CONDITION AND WARRANTIES
Every contract is made up of stipulations which are divided into two categories, namely, conditions and warranties.
Condition- condition is a stipulation essential to the main purpose of the contract, breach of which give rises to treat the contract repudiated. Eg
Warranty- is a stipulation collateral to the main purpose of the contract, breach of which cannot treat the contract repudiated but give right to claim for damages. Eg
Distinction between condition and warranty
It is essential to the main purpose of the contract
On breach of condition contract may be repudiated
On breach of condition buyer may reject the goods
In breach of condition aggrieved party is not bound to perform the contract
The buyer may treat the breach each of the conditions as breach of the warranty only
It is collateral to the main purpose of contract
On breach of warranty contract cannot be repudiated, but only damages can be claimed
On breach of warranties goods cannot be rejected
In breach of warranty aggrieved party is bound to perform the contract.
A breach of warranty connot be treated as breach of conditions the buyer.
Implied conditions
Conditions may be expressed or may be implied. Express conditions are those which the parties provide for them expressly in the terms of contract. Implied conditions are such as the law incorporates into the contract unless the parties stipulate to the contrary.
- As to title of goods(sec 14(a)) In every contract of sale, there is an implied condition that seller has right to sell the goods Eg A bought a motor car from B and used. Subsequently it was known that B had no title on the car and A had to return the car to the real owner.
- Sale by description (Sec 15) in case of a sale of goods by description, there is an implied condition that goods shall correspond with the description.
Grant Vs Australian Knitting Mills Ltd – woollen under garments case
Eg A advertised to sell red 2008 model maruti 800 car and it is essential that the car must be red maruti 800 and 2008 model.
- Sale by sample as well as description – where a contract is for the sale of goods by sample as well as description, there is an implied condition that goods shall correspond to sample as well as description.
- Fitness of the goods(sec 16(1)) Normally there will be no implied condition with regard to quality or fitness of goods for any particular purpose but under the following circumstances there will be an implied condition:
a) Where buyer has expressly or impliedly made known the intended purpose for which goods are required
b) Buyer relies on sellers skill or judgment
Eg : In Priest Vs Last :- a hot water bottle was bought by plaintiff, from a chemist who sold such articles. While being used by his wife, the bottle burst and injured her. Held, the seller was responsible for damages.
- Merchantable Quality:- In a contract of sale, there is an implied condition that goods purchased are of merchantable quality. By merchantable quality means goods must be fit for human consumption and not harmful for health.
Eg. A purchase some food items form a departmental store. The food was defective and A suffers from food poisoning. A is entitled to claim damages from the seller because goods were not fit for human consumption.
- Usage of trade (sec 16(3)) In a contract of sale there may be any other implied condition with regard to quality or fitness for a particular purpose by usage of trade.
- Sale by sample – where a contract is for the sale of goods by sample, there is an implied condition that goods shall correspond to sample.
a) Bulk should correspond with sample
b) Buyer to have reasonable opportunity to compare.
c) The goods must be free from defects.
Implied warranty
1. Quiet possession of the goods (sec 14) In a contract of sale thgere is and implied warranty that purchaser will receive quiet possession of the goods. Where the buyer has obtained possession of the goods and his right to possession and enjoyment of the goods is in any way disturbed, he has a right to sue the seller for damages
2. Free from encumbrance: In a contract of sale there is an implied warranty that goods are not subject to any right in favor of third party.
3. Usage of trade (sec 16(3)) In a contract of sale there may be any other implied warranty with regard to quality or fitness for a particular purpose by usage of trade.
Doctrine of Caveat Emptor.
Caveat emptor is a Latin expression which means buyers beware. Ordinarily a buyer must buy foods after satisfying himself of their quality and fitness. It is no part of the seller’s duty to point out the defects in the goods he is selling.
Exemptions:- thus the rule of caveat emptor will not apply under the following circumstances.
1. Where the buyer relies upon the skill and judgment of the seller
2. Where the sale is under patent or trade name
3. Merchantability
4. Seller is guilty of fraud: A contract of sale of goods must satisfy all essentials of valid contract and therefore if the consent of the buyer was obtained by fraud, the seller is not protected by the doctrine of caveat emptor. Similarly if the seller knowingly conceals any defect in the goods which the buyer could not discover on a reasonable examination the doctrine of caveat emptor shall not apply.
CIF contract
CIF stands for cost, insurance and freight. When the buyer orders goods from a merchant abroad then the seller insured the goods and delivered them to a common carries like ship. Three document s namely the invoice, insurance policy and the bill of lading are sent usually through sellers’ bank situated at the place of the buyer. The bank to which documents are sent, collect the price form the buyer and delivers the document to him. Hence under CIF contract price include
a. The cost of goods
b. Insurance premium
c. Freight charges
This procedure protects the seller, because the goods
continue to be in his ownership until the buyer pays for them. The buyer is equally protected, for he is only called upon to pay against the documents and the moment he becomes the owner and can take delivery of goods.
FOB and FOR contract
FOB stands for Free On Board and FOR stands for Free On Rail. In such contract the seller has to put the goods on board or on rent at sellers’ expense. So for the buyer is concerned, he is free from bearing the cost of putting the goods on board. But he is responsible freight, insurance and subsequent expenses.
UNPAID SELLER (sec 45(1))
An unpaid seller means a seller who has not been paid the price of the goods or who has received a bill of exchange or any other negotiable instrument but which is subsequently dishonored.
Rights of unpaid seller.
Under the sale of goods Act the unpaid vendor has the following two kinds of rights viz:-
a) Rights against the goods
b) Rights against the buyer personally
a) Rights against the goods
1. Right of lien
2. Right of stoppage of goods in transit
3. Right of resale
4. Right of withholing property
Right of lien(sec 47 to 49)
If the buyer does not pay the price of the goods, the seller has right to retain the goods, the seller has right to retain the goods until the whole price due to him is paid. This right is known as the unpaid vendors’ lien
Right of stoppage of goods in transit (sec 50 to 52)
Right of stopping the goods in transit is just an extension of the unpaid sellers’ right of lien. When the goods are in the sellers’ possession; he always entitled to exercise his lien and can retain the goods with him. When the goods have come in the buyers possession then the right of lien is altogether lost. When an unpaid seller has sent the goods, but the goods have not actually come into the hands of the buyer, ie while the goods are in transit, the seller has the right to stop the goods in transit and regain the possession. It is known as right of stoppage of goods in transit
Right of resale (sec 54)
The unpaid seller who retained possession of goods in exercise of his right of lien or who has resumed possession from the carrier upon insolvency of the seller can resell the goods
1. If the goods are of perishable nature without any notice to the buyer
2. In other cases after notice to the buyer, calling upon him to pay the price within a reasonable time and upon failure of the buyer, seller can resale the goods.
3. Where the seller expressly reserve a right of resale in case of buyers default
Right of withholding property
When the property in the goods has not passed to the buyer the unpaid seller has in addition to others, a right to withhold delivery.
b) Rights against the buyer personally
1. Suit for price(Sec 55)
Where property has passed to the buyer and the buyer wrongfully refuses or neglects to pay for the goods, the seller may sue him for the price of the goods.
2. Suit for damages (Sec 56)
Where property has passed to the buyer and the buyer wrongfully refuses or neglects to accept the goods, the seller may sue him for damages for non acceptance. Seller is entitled to
a) Recover any loss occurred due to buyers refusal or neglect to take delivery
b) Recover reasonable charges for care and custody of goods
3. Suit for repudiation (Sec. 60)
If the buyer repudiates the contract before the date of delivery the seller may treat the contract as subsisting and wait till the date of delivery, or may treat the contract as rescinded and sue for damages for breach.
4. Suit for interest (sec 61)
Where there is specific agreement between the seller and the buyer as interest on the price of the goods the seller may claim it from the date when payment becomes due. If no specific agreement, the interest is payable from the date notified by the seller to the buyer
Subject matter of the contract
Goods form the subject matter of the contract of sale. Goods means every kind of movable property other than actionable claims and money. Actionable claims means something which is enforcible only by action in court of law eg:- a debt due
Type of goods
Goods are divided in to three types
1. Existing goods
2. Future goods
3. Contingent goods
Existing goods:- Goods owned and possessed by the seller at the time of making the contract of sale are called existing goods.
Existing goods may again be either specific, ascertained or unascertained
a) Specific goods:- specific goods means goods identified and agreed upon at the time of a contract of sale is made
Eg:- If A who owned a number if cows, promises to sell one of them, the contract is for unspecified goods but of the cow that is to be sold has be singled out, the contract is for specific goods
b) Ascertained goods:- Ascertained goods means goods identified in accordance with the agreement after the contract of sale is made. Eg:- If A had 30 chairs of the same kind and offers to sell 15. The goods are ascertained only 15 chairs are appropriated towards a contract.
c) Un ascertained goods;- Unascertained goods are goods defined by description or by samples. Unascertained goods are not definite and specific Eg:- A promises to sell to B one of his 10 cows without pointing out separately any of them
Future goods:- future goods means to be manufactured or produced or acquired by the seller after the making or the contract of sale. Eg:- A contract to sell oil not yet pressed from seeds in his possession.
Contingent goods:- Contingent goods are a type of future goods, the acquisition of which by the seller depends upon a contingency which may or may not happen
Eg:- goods to arrive, a future crops or eggs.
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