrine of Caveat Emptor will not apply. Such a contract being voidable at the
option of the innocent party, the buyer has a right to rescind the contract.

WHAT ARE THE RIGHTS OF UNPAID SELLER

The seller who has not received price of goods sold or the seller who has got his negotiable
instrument dishonored will become Unpaid Seller. Sale of goods act, 1930 Section 45 to 55 read
about the rights of Unpaid Seller. Those rights can be classified into two groups. They are as
follows.

Rights against Goods

Rights against Buyer

What are the Rights of Unpaid Seller against Goods

When goods are in existence and title has not gone to buyer, Unpaid Seller can exercise the
rights against goods. These rights are categorized into three types. They are as follows.

1. Right of lien

2. Right of stoppage in transit

3. Right to Re-Sell

Right of lien

Right to retain goods by unpaid seller till amount is recovered is called right of lien. If unpaid
seller wants to exercise right of lien, he has to fulfill the following conditions.

• He must be unpaid seller

• There should be no credit terms in the Contract of Sale.

• After completion of credit period, right of lien can be exercised.

• The unpaid seller should have obtained those goods lawfully.

• Amount must be due on those goods only against which right of lien is decided.

Right of stoppage in transit

Unpaid Seller has right to stop the goods in the transit itself. To exercise this right the following
conditions are to be fulfilled.

• He must be unpaid seller.

• Buyer must be insolvent.

• There should be no credit terms in the Contract of Sale. After expiry of Credit period, this
right can be exercised.

• Amount must be due on those goods only against which this right is desired.

At times the transport company may refuse to deliver the goods to buyer due to any reason. Then
the goods are said to be in transit. At times, the buyer may retain the goods at the transport
company. Then the goods are said to be not in transit.

Right to re-sale

The unpaid seller can re-sell the goods for non-payment of price by buyer. He can exercise this
right when the goods are of perishable nature while doing so it is beneficiary to the seller to give
a notice to buyer with regard to resale. If such notice is given seller can claim loss, if any on
resale from the buyer. On the other hand if there is profit on resale the former buyer cannot claim
that profit. If notice is not given the seller has to face adverse consequence. If there is any loss on
re-sale, that loss cannot be recovered from buyer. But in case of profit, seller has responsibility to
pay that amount of profit to buyer.

What are the Rights of Unpaid Seller against Buyer

At times it becomes inevitable choice to exercise rights on buyer for non-payment of price. The
unpaid seller can file suits against the buyer as explained below.

Right to sue for price

“Where under a contract of sale the property in goods has passed to the buyer and the buyer
wrongfully neglects or refuses to pay for the goods according to the terms of the contract, seller
may sue him for the price of the goods” [Section 55(1)]. However sometimes, under a contract of
sale the price is payable on a certain day whether the goods are delivered or not. “In such cases if
the buyer wrongfully neglects or refuses to pay the price, the seller may sue him for the price
although the property in the goods may not have passed to the buyer and the goods may not have
been appropriated to the contract” [Section 55(2)].

Suit for Damages

Sometimes the seller is ready and comes forward to deliver the goods to the buyer. However the
buyer wrongfully neglects or refuses to accepts the goods and pay for them. In this case, “the
seller may sue the buyer for damages for non-acceptance. Before the seller becomes entitled to
sue for damages, there must be either a wrongful neglect or refusal on the part of the buyer to
accept and pay for the goods” (Section 56).

Right to Sue for anticipatory contract

When an agreement to sell is breached by buyer before date of performance, it is called

anticipatory breach. Then also seller can sue for compensation. (Section 60)

Right to sue to interest

If the buyer makes unreasonable delay for making payment, the seller has right to claim interest
also. If the seller delivers or sends the goods to the buyer and the buyer wrongfully refuses to
accept and pay for them, Court may award interest on the price. If the price is payable on a
certain day irrespective of delivery, interest will be calculated from that day, and if the goods are
sold on credit, interest will be calculated from the date of expiry of the credit period” (Section
61).