Conditions and Warranties | Sale of Goods Act

The article 'Conditions and Warranties' delves into the essential aspects of two significant subjects delineated in the Sale of Goods Act. These conditions and warranties primarily address breaches of the contract that empower the aggrieved party to repudiate the contract and seek damages.

Furthermore, the article highlights the importance of safeguarding the interests of the involved parties in the promotion of trade and commerce, all while taking into account the relevant legal aspects.

Introduction

The Sale of Goods Act (“the Act”) is an essential legal framework to regulate the sale of goods in commercial transactions in India. The objective is to control and make a uniform process for purchasing and selling goods. The essential concepts of the act, “conditions,” as the term of a contract, and “warranties,” are ancillary promises made by the seller. The ownership transfer, delivery, payment terms, and dispute resolution framework promotes transparency, accountability, and confidence in commercial transactions.

Chapter II (Sections 11 to 17 of the Sale of Goods Act, 1930) talks about the conditions and warranties. There are necessities that should be met with the demand of the selling agreement or any other deal. While the warranty is written system agrees to fix or replace the product in the event that it has a defect, the condition is a basic requirement upon which the contract depends. A condition and warranty are separated under section 12 of the Act. The interpretation of the terms determines whether the provision is a condition or a warranty. Its function should be the basis for interpretation, not the word’s form.

Types of Conditions and Warranties 

Explicit Condition is a term that refers to a statement in a contract specifying what is to be done or stated. These are also added to a contract at the mutual discretion of the parties and are required for its operation

Implied Condition (Sections 14 to 17) talks about different types of sales contracts for the parties to accept. Consider the presumption made during a transaction based on a sample or description. The parties agree to these conditions as though they were written into the contract unless otherwise specified. These implied conditions are as to:

- Title (Section 14): the terms of the agreement indicate otherwise, an implied warranty that the buyer will have quiet possession of the goods, and an implied condition on the part of the seller that, in the event of a sale, he has the right to sell the goods and, in the case of an agreement to sell, he will have the right sell the goods at the time when the property is to pass.

Further, an implicit guarantee is provided for the products to be free of any encumbrances or charges owed to third parties that the buyer has no knowledge of or failed to disclose before the contract was created. In a case [Rowland v. Divall, (1923) 2 KB 500], the aggrieved party bought a second-hand motor car and paid the defendant as well. After a few months, the petitioner got to know that the defendant did not have the title to sell the car. Thus, the petitioner shall be compensated.

- Description (Section 15): The Act says if a contract is made by description, it is implied that the goods must match the description. Additionally, if the sale is made both by description and by sample, it is not sufficient if the majority of the goods do not match the description.

- Quality (Section 16): The Act states the items must be of a merchantable quality. Also, the products are of a calibre that a rational individual would find acceptable. The Provision of the Act clears that the buyer has the right to inspect the products before accepting them. The buyer approving the products even without a thorough inspection, may repudiate the contract if the examination fails to identify the fault and the items are later determined to be defective within a reasonable time.

- Sample (Section 17): In case of an express or implied condition that has this effect in the contract, it is referred to be a contract of sale. If a contract is made for the sale of a sample, first, the whole quality must match the sample; second, the buyer must reasonably compare the bulk and sample; and third, the goods shall not be defective in nature that would make them unsellable and would not be evident from a reasonable inspection of the sample.

Warranty

Explicit Warranty: These are included in a contract and generally both parties agree to the contract.

Implicit Warranty: Even though the parties have not expressly included them in the contract, implied warranties make the parties believed to be included in the sale agreement. These implied warranties are as to:

- Undisturbed possession [Section 14(2)]: The Act states that the buyer should have an implied warranty of continuous ownership of the goods. The buyer has the right to sue the seller for breach of guarantee if, after obtaining possession of the goods, he is later disturbed.

- Freedom from obstacles [Section 14(3)]: The items will be free from any obstacles or charges in favour of any third party. The buyer is entitled to any claim if it is shown that he has no knowledge of the information at the time of signing the contract.

- Disclosing of the dangerous nature of the goods sold: The seller is responsible for alerting the buyer to the risks if the items are intrinsically harmful or likely to be dangerous and the buyer is unaware of this. The vendor shall be held accountable in case this warranty is broken.

Condition when to be treated as warranty (Section 13): The Act states any condition in the condition of sale that the seller must meet, the buyer may choose to accept them or choose to consider the seller’s failure to meet the conditions as a warranty breach rather than a reason to treat the contract as repudiated.

Unless there is an express or implied clause to that effect, in case a contract of sale is not severable and the buyer has accepted the items or a portion of it, the seller's failure to fulfil any condition may only be interpreted as a breach of warranty and not goods and treat the contract as repudiated. Thus, this clause has no bearing on any condition or warranty whose fulfilment is legally executed due to impossibility or another reason. In Mackenzie and Co. Ltd. v. Nagendra Nath, the court stated that the section is not limited to the breach of an express condition but also to the breach of an implied condition.

Conclusion

The Sale of Goods Act serves as a vital legal framework governing commercial transactions in India. Chapter II of the Act meticulously outlines the differentiation between conditions and warranties, crucial elements that determine the enforceability and obligations within a contract. Understanding these distinctions is imperative for both buyers and sellers to ensure clarity and fairness in trade.

Under the Act, conditions are fundamental prerequisites upon which the contract's validity rests, while warranties serve as ancillary assurances provided by the seller. The Act stipulates various types of conditions and warranties, including explicit and implied ones, concerning aspects such as title, description, quality, and samples. It also outlines explicit and implicit warranties such as undisturbed possession, freedom from encumbrances, and disclosure of potentially hazardous goods.

Furthermore, the Act addresses the treatment of a condition as a warranty in specific scenarios, emphasizing that a buyer can opt to consider the seller's failure to meet certain conditions as a breach of warranty rather than grounds for repudiation of the contract. However, it also acknowledges situations where the fulfilment of a condition may be rendered impossible due to external factors. Overall, the Sale of Goods Act's comprehensive coverage of conditions, warranties, and the treatment of breaches ensures a balanced and regulated commercial environment, promoting trust and confidence in the marketplace for both buyers and sellers in India.

References

[1] Mackenzie and Co. Ltd. v. Nagendra Nath, ILR (1946) 1 Cal 225

[2] The Sale of Goods Act, Available Here

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