Thursday, July 19, 2012

Condition and Warranties

Condition and Warranty:
Section 12(2) states that a condition is a stipulation which is essential to the main purpose of the contract. The breach of a condition gives rise to a right to treat the contract as repudiated or broken. Example – A buys from B hair oil advertised as pure coconut oil. The oil turns out to be mixed with herbs. A can return the oil and claim the refund of price.
Section 12(3) states that a warranty is a stipulation which is collateral to the main purpose of the contract. The breach of a warranty gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated. Example – A while selling his car to B, stated the car gives a mileage of 12 kms per litre of petrol. The car gives only 10 kms per litre. B cannot reject the car. It is breach of warranty. He can only claim damages for the loss due to extra consumption of petrol.
Difference between Condition and warranty:
Basis of Difference
A stipulation which is essential to the main purpose of the contract.
A stipulation which is collateral to the main purpose of the contract.
The aggrieved party can terminate the contract, claim damages or treat it as breach of warranty
The aggrieved party cannot terminate the contract but can only claim damages
A breach of condition can be treated as a breach of warranty
A breach of warranty cannot be treated as breach of condition.

Conditions can be classified into two broad categories:
a)      Express conditions 
b)      Implied conditions
Express Conditions
Conditions that are agreed to by the parties, are commonly referred to as express conditions. Express conditions are usually denoted by language such as "if", "on condition that", "provided that", "I the even that", and "subject to" to make an event a condition.
Implied Conditions
If an agreement does not make an event a condition then the court may supply a term that does so. Such conditions will be referred to as "implied" conditions, since a court uses the process of implication to determine whether to supply a term that makes an event a condition and what term to supply.
Some of the important Implied conditions are:
1. Condition as to title – In a 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 the case of a sale, he has a right to sell the goods and
b)      In the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass.
2. Sale by description – Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description (Section 15). If you contract to sell peas, you cannot oblige a party to take beans.
3. Sale by sample – In a case of a contract for sale by sample, there is an implied condition –
a)      That the bulk shall correspond with the sample in quality
b)      That the buyer shall have a reasonable opportunity of comparing the bulk with the sample.
c)       That the goods shall be free from any defect, rendering them unmerchantable.
4. Sale by description as well as sample – Section 15 further provides that if the sale is by sample as well as by description, the goods must correspond both with the sample and with the description.
5. Condition as to quality or fitness – Normally, in a contract of sale there is no implied condition as to quality or fitness of goods for a particular purpose. The buyer must examine the goods thoroughly before he buys them in order to satisfy himself that the goods will be suitable for the purpose for which he is buying them. However, in the following instances, the condition as to quality or fitness applied –
a)      Where the buyer, expressly or by implication makes known to the seller the particular purpose for which he needs the goods and depends upon the skill and judgement of the seller whose business it is to supply goods of that description, there is an implied condition that the goods are reasonable fit for that purpose. [Section 16(1)]. For e.g. an order was placed for some Lorries to be used “for heavy traffic in a hilly area”. The Lorries supplied were unfit and broke down. Held, there is a breach of condition as to fitness.
b)      An implied condition as to quality or fitness for a particular purpose may also be annexed by the usage of trade. [Section 16(3)]
6. Condition as to merchantability – Where goods are bought by description from a seller who deals in goods of that description, here is an implied condition that the goods are of merchantable quality. This means that the goods should be such as are commercially saleable under the description by which they are known in the market at their full value.
7. Condition as to wholesomeness – In the case of eatable and provisions, in addition to the implied condition as to merchantability, there is another implied condition that the goods shall be wholesome. For e.g. C bought a bun containing a stone which broke one of C’s teeth. Held, he could recover damages.
8. Condition implied by custom – An implied condition as to quality or fitness for a particular purpose may also be annexed by the usage of trade in the locality concerned.


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