Consequences of Breach of Conditions and Warranties | Sale of Goods Act

Indian Sale of Goods Act, 1930 (hereinafter referred to as the "Act"), governs the contracts related to the sale of goods in India. Among its provisions, the distinction between conditions and warranties is fundamental as it determines the rights and remedies available to the parties in case of a breach. This article delves into the consequences of the breach of conditions and warranties under the Act, analyzing their legal implications, and relevant case laws.

Conditions and Warranties: An Overview

Conditions

Section 12(2) of the Act defines a condition as a stipulation essential to the main purpose of the contract. A breach of condition allows the aggrieved party to repudiate the contract or claim damages.

Example: If a buyer purchases a machine for a specific purpose and it fails to serve that purpose due to a defect, the stipulation related to the machine’s capability would be treated as a condition.

Warranties

Section 12(3) defines a warranty as a stipulation collateral to the main purpose of the contract. A breach of warranty does not allow the aggrieved party to repudiate the contract but only to claim damages.

Example: A warranty may cover minor defects or non-essential aspects, such as a promise regarding packaging that does not affect the usability of the goods.

Consequences of Breach of Conditions

1) Right to Repudiate the Contract:

If the seller breaches a condition, the buyer may choose to repudiate the contract. Section 13(1) of the Act provides that a breach of condition gives the buyer the right to treat the contract as repudiated.

2) Claim for Damages:

Apart from repudiating the contract, the buyer may also claim damages for any loss suffered due to the breach.

3) Conversion of Condition into Warranty:

Section 13(2) states that a condition may be treated as a warranty under specific circumstances:

• Where the buyer waives the condition.
• Where the buyer has accepted the goods and is precluded from rejecting them.

Illustrative Case:

In Baldry v. Marshall (1925), a car was purchased for a specific purpose, but it failed to meet that purpose. The court held the stipulation as a condition, allowing the buyer to repudiate the contract.

Consequences of Breach of Warranties

1) Right to Claim Damages

The primary remedy for breach of a warranty is a claim for damages. Section 59 of the Act provides that the buyer is entitled to compensation for the breach but cannot repudiate the contract.

2) No Right to Reject Goods

The buyer must accept the goods and cannot reject them solely due to a breach of warranty.

Illustrative Case:

In Oscar Chess Ltd. v. Williams (1957), the court held that a representation about a car’s model was a warranty. Since it was breached, the buyer could only claim damages but not reject the car.

Exceptions and Special Provisions

I) When Condition Cannot Be Repudiated:

• Section 13(3) specifies that if the buyer has accepted the goods, they lose the right to repudiate the contract for a breach of condition but can still claim damages.
• If the condition breached is not essential to the primary purpose of the contract, it may be treated as a warranty.

II) Doctrine of Caveat Emptor

Section 16 imposes the principle of "buyer beware," which limits the seller’s liability for conditions or warranties unless explicitly agreed upon or implied by the contract.

Implied Conditions and Warranties

The Act recognizes several implied conditions and warranties that automatically form part of a contract unless otherwise agreed.

Implied Conditions (Section 14-17)

• Condition as to Title: The seller must have the right to sell the goods.
• Condition as to Description: The goods must match their description.
• Condition as to Quality or Fitness: Goods must be fit for the buyer’s specific purpose if such purpose is communicated to the seller.
• Condition as to Merchantability: Goods must be of merchantable quality.

Implied Warranties (Section 14)

• Warranty of Quiet Possession: The buyer should enjoy uninterrupted possession of goods.
• Warranty of Freedom from Encumbrance: Goods must be free from any charge or encumbrance not disclosed to the buyer.

Remedies for Breach

Buyer’s Remedies

• For Breach of Condition: Repudiate the contract, claim damages, or both.
• For Breach of Warranty: Accept the goods and claim damages.

Seller’s Remedies

• Where the buyer wrongfully rejects goods, the seller may sue for damages or the price.
• Specific performance may be sought in appropriate cases under the Specific Relief Act, 1963.

Conclusion

The distinction between conditions and warranties under the Indian Sale of Goods Act, 1930, plays a pivotal role in determining the remedies available to parties. While a breach of condition allows repudiation of the contract and damages, a breach of warranty limits the remedy to damages only. By understanding these nuances, parties can better navigate contractual disputes and ensure compliance with the legal framework. Judicial precedents and practical considerations further highlight the importance of precision in contract drafting and execution.

In essence, the Act balances the rights of buyers and sellers, providing a robust mechanism to address breaches while promoting fair trade practices.

References

[1] Sale of Goods Act, 1930

[2] Baldry v. Marshall (1925) 1 KB 260

[3] Oscar Chess Ltd v. Williams [1957] 1 WLR 370

[4] Express and Implied Conditions / Warranties: A Sale, Available Here