Kinds Of Conditions and Warranties

Condition and warranty may either be express or implied.

Express Conditions and Warranties

They are said to be express when the terms of the contract expressly provide for them. Thus, where a buyer desires to buy ‘White Maruti Car’, the colour of the car becomes an express condition. If the two contracting parties desire, they may put the contents of any specific statement or promise which has taken place between them at par as the description of the thing contracted for. This then shall be treated as express condition. The parties are at liberty to impose any condition or warranty by an express agreement in a contract of sale.

Similarly, you must have noticed companies advertising their products carrying guarantee for a certain period, for instance, ‘Orient Fans - Guaranteed for Two Years’. ‘Binatone TVs - Three Years Guarantee’. All these are example of express warranties.

 


Implied Conditions

Conditions and Warranties are said to be implied when the law infers their existence as implicit in the contract even without their actually having been put in the contract. Hence, unless otherwise is agreed upon between the parties, every contract of sale of goods shall be subject to these implied conditions and warranties. But the parties do have the right to exclude any of the implied conditions or warranties by specifically and expressly providing otherwise. The implied conditions and warranties are enforced because the law deems that in the circumstance of the contract the parties desired to add these stipulations to their contract but did not put them expressly. These implied conditions and warranties are contained in Sections 14 to 17 of the Act and are as follows:

1. Conditions as to title (ownership): Sale involves transfer of ownership and possession. Therefore, Section 14 (a) provides that 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 he has a right to sell the goods, and that in the case of an agreement to sell, he will have a right to sell the goods at the time when the property (ownership) is to pass.

The aforesaid provision, you should note, is based upon a simple logic that only an owner has the right to affect a valid sale of goods, since only he (subject, however, to certain exceptions which you will study later under ‘Sale by Non-owners’) can confer ownership. The rule of law is Nemo dat quod non-habat, i.e., ‘one cannot give what one does not have’. In every contract of sale there is an implied condition that the seller has a valid title to the goods. This condition is very essential to protect the interest of innocent buyers.

The following example will clarify the point further:

A purchased a car from B who had no title to it. A used the car for several months. After that, C, the true owner, spotted the car and demanded it from A. Held, that A was bound to hand over the car to its true owner. A’s remedy is to sue B, the seller without title, for the recovery of the price and damages even though several months had passed (Rowland v. Divall).

However, this condition like other implied conditions, may be negatived by an express term. Thus, where a thief goes to a ‘Chor Bazar’ to sell the stolen goods to the knowledge of the buyer thereof, the buyer may not get the refund of sale price if those goods are to be restored to its real owner. Similarly, when the custom authorities sell any confiscated items, they are absolved from any responsibility with respect to the owner’s title. It should further be noted that the seller should have the right to sell the goods. The term ‘right to sell’ is wider than ‘right to pass ownership’. Thus, a seller has no right to sell, if he infringes the trade mark of another person.

Therefore, if the seller sells the goods in contravention of trade mark laws, it is regarded as a breach of implied condition as to title. In such a case the buyer will have a right to terminate the contract of sale. In Niblett Ltd. v. Confectioner’s Materials Co. certain tins of condensed milk bearing the label “Nissly Brand” were sold by A to B. In order to save themselves from any liability under the trade mark laws, B had to remove the labels and sold the naked tins at loss. A was held liable for breach of implied conditions that they had a right to sell.

 

2. Sale by description: Sometimes, the goods are sold by description. In such a case, Section 15 lays down that there where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with description. The term ‘correspond with ‘description’ means that the goods supplied must be same as were described by the seller. If it is found that the goods supplied do not correspond with the description, the buyer has a right to reject the goods and claim damages. The term ‘sale of goods by description’ is wide and shall include many situations.

i) It will include a case where the buyer has never seen the goods and buys them only on the basis of the description given by the seller. For example, in a sale of a reaping machine, the seller described it to be only one year old and used only to cut 50 to 60 acres. On delivery, the buyer found that the machine was extremely old. The buyer was entitled to reject the machine as it did not correspond with the description given by the seller (Varley v. whipp).

Similarly, where a person orders for 2 ‘Philips Juicer-made in Japan’ it will not be a sufficient compliance if a ‘Philips Juicer-made in Hongkong’ is supplied to him.

ii) Even where the buyer has seen the goods, it may be treated a sale by description, if he purchases those goods not on what he has seen but what was stated to him. Thus, where a person orders 100 bags of a particular variety of ‘Punjab Wheat’ and the wheat supplied to him is found to be ‘Gujarat Wheat’, condition as to description shall be deemed to have been violated in spite of the fact that buyer was shown the wheat to be delivered. Similarly, in an auction sale, a set of linen napkins and table cloths were described as “dating from seventeenth century”. The buyer, who was a dealer in antiques, purchased the same after seeing it, but later found it to be an “eighteenth century set”. It was held that they having relied on the description, the buyer had a right to return the same for not conforming to the description (Nicholson and Venn. v. Smith Marriott).

iii) The methods of packing may also form part of the description, for example, where a seller agrees to deliver 5,000 tins of canned fruit to be packed in cases each containing 50 tins, the buyer shall have a right to reject the goods if the cases contain ‘more’ or ‘less’ than 50 tins.

 

3. Sale by sample: Sale by sample means that the seller has shown a sample of the goods to the buyer and has agreed to supply the goods according to the sample. It cannot be assumed that in all cases, where sample is shown, the sale shall be a sale by sample. In cases where there is no term to that effect, it is assumed that the sample is not shown as a warranty, but only to enable the buyer to form a reasonable judgement about the goods to be bought. The goods supplied may marginally differ. They may be inferior or superior to the sample shown.

In case of a contract of sale by sample, law assumes the sale to be subject to the following three implied conditions:

i) The goods must correspond in quality with the sample, i.e., the buyer shall have a right to reject goods inferior or superior to the sample.

ii) The buyer shall have a reasonable opportunity of comparing the goods with the sample. Thus, the seller will have to take the goods back, if they are not found to be according to the sample. In fact, depending upon the nature and volume of the goods involved, opportunity to compare the goods with the sample shall be available to the buyer. For example, in a sale of 100 bags of wheat, the buyer is given an opportunity to examine the contents of three bags only. The buyer can terminate the contract.

iii) The goods shall be free from any defects rendering them unmerchantable, which would not be apparent on reasonable examination of the sample, i.e., latent defects. Such defects are discovered when the goods are put to use. However, seller will not be liable for apparent or visible defects which could be easily discovered by an ordinary prudent person. For example, A sold to B certain quantity of worsted coating equal to sample. The coating was equal to sample but had a latent defect as a result of which the cloth was found to be unfit for making coats. It was held that the buyer could reject the goods. The reason for this was that though the sample also contained the defect was not apparent on an examination of sample (Drummond & Sons v. Van Ingen).

 

4. Sale by sample as well as by description: If the sale is by sample as well as by description, Section 15 requires that the goods must not only correspond with the sample but should also correspond with the description. The following examples explain the point:

i) In Wallis v. Pratt case the agreement was for the sale of ‘English Sainfoin Seeds’, exhibited by sample and described as common English Sainfoin. However, seller did not give any warranty regarding the growth description or any other matter. The seeds supplied did correspond to the sample but both the sample and the seeds supplied were found to be ‘Giant Sainfoin’, in altogether different variety. Held, there was a breach of condition as to description and therefore the buyer may recover damages from the seller.

ii) ‘Foreign refined rape-seed oil’ was sold which was warranted to be equal to sample. The oil which was supplied by the seller was according to the sample. The sample was actually not ‘foreign rape-seed oil’ but contained a mixture of rape oil and hemp oil. Held, the buyer could reject the oil (Nichol v. Godts).

 

5. Condition as to quality or fitness: The general rule in respect of the sale of goods is that a buyer is supposed to satisfy himself about the quality as well as the suitability of the goods. Thus, later on, if the goods turn out to be unsuitable or unfit for the purpose, he purchased them for, he shall not be entitled to return or exchange them or seek compensation. There are, however, certain exceptions to this rule. It is in these exceptional circumstances that implied condition as to fitness applies.

Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgement, and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not) there is an implied condition that the goods shall be reasonably fit for such purpose [Section 16(1)]. Thus, to avail of the condition as to fitness, all the three conditions must be satisfied, viz.,

i) the exact purpose for which the goods are being bought must have been disclosed (expressly or impliedly) by the buyer to the seller,

ii) the buyer must have relied upon the seller’s skill or judgement with respect to the fitness of the goods for any particular purpose, and

iii) the seller’s business must be to sell such goods (the condition cannot be invoked against a casual seller).

Thus, in Priest v. Last, a draper went to a chemist shop and asked him to give a hot water bottle. He told him the purpose also for which it was required. The chemist gave the hot water bottle but told him only to use hot water because the bottle would not stand the boiling water. While the bottle was being used, it burst and injured her. Held, breach of condition as to fitness was committed and the chemist was liable for refund of price as well as damages because the bottle was unfit for being used as a hot water bottle.

When the goods can be used only for one particular purpose, the buyer need not tell the seller the purpose which the goods are being bought. Thus, a refrigerator that failed to make ice would be rejected on grounds of breach of this condition (Evens v. Stelle Benjamin). A set of false teeth bought from a dentist may be rejected if they do not fit the buyer’s mouth (Dr. Baretto v. T.R. Price).

The problem may arise where the goods are capable of being put to multiple uses. In such a case, to avail the relief under the aforesaid condition, the buyer must show that he had explained to the seller the exact purpose for which the goods were purchased. For example, in Re: Andrew Yule & Co., hessian cloth, which is generally used for packing purposes, was supplied to buyer in accordance with his order. The buyer found it unfit for his purpose of packing foodstuffs because this cloth has a peculiar smell, although it was good as a packing cloth. Held, the buyer cannot reject it because he had not disclosed to the seller, the particular purpose for which he required the cloth. The buyer need not disclose the exact purpose for which he is buying the goods when the goods are fit only for a specific purpose or where the nature of the goods itself by implication tells the purpose for which they are being bought. In those conditions the purpose is deemed to have been impliedly told. For example, if the buyer demands a cold drink from the seller, it is implied that the buyer needs it for consumption and subsequently, if it is found to contain some unhealthy contents, it is a breach of implied condition as to fitness and makes the seller liable to pay damages.

However, condition as to fitness shall not be applicable in the following cases:

i) Where the buyer fails to disclose to the seller any abnormal circumstances. In Griffith v. Peter Conway Ltd., a woman with abnormally sensitive skin asked for a warm tweed coat and was supplied a ‘Harris Tweed Coat’. She got rashes on wearing the coat. Her claim for return of price and damages was struck down because there was nothing in the Harris tweed which would have affected the skin of a normal person and she had failed to inform the seller about her abnormally sensitive skin.

ii) When the buyer buys the goods by a patent or other trade name. Thus, where a person goes to a chemist and purchases ‘Bournvita’ as a health drink, he cannot claim any compensation if he finds no improvement in his health in spite of its prolonged use.

 

6. Condition as to merchantable quality: Section 16(2) of the Act provides that where the goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality. The expression ‘merchantable quality’ in simple words means that the quality of the goods shall be such that they are capable of being used as the goods of that description and should be free from any latent or hidden defects. If the goods are purchased for resale, then they should be resaleable in the market under the description by which they are ordinarily known in the market. There should be no defect in the goods which renders them unfit for sale. For example, if sugar becomes syrup (Sharbat) it is no longer merchantable. The term ‘merchantability’ also means that the goods must be properly packed. For example, A purchased wine from B. While opening its cork in the normal manner, the bottle broke off and injured A’s hand. It was held that the bottle was not of merchantable quality and A could recover damages from B.

Examples

a) A person purchases a 3-metre suit length to make it into a three-piece suit and gives it to the tailor for stitching. The tailor after stitching coat and waist-coat finds that the balance of the cloth is sufficient to make only half-pants instead of full pants - the cloth having a texture defect, i.e., it is not uniform throughout its width. The buyer shall have a right to claim compensation.

b) A purchases Black Yarn from B and finds it to be damaged by white ants, the condition as to merchantability shall be said to have been breached.

c) A sold a plastic catapult to B. While B’s son was using it in the usual manner, the catapult broke due to the fact that the material used in its manufacture was unsuitable. As a result, the boy was blinded in one eye. It was held that A, the seller was liable as the catapult was not of merchantable quality (Godley v. Perry).

It should be noted here that when the buyer buys the goods after examining them, the implied condition as to merchantability shall not be applicable as regards those defects which the buyer by an ordinary examination could have discovered. For example, A purchased glue from B, which was packed in barrels. A was given every facility to examine the goods, but the buyer A did not bother to examine the contents. Here A cannot reject the goods by saying that they are not merchantable. Had he taken the trouble of examining the goods, he would have easily discovered the defect (Thornett v. Beers).

 

7. Condition as to wholesomeness: In case of items which are supposed to be physically consumed, e.g., provisions or foodstuffs, condition as to merchantability assumes another form, viz., condition as to wholesomeness. Condition as to wholesomeness means that the goods shall be fit for human consumption, that is, they shall not be stale or contaminated. In Frost v. Aylesbury Dairy Co. Ltd. F bought milk from A’s dairy. The milk contained typhoid germs. F’s wife consumed the milk, became infected and died. A was held liable for damages because the milk was not fit for human consumption. Thus, an action shall lie if a ‘house fly’ is found in a bottle of cold drink or a ‘lizard’ in a bottle or pack of milk and the consumer, therefore, suffers thereby.

 

Implied Warranties

There are only two implied warranties under the Act and both of them are in fact necessary corollaries to the ‘implied condition as to title’. These are:

1. Warranty as to quiet possession: In every contract of sale, unless contrary intention appears from the circumstances of the contract, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. Thus, if the right of enjoyment or possession of the buyer is disturbed by the seller or any other person, the buyer shall be entitled to sue the seller for damages. Breach of this warranty shall arise where the title of the seller is not exclusive and he has not been conferred a clear right to affect the sale or where his title is defective.

This implied warranty can be understood by referring to the case of Niblett Ltd. v. Confectioner’s Materials Co. Ltd. which you have already read in this unit. In that case the seller was held responsible for two things. Firstly, that they had committed a breach of implied condition as to their title and secondly, for committing breach of implied warranty that the buyers would have quiet possession of the goods sold.

 

2. Warranty of freedom from encumbrances: Under this warranty, the buyer is entitled to assume that the goods are free from any charge or encumbrance in favour of any third person, not declared to or known to him before or at the time when the contract is made. Thus, this clause will not be applicable where the buyer has been informed of the encumbrances or has notice of the same. Further, it was held in Collinge. v. Heywood case that the claim under this warranty shall be available only when the buyer discharges the amount of encumbrance. If the possession of the buyer is disturbed due to such charge in favour of a third person, he can claim damages from the seller. For example, A sells certain goods to B. A had already taken a loan of Rs. 500 from X on the security of those goods. B was not aware about this charge on the goods. B had to pay Rs. 500 to X in order to enjoy the goods. Now B can claim this amount from A.

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