Condition and

Warranties in Sale of
Goods Act

Sale of Goods Act

Sale of Goods is one of the
special types of Contract.
The Sale of Goods Act is
complimentary to Contract Act.
Basic provisions of Contract Act
apply to contract of Sale of
Goods also.

Stipulation
In

a contract of sale,parties make

certain stipulations, i.e. , agree to
certain terms .

stipulation in a contract of sale

with reference to goods which
are the subject thereof may be a
condition or a warranty.

Condition
The Sale of Goods Act, 1930 defines the
term condition in section 12(2) .
According to this definition a condition is
the stipulation essential to the main
purpose of the contract, the breach of
which give rise to a right to treat the
contract as repudiated.
e.g. : Quality of the goods to be supplied
A condition is a stipulation essential for
the main purpose of the contract.

Warranties
Stipulation collateral to the main
purpose of the contract, the breach
of which gives rise to a claim for
damages but not to a right to reject
the goods are known as
`warranties'.
e.g.

: Time of payment

DISTINCTION BETWEEN
'CONDITION' AND
'WARRANTY'
Condition
Warranty
1 . A condition is a stipulation,
which is essential to the main
purpose of the contract.

1. A warranty is a stipulation,
which is only collateral or
subsidiary to the main
purpose of the contract.

2. A breach of condition gives

the aggrieved party the right
to repudiate the contract as
well as the right to damages.

2. A breach of warranty gives

only right to sue for damages.
The contract cannot be
repudiated.

3. A breach of condition may

be treated as a breach of
warranty in certain
circumstances.

3. A breach of warranty cannot

be treated as a breach of
condition

Breach of Condition to be
treated as breach of
Warranty

Under the following 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:
1.The buyer waives the conditions or opts to
treat the breach of the condition as a breach
of warranty ; or
Eg: A agrees to supply B 10 bags of first
quality sugar @ Rs. 1625 per bag but
supplies only second quality, the price of
which is 1500.

contd
The buyer accepts the goods or a
part thereof, or is not in a
position to reject the goods.
2. By impossibility Nothing in this
section shall affect the case of
any condition or warranty
fulfilment of which is excused by
law by reason of impossibility or
otherwise.
1.

EXPRESS AND IMPLIED

CONDITIONS AND
WARRANTIES
Conditions and Warranties may be
either express or implied.
They are said to be 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.

Express conditions and

warranties
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.

Implied conditions and

warranties
They are deemed to be
incorporated by law in every
contract of sale of goods unless the
terms of the contract show a
contrary intention.

Implied Conditions
1.

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 :
i. In case of a sale, he has a right to sell the goods, and
ii. 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 intends
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.

Implied Conditions
2.

Condition as to Description -- In
a contract of sale by description,
there is an implied condition that
the goods shall correspond with the
description.

Eg: If you contract to sell peas, you

cannot oblige a party to take beans

Contd..
2.

The term ' sale by description' includes the following

situation:
i. Where the buyer has not seen the goods and buys
them relying on the description given by the seller. Eg:
second hand scooter
ii. 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. Eg: antique goods
iii.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.

Implied Conditions
3.

Condition as to Quality or Fitness

Generally , there is no implied condition or

warranty as to quality or fitness. But an
implied condition is deemed to exist on the
part of the seller, if the following conditions
are satisfied:
i. The buyer makes known to the seller the particular purpose
for which the goods are required, eg: Andrew yule & co.Hussein cloth
ii. The buyer relies on the seller's skill or judgement, eg:
patented goods, hot water bags
iii.The goods are of a description which the seller ordinarily
supplies in the course of his business

Implied Conditions
4.

Condition as to Merchantability -Where the goods are bought by

description from a seller, who deals in
goods of that description 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.

Contd..
Goods

cannot be said to be
merchantable, if they cannot be
used for the purpose , for which
the goods of that description
would normally be used.
Thus , a watch that does not
keep time, a pen that will not
write cannot be regarded
merchantable.

Implied Conditions
5.

Condition as to Wholesomeness -- In
case of sale of eatable provisions and
foodstuff, there is an implied condition
that the goods shall be wholesome.
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.
Eg: ( Frost Vs aylesbury dairy)

Implied Conditions
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.
In the case of a contract for sale by sample the implied
conditions are:
6.

(a) that the bulk shall corresponded with the sample

in quality.

(b) that the buyer shall have a reasonable opportunity

of comparing the bulk with the sample.

6.

(c) that the goods shall be free from any defect,

rendering them un-merchantable, which would not be
apparent on reasonable examination of the sample

Implied Conditions
7.

Conditions in a sale by Sample as

well as by Description: A vast
majority of cases where samples are
shown, are sale 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
Implied Warranty of Quiet Possession
In every contract of sale, unless there is a
contrary intention, there is implied warranty 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.

Implied Warranties
Implied

Warranty of Freedom from

Encumbrances
The buyer is entitled to a further warranty
that the goods shall be free from any charge
or burden in favour 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.

Implied Warranties
Warranty

to disclose dangerous nature

of goodsIn case the goods sold are of dangerous

nature, hell warn the ignorant buyer of the
probable danger. If there is a breach of this
warranty the buyer is entitled to claim
compensation for the injury caused to him.

Caveat Emptor
The

principle termed as caveat

emptor means let the buyer
beware.
Buyer is expected to be careful
while purchasing the goods and it
is no part of sellers duty to point
out defects of his own goods.

Exceptions to the doctrine of

Caveat Emptor
In case of misrepresentation by the
seller
In case of concealment of latent defect
In case of sale by description
In case of sale by sample
In case of sale by sample and
description
Fitness for a particular purpose
Merchantable quality

Passing of property
Transfer of property in goods from the seller
to the buyer is the main object of a contract
of sale.
property in goods means the ownership of
goods
An article may belong to A although it may
not be in his possession. B may be in
possession of that article although he is not
its owner.
It is important to know the precise moment of
time at which the property in goods passes
from the seller to the buyer for the following
reasons

Contd..
Contd

Risk Owner to bear the risk and not the

person who merely has the possession
eg: B contracted to buy 30 tons of apple
juice from D. delivery was to be made in
weekly truckloads.B accepted some of the
delivery but delayed to take the subsequent
deliveries. The juice got deteriorated and
had to be thrown away.
It

was held that although the goods had not passed

to the buyer, the risk of loss had to be borne by B

Contd..
Action against third party if after
the contract of sale, the goods have
been damaged by a third party, it is
only the person in whom the
property vests who can take action.

Unpaid seller
Meaning of an unpaid seller Sec
45(1)(2)
The seller of the goods is deemed to
be an unpaid seller (a) When whole of the price has not
been paid or tendered
(b) When a bill of exchange or other
negotiable instrument (such as
cheque) has been received as
conditional payment and it has been
dishonoured [sec 45(1)]

Contd
The seller shall be called an unpaid seller even when
only a small portion of the price remains to be paid.
It is for the non-payment of the price and not for other
expenses that a seller is termed as an unpaid seller.
Where the goods have been sold on credit, the seller
cannot be called as an unpaid seller during the credit
period unless the buyer becomes insolvent. On the
expiry of credit period if the price remains unpaid, then
only the seller will become an unpaid seller
Where the full price has been tendered by the buyer
and the seller refused to accept it, the seller cannot be
called as an unpaid seller.

Thus..
The

conditions mentioned below must be

fulfilled before a seller can be deemed to be
an unpaid seller:
(a)He must have sold goods against cash and
the price must be due.
(b)He must be unpaid either wholly or partly.
(c)He must have an immediate right or action
for the price.
(d)He must have not refused payment when
tendered. (e)A bill of exchange or any other
negotiable instrument was received but
dishonored.

Rights of an unpaid seller

Against goods
Against buyer personally

AGAINST GOODS
A)Where

the property in goods

has passed to the buyer

B)

Where the property in goods

has not passed to the buyer

Where the property in goods

has passed to the buyer
Here the seller has the following
rights:
Right of lien
Right of stoppage in transit
Right of resale

Right of lien
The right of lien means the right to
retain the possession of the goods
until the full price is received.
Circumstances under which the right
of lien can be exercised
Where the goods have been sold without
any stipulation to credit
Where the goods have been sold on
credit, but the term of credit has expired
Where the buyer fails to pay, due to
insolvency or not

Right of stoppage of goods in

transit
Right of stoppage in transit means the
right of stopping the goods while they
are in transit, to regain possession and
to retain them till the full price is paid.
Conditions under which Right of
stoppage in transit can be exercised
(i)Seller must have parted with the
possession of goods,ie, the goods must not
be in the possession of the seller
(ii) the goods must be in course of transit
(iii) buyer must have become insolvent

Distinction between right of

lien and right of stoppage of
1
goods
Right
of lien in transit.
Right of stoppage in
transit

Right of lien is exercised by

the unpaid seller , when the
goods are in his possession ,
actual or constructive. If he
loses the possession he loses
the right of lien

This right can be exercised

when goods are in his
possession or which the
middleman.

It is exercised when the buyer Can be exercised when buyer

can pay but refuses to pay
becomes insolvent
It comes to an end when the
possession of goods passes

Continues till the buyer

receives the goods

Right of resale
An unpaid seller can resell the goods
under the following circumstances:
(i) Where the goods are of a perishable
nature
(ii) Where the seller expressly reserves
the right of resale if the buyer commits a
default in making payment
(iii)Where the unpaid seller who has
exercised his right of lien or stoppage in
transit gives a notice to the buyer about
his intention to resell and buyer does not
pay or tender within a reasonable time

Where the property in goods

has not passed to the buyer
Withholding

delivery or Lien
Stoppage in transit
Resale

Against the buyer

personally
Suit for price (Sec. 55)
Suit for damages for non acceptance of
goods (Sec.56)
Suit for damages for repudiation of
contract (Sec. 60)
Suit for interest (Sec. 61)

Suit

for Price

On the transfer of the ownership of the goods

to the buyer, he becomes bound to pay the
price to the seller. When he does not pay the
price in terms of the contract, legal action can
be taken against the buyer by the unpaid seller.

Suit for damages for non-acceptance

Sec 56 states, where the buyer wrongfully
neglects or refuses to accept and pay for the
goods, the seller may sue him for damages for
non-acceptance. This section deals with
general damages.
Sec. 73 of indian contract Act

Suit

for damages for repudiation of

contract before due date
Sometimes, the buyer puts an end to the contract
before the due date of delivery of goods
Sec 60 states, Where either party to a contract of
sale repudiates the contract before the due date of
delivery, the other may either treat the contract as
subsisting and wait till the date of delivery or may
treat the contract as rescinded and sue for
damages for the breach.

Suit for interest:

Where there is a specific agreement b/w the
parties as to interest on the price of the goods from
the date on which the payment becomes due. The
seller may recover such interest from the buyer.

Buyers right against seller

Suit

for non delivery (sec.57)

Suit for specific
performance(sec.58)
Suit for damages for breach of
warranty (sec.59)
Suit for rescission of contract and
for damages for breach of condition
Suit for recovery of the price
together with interest (sec.61)