Monday, October 22, 2012

Implied condition and Warranty

‘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
Condition
Warranty
Definition
A stipulation which is essential to the main purpose of the contract.
A stipulation which is collateral to the main purpose of the contract.
Remedy
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
Treatment
A breach of condition can be treated as a breach of warranty
A breach of warranty cannot be treated as breach of condition.

Implied warranties and implied conditions
Implied Conditions:
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.

Implied warranties
1. Warranty of quiet possession – In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. If buyer’s possession is disturbed because of some defect in seller’s title, he can claim damages from the seller.
2. Warranty of freedom from encumbrances – The buyer is entitled to a further warranty that the goods are not subject to any charge or right in favour of a third party.
3. Warranty to disclose dangerous nature of goods – Where a person sells goods, knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, otherwise he will be liable for damages. 

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