CONDITIONS AND WARRANTIES WITH REFERNCE TO THE SALE OF GOODS ACT, 1930
– Shuchi Khutate1
The paper focuses on the conditions and warranties with reference to Sale of Goods Act, 1930. Acondition is a stipulation essential to the main purpose of the contract and breach of which gives rise to a right to treat the contract as repudiated. A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated. Where a stipulation in a contract ofsale is a condition or warrantydepends in each case on the construction of the contract. Astipulation may be a condition, though called warranty in the contract. The breach of a condition has been treated as a breach of warranty, only damages can be claimed and the plaintiff cannot claim the right to reject the goods and refund of the price. The paper also includes the doctrine of caveat emptor which means it is the duty of the buyer to ensure that the goods are of the quality which he wants. He could not hold the seller responsible for any defect in the goods. The new concept of “caveat venditor” has come into force with the introduction of Consumer Protection Act, 1986.
THE SALE OF GOODS ACT, 1930:
The whole object of sale of goods is to transfer propertyfrom one person to another. According to Section 4(1) of the Sale of Goods Act, 1930, a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price2. The law of sale of goods seeks to balance the rights, duties, claims and expectations of the sellers and buyers of goods. Sale of Goods Act is one of very old mercantile law. Earlier this was a part of Indian Contract Act, 1872 from Section 76 to 123. At the time of selling the goods, a seller usually makes certain statements or representations with a view to induce the intending buyer to purchase the goods. Such representations are generally about the nature and quality of the goods and about their fitness for the buyer’s purpose.
1 B.B.A.LL.B., II Sem., Indore Institute of Law
2 The Sale of Goods Act, 1930
These representations aim at providing satisfaction to the buyer. Some of these representations are merely opinion which does not forma part of contract of sale, while some of them become a part of contract of sale.A representation which forms a part of the contract of sale and affects the contract is called a stipulation which may be either a condition or a warranty. Though condition and warranty denote the promise made by the seller, the Sale of Goods Act recognizes them separately as both differ in their nature3.
A stipulation is a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract.Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale4. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract5.
CONDITIONS AND WARRANTIES
Conditions: There may be a number of terms and stipulations in a contract of sale. All these terms, are not of equal significance. Some of the terms and stipulations are so important that they go to the root of the contract and a breach of them is considered to be a serious matter and may give to the aggrieved party the right to treat it as a breach of the contract as a whole and therefore to repudiate the contract. Such a term or stipulation is called a condition. A condition is a fundamental term of the contract6.
Poussard v. Spiers and Pond7
1. Mrs. Poussard was an opera singer. She agreed to sing in an opera standing on 28th November. However, she became ill and was unable to sing until 4th December;
2. The opera company had to hire another singer so that the opera could start on 28th November;
3. They could only get another singer if they hired her for all the performances of the pera;
4. They did this and refused the services of Mrs. Poussard once she was better;
3 Section 12 of sale of goods act, 1930
4 Section 11 of the sale of goods act, 1930
5 Business laws, the sale of goods act, 1930
6 Section 12 of sale of goods act, 1930
7 [1 QBD 410, 1876]
5. She raised a court action to try to make the company pay her;
6. The court held that Mrs. Poussard breached the condition of the contract when she was unable to perform;
7. This was a basic term of contract;8
Warranty: A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated. A warranty refers to a stipulation which is attached to the main contract and a failure of the same does not allow a buyer to avoid the contract.9
Bettini v. Gye10
1. Bettini was an opera singer;
2. He agreed to sing in London in a number of theatres beginning on 30th March;
3. He also agrees that he would arrive in London 6 days before the first performance in order to practice;
4. Bettini became ill and did not arrive in London until 3 days before the first performance;
5. The opera company refused to allow him to sing;
6. They said he had breached the contract;
7. The court held that the part of the agreement about practicing was a warranty not a term;
8. That meant it was not a basic part of the contract. It was subsidiary part;11
EXPRESS AND IMPLIED CONDITIONS
A condition that has been expressly provided for agreed upon by both the parties at the time of the contract of sale.
8 1 QBD 410, 1876
9 Section 12 of sale of goods Act, 1930
10 1 QB 183, 1876
11 1 QB 183, 1876
1. Conditions as to title: There is an implied condition on the part of the seller that
• in the case of a sale, he has a right to sell the goods, and
• 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.13
2. Condition as to description: Where there is a sale of goods by description the goods shall relate with the description and if the sale is by description as well as by sample it is not sufficient if the bulk of the goods related to the sample alone and not with the description.14
3. Condition as to quality of fitness for a particular purpose: There is no implied condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. In other words, the buyer must ensure himself about the quality as well as the suitability of the goods. This is indicated by the maxim caveat emptor (let the buyer beware).
4. Implied condition of merchantability: According to Section 16(2) where goods are purchased by description from a person who usually sells them although he may be a manufacturer or producer or not there is an implied condition that the goods supplied shall be of merchantable quality.15
5. Implied condition in a contract of sale by sample:
• The case of sale by sample the bulk of the goods must be according to the sample in quality because in such cases it is the sample alone which has been held to be representative of the quality of goods to be supplied by the seller
• The buyer should get reasonable opportunity of comparing the bulk with the sample, however the goods supplied shall be considered according to the sample if so much of the quantity out of the entire bulk is equal to the sample as any standard of fair play and equity prescribes. In other words, it is the discretion of the court to decide whether the goods conform to the sample or not.
12 Section 14 of sale of goods Act, 1930
13 Section 14(a)of sale of goods Act, 1930
14 Section 15 of sale of goods act, 1930
15 Section 16(2) of sale of goods act, 1930
• In the case of sale by sample there is an implied condition that the goods shall be merchantable and free from defects which could not be disclosed by an ordinary examination.16
EXPRESS AND IMPLIED WARRANTIES
EXPRESS WARRANTIES: Awarranty is said to be express when the term of the contract expressly provides for it. At the time of contract of sale, both the parties may agree upon any number of express warranties.
IMPLIED WARRANTIES : Some of them are-
• The buyer must get quiet possession : In a contract of sale of goods there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods16
• The goods must be free from encumbrance: That the goods shall be free from any charge or legal burden in favour of any third party which are not known to the buyer before or at the time when the contract is made.
• By usage of trade: An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.17
• Warranty to Disclose Dangerous Nature of Goods: In case of goods of dangerous nature, the seller must warn the buyer for the danger related to the use of the product. If the seller fails to do so, the buyer may make him liable for breach of implied warranty.18
WHEN CONDITION TO BE TREATED AS WARRANTY
Section 13 provides for the circumstances under which a condition may be treated as a warranty. The two circumstances are as follows:
i. A contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated. Thus, it is for the buyer either to repudiate the contract on account of the breach of condition or to treat it only as a breach of a warranty and continue the contract and claim only damages for such breach.19
16 Section 17 of sale of goods act, 1930
17 Section 16(3) of sale of goods act, 1930
18 Section 14 of sale of goods act, 1930
19 Section 13(1) of sale of goods act, 1930
ii. Another method of reducing a condition to a warranty is to accept the goods despite the breach of the condition the buyer can accept the goods and treat it as a breach of warranty instead of breach of condition.
DIFFERENCE BETWEEN CONDITION AND WARRANTY
Basis Condition Warranty
Nature Condition is of a fundamental
nature Warranty is collateral to the main
purpose of contract
Meaning Stipulations those are essential for main purpose of contract. Non-fulfilment ofsuch will mean loss of foundation of contract. These are termed as conditions.20 A warranty is an assurance given by the seller to the buyer about the state of the product, that the prescribed facts are authentic.
Defined Section 12 (2) of Indian Sale Of Goods act, 1930 Section 12 (3) of Indian Sale Of Goods Act, 1930
What is it? It is directly associated with the objective of the contract It is ancillary to the objective of the contract
Result of breach In case of breach of condition, the aggrieved party can reject the contract In case of breach of warranty, the aggrieved party can only claim for damages
Remedy available to the aggrieved
party on breach Contract can be repudiated and damages can also be claimed. Damages can be claimed
20 Section 12 of sale of goods act, 1930
PRACTICAL APPLICATION OF CONDITIONS AND WARRANTIES – SAMSUNG REFRIGERATOR
TERMS & CONDITIONS OF SALE :
1. The goods will deliver to the delivery location or you can collect the goods from us
2. There will be the extra charges for transportation of goods from or to the premise of consumer
3. If the service center inspects the product but the users do not want the inspection then the inspection fee will be charged.
4. The service charges shall be charged for inspection of any product or replacement of any part of the product with the accessory cost.
5. Every effort will be made to supply goods in accordance with agreed specifications, designs, materials where such modification will not affect the quality of the products.
6. The labor charges as mentioned in this are applicable only for the products sold by Samsung Authorized Dealers in India
7. Unless otherwise notified to you, the products will be invoiced at the price set out in the order or ifno price is quoted the price stipulated in our published price list current at the date of the acceptance of the order.
1. The warranty is not transferable it will be confined to first purchaser.
2. The repairs should be carried out under the warranty period bythe company authorized personnel only.
3. The units which are installed beyond the municipal limits of the company’s authorized service center, it is the responsibility of the consumer to contact the nearest service center at their own cost and risk
4. In the case of repairs of any part of the product, the warranty will continue and remain in force only for the unexpired period.
5. In case of any damage to the product or misuse detected by the service center personnel, the warranty conditions will not be applicable.
CASES WHERE WARRANTY IS NOT APPLICABLE
1. When the product is not purchased form authorized dealer.
2. When the product purchased is not used according to instructions given in the instruction manual, as determined by the authorized service center or the company personnel.
3. When defects caused by improper use, as examined by theAuthorized Service Centre or the Company personnel.
4. When the original serial number is removed or altered from the product.
5. When defects caused due to the abnormal situations which are beyond the control of humans like lighting, abnormal voltage, acts of god while in transit to service center or to the purchaser’s residence.
6. When the defects caused to the product by household pets, rats, cockroaches or any other animals or insects.21
DOCTRINE OF CAVEAT EMPTOR
The maxim of “Caveat Emptor” means let the buyer beware. According to the doctrine of Caveat Emptor, the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made. So, buyer must examine the goods thoroughly before buying the goods, it is the duty of the buyer to ensure that the goods are of the quality which he wants.
Once the goods were brought, the buyer could not claim that the goods were unsuitable for his purpose, he could not hold seller responsible for any defect in the goods. The seller is not responsible if the goods are not suitable for the object for which they have been purchased. The seller’s liability arises only when there are hidden defects in goods which were not visible at the time of purchase. Unless, there is an agreement to the contrary, the risk involved in a purchase is of the buyer.22
Example: A purchases a horse from B. A needed the horse for riding but he did not mention this fact to B. The horse was not suitable for riding but is suitable only for carriage of goods. The doctrine ofcaveat emptor applies here and so Acan neither return the horse nor claim the compensation from B.
21 https://www.samsung.com/in/support/warranty/, 19th July 2018, 7: 00p.m
22 Findlaw, https://consumer.findlaw.com/consumer-transactions/what-does-caveat-emptor-mean-.htmlndlaw, 19th July, 2018, 9:00p.m.
EXCEPTIONS TO THE DOCTRINE OF CAVEAT EMPTOR
The exceptions to the doctrine of caveat emptor are as follows:
• Implied Condition regarding Quality or Fitness
Where the goods are such that it is used only for one purpose or purpose for which goods is generally used is already known to the seller, it will not be necessary for the buyer to expressly specify the purpose for which the goods is required. There is an implied condition that the goods shall reasonably fit for such purpose.
• Implied condition of merchantable quality
It is the second exception to the rule of doctrine ofCaveat Emptor. This exception is contained in Section 16(2) of Sales of Goods Act, 1930. It deals with the goods that are brought 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.23
• Usage of Trade
An implied condition with regard to quality or fitness of goods for a particular purpose may also establish through the proof of rational usage of trade.
• Consent by Fraud
Where the seller makes a false statement deliberately to the buyer and the buyer relies on the facts made by the seller or where the seller knowingly hides the defects in the good, the doctrine of caveat emptor does not apply.
• Sale under a Patent or Trade name
In the case of a contract of sale of specified articles under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose because when the buyer buys the goods from a seller under a patent or trade name he relies upon the patent or trade name and not upon the skill or judgement of the seller.
23 Section 16(2) of the sale of goods act,1930
• Sale by sample
The rule of Caveat Emptor does not apply in a sale of goods by the sample, if the bulk purchased by the buyer is not according to the sample, or ifthe buyer is not given an opportunity to compare bulk with the sample.24
• Purchase by description
The rule of caveat emptor does not apply in a case where goods are brought by description from a seller.
CAVEAT EMPTOR TO ‘CAVEAT VENDITOR’ ; ROLE OF CONSUMER PROTECTION ACT, 1986
Long time back, the Latin maxim that was applicable was “Caveat Emptor” which means let the buyer beware. A consumer was subjected to exploitation by corrupt traders and service providers. On having known the conditions in which the civil courts work and the time period they require to dispose the cases, an aggrieved consumer would never approach the court. Therefore, a need was felt to provide protection to the consumers from the exploitation of the sellers; for this purpose, Consumer Protection Act 1986 was enacted.
The act defines consumer as a person who pays money for goods and services and deserves to get what he pays for. The Consumer ProtectionAct provides for a three tier quasi-judicial system at the district, state and national level. The act provides various rights to the consumers such as right to safety, right to be informed, right to be heard, etc.25
We have come long way from the application of the maxim Caveat Emptor. The reason for this may be the awareness among the citizens about their rights. The maxim which is more relevant today is “Caveat Venditor” which means let the seller beware and the increase in awareness of Consumer Protection Act has indeed paved the way for a bright future of consumers.
24 Section 17 of sale of goods act, 1930
25 Krupa Thakkar, the Law Blog, https://thelawblog.in/2017/03/19/evolution-of-consumerism-in-india-journey-from- caveat-emptor-to-caveat-venditor/ 20TH July 2018, 8: 00p.m
Caveat Venditor is the Latin for let the seller beware, it refers to the sale of something of value in which the seller does not deny responsibility prior to the sale. In this situation, the seller assumes liability to the buyer for any alteration from the specifications stated in the written sales contract, the seller must have knowledge of implied conditions and warranties.
The seller will be liable for loss on account of sale if the goods do not come up to the standard required by law even though he has taken all possible care and it is the duty of the seller to disclose all the relevant facts related to the product. The doctrine ofcaveat emptor discourages the sellers to sell the defective goods to the buyer, the seller shall be under an obligation to inform the buyer of any defect in the goods sold at the time of the contract except in a case where the defect is known to the buyer. This forces the seller to take responsibility for the product and discourages sellers from selling products of inferior quality.26
There may be a number of terms and stipulations in a contract of sale. All these terms, are not of equal significance, some of the terms and stipulations are so important that they go to the root of the contract and a breach of them is considered to be a serious matter and may give to the aggrieved party the right to treat it as a breach of contract as a whole and therefore to repudiate the contract. Such a term or stipulation is called a condition, on the other hand, there may be other terms of stipulations which may not be so vital and are not considered so serious and as such a breach of them may give the aggrieved party the right to claim only damages for such breach.
In few cases condition can be treated as warranty, the buyer waives the condition or elects to treat the breach of condition as a breach of warranty or accepts, he cannot reject the goods and treat the contract as repudiated. He can only claim damages for the breach of condition as if it is a breach of warranty. This rule does not apply in case of the performance of the contract becomes impossible or unlawful. The parties to a contract of sale may include as many conditions and warranties as they like. Apart from the conditions and warranties they expressly include in their contract, there are certain conditions and warranties which are implied by law.
26 http://www.legalserviceindia.com/articles/caveat1.htm, 20th July 2018, 9: 00p.m
The doctrine of caveat emptor states that the buyer must ensure that the good that he is buying is of his requirement and in the absence of any enquiry from the buyer; the seller is not bound to disclose every defect in goods of which he may be aware. This doctrine leads to the exploitation of consumer by the unscrupulous sellers.
With the introduction of Consumer Protection Act, 1986, the principle of caveat emptor changed to the principle of caveat venditor the doctrine of caveat venditor increases the obligation of sellers towards the consumers. The seller must disclose all the relevant facts related to the product to consumers. the seller should not use unfair trade practices against consumers.