Types of conditions and warranties
Types of Conditions and Warranties
In a contract of sale of goods, there are two types of conditions and warranties: Express conditions and warranties and implied conditions and warranties. Express Condition and warranties are those which are expressly provided in the contract at the time of the agreement. By contrast, implied conditions and warranties are presumed by law into each and every contract unless the parties stipulate to the contrary. Further, an express condition or warranty does not negative an implied condition or warranty.
Even though in a contract of sale, definite representations might not have been made, yet the law implies certain representations as having been made. The implied conditions in a contract of sale are as follows:
1) Condition as to title to goods sold: The first condition implied as a matter of law in every contract of sale is that the seller has got the right to sell the goods and in case of an agreement to sell, he will have a right to sell the goods at the time with property is to pass.
- B bought a car from S and used it for some months. S had no title to the car and consequently B had to hand it over to the true owner T. B could recover the price paid.
- S sells a cow to B which has delivered to him under a bailment when the true owner of the cow knew that it has been sold out to B, he seized the cow from B. S is bound to return back the amount to B.
2) A condition in sale by sample: Where the goods to be sold are bulky in nature the contract can be entered into by providing sample of the goods. In such a case there is implied condition that:
- The buyer has right to check the good whether the goods supplied are matched to the sample provided.
- He has right to reject the goods and can recover the amount already paid.
- Only the receive or retain of the goods does not amount to the acceptance of the goods so supplied.
3) A condition in sale by description: Where a contract is for the sale of goods by description, the goods delivered shall correspond with the description. If the description of the article tendered is different in any respect, it is not the article tendered is different in any respect, it is not the article bargained for and the other party is not bound to take. Section 44 of the Contract Act, 2056 provides 44(1): "In case the name, brand, trademark or specification of goods to be sold are mentioned in the contract, the contract shall be deemed to have to be concluded to sell goods of the same name, brand, trademark or specification."
Am implied condition as to sale of goods by description applies in the following situation:
- Where the buyer has not seen the goods and relies on their description given by the seller.
- Where the buyer has seen the goods but he relies not on what he has seen but what was stated to him and the deviation of the goods from the description is not apparent.
- Packing of goods may sometimes be a part of the description.
- If the quality of goods forms part of the description it becomes description not a quality.
4) A condition in sale by a sample as well as description: Where the sale was made by sample as well as description even though the goods supplied correspond to the samples, yet, if it does not answer to be description, the condition is deemed to be breached and the buyer may reject the goods. If however, the sale is solely by sample and there is no other description. The seller will be deemed to have contracted only for stuff identical with the sample. Section 44(2) reads as follows:
"In case the name, brand trademark or specification and sample of goods to be sold have been mentioned, the bulk of those goods shall correspond not only to the sample but also to their name, brand, trademark or specification as mentioned in the contract."
5) Condition as to quality or fitness: Generally, in a contract of sale, there is no implied condition or warranty as to quality or fitness for any particular purpose of goods supplied under a contract. In regard to quality or fitness under a contract of sale, the general rule is that expressed by the maxim "caveat emptor", i.e., 'let the buyer beware'. In the absence of fraud, the buyer buys at his own risk unless an express warranty has been given by the seller or unless a condition or warranty is implied from the nature and circumstances of the sale. Otherwise, the buyer must, himself, examine the goods thoroughly before the buys them in order to satisfy himself that the goods will be suitable for the purpose for which he is buying them. However, the condition as to quality or fitness shall apply:
- 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 judgment of the seller, there is an implied condition that the goods shall be reasonably fit for that purpose.
- An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the custom or usage of trade. In this case, if the goods purchased turns to be unfit, the buyer can reject the goods and terminate the contract.
But where goods supplied can be used for several purposes, the buyer in order to succeed on a breach of condition must prove that he informed the seller of the purpose for which he has buying and relied upon his judgment and that the goods supplied are not fit for the particular purpose. Knowledge of the special purpose on the part of seller may be inferred from extraneous circumstances or the background of a particular trade.
- Rekha, a leading actress purchased a tweed coat which caused her dermatitis due to her unusually sensitive skin. The seller is not liable as the cloth is fit for any with a normal skin.
- Sagar told Nirwan, a managing director of Laxmi Group, a motor car dealer, that he wanted a comfortable car suitable for a 'Jungle Safari' the MD recommend a Ford car and Sagar relying thereupon on bought one. The car was fit for the touring purpose but not for the 'Jungle Safary'. Sagar could reject the goods and service, the price paid and compensation as well.
6)Condition as to merchantability: Even though the goods may be sold by description and the goods answer to the description, yet the must be in a merchantable quality. Section 46 under subsection (1) lays down a general rule that except when otherwise provided for in the contract, goods sold or to be sold shall be deemed to be of merchantable quality. Further subsection (2) reads, "In case specific goods sold or to be sold for any specific purpose are suitable for that purpose, the shall be considered to be of merchantable quality."
Provided that in case any defect in the goods have been mentioned in the contract itself or in case the buyer had become aware of any defect before entering into the contract or while inspecting the goods, those goods shall not be deemed to be of merchantable quality.
In short, the term merchantable quality refers that the goods should be such as they are commercially saleable under the description by which they are known in the market for their full value.
7) Condition implied by custom or usage of trade: In some cases, an implied condition as to quality or fitness for a particular purpose may be annexed by the custom or usage of trade. The goods may be known for a long period of time in a particular territory to be fit a particular purpose. In such case, the buyer need not disclose his purpose or rely on the seller's skill or judgment. If the goods unfit such purpose for which it is known, the buyer can reject the goods.
- Example: B bought a set of the false teeth from a dentist, S. The set did not fit into B's month. B could reject the set as the purpose of which anybody would buy it was implicitly known to the seller, i.e. the dentist.
8) Condition as to wholesomeness of goods sold: Where the goods sold are provisions or eatables in addition to an implied condition as to merchantability, there is another implied condition that the goods shall be wholesome, i.e., the goods must be medically fit to eat or consume.
As we already observed that every one of the implied conditions may sink to the level of warranty in which the buyer is not in a position to reject the goods or elects to be content with his right to damages. However, the following are the implied warranties in a contract of sale.
1) Warranty for quiet possession: 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 to the seller to damages so caused. In a contract of sale, unless there is a different intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the good. If the buyer is in any way disturbed in the enjoyment of the goods in consequence of the seller's defective title to sell, he can claim damages from the seller.
- Example: A bought a car from B and taken it to a garage to inspect its engine's position. B immediately exercise his right of lien as the B had not paid repairing charges Rs. 10,000. Hence, A is deprived of using the car for 5 days. He can recover the amount as loss causes to him as he was deprived of using the car.
2) Warranty against encumbrances: The buyer is also entitled to a further warranty that the goods purchased are not subject to any right in favor of a third party. If his possession is in any way disturbed by reason of the existence of any charge or encumbrance on the goods in favor of any third party, he shall have a right to claim damages for breach of this warranty. Therefore, the goods must be free from encumbrances payable to any third person.
- Example: A purchased some quantity of 'Yarcha Gumba' at Dolpa from B, a seller and dealer of such Himalayan herbs at a certain rate. When he was carrying the goods to Kathmandu, it was inspected by the government officials and charged A Rs. 20,000 as no local tax to be paid to Forest Office by the seller. If he pays that amount to the official, he can recover the paid amount and loss therefor against the seller.
3) Warranty as to disclose the dangerous nature of goods: Where the goods sold contains some dangerous nature by reason of its manufacture or chemical composition, therefore, it should be handled with special care otherwise it may cause loss to the buyer and the buyer is ignorant of this, the seller has to disclose the dangerous nature of the goods. If he does not disclose such dangerous nature and buyer suffer loss, he is bound to compensate the buyer.
4) Warranty as to quality or fitness of goods by custom or usage of trade: An implied warranty as to the quality of fitness of goods for a particular purpose may be annexed by the custom or usage of trade prevailing in a particular territory and applied to a particular type of goods or business.
At last but not least, the implied conditions and warranties in a contract of sale may be negative or varied by express agreement between the parties, or the course of dealing between them, or the custom or usage of trade.
Business Law, Ram Prasad Shrestha;M.K Books, Bhotahity, Kathmandu,2013
Merchantile law, ICAI, 2013
Types of and warranties
1) Expressed condition and warranties
2) Implied condition and warranties
# Implied condition includes:
a)Condition as to title to goods sold
b)A condition in sale by sample
c) A condition in sale by description
d) Condition in sale by sample as well as description
e) Condition as to quality or fitness
f) Condition as to merchantability
g) Condition implied by custom or usage of trade
h) Condition as to wholesomeness of goods sold
# Implied warranties include
a) Warranty for quiet possession
b) Warranty against encumbrances
c) Warranty as to disclose the dangerous nature of goods
d) Warranty as to quality or fitness of goods by custom or usage of trade
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