Conditions and Warranties in Sale of Goods

Sale of Goods Act is one of very old mercantile law. Earlier this was a part of Indian Contract Act, 1872 in chapter VII (sections 76 to 123). But after the completion of it’s half century, the then legislature found that Sale of Goods is one of the special types of Contract and in perspective of it’s huge use, a special enactment to this effect is necessary. Thus, the abovementioned relevant sections in Contract Act were dug out, and separate Sale of Goods Act was passed in 1930.The Sale of Goods Act is complimentary to Contract Act. Though it is a special law but it has the root in Contract Act and so basic provisions of Contract Act apply to contract of Sale of Goods also.

The use of the word “condition" appears to have originated in the 17th century. In my second chapter I have discussed about it in brief. The Sale of Goods Act, 1930 defines the term condition in section 12(2). According to this definition a condition can be defined as a stipulation which is so vital to the contract that its complete and exact performance by one party is condition precedent to the obligation of the other party to perform his part.

Conditions and Warranties

Opening para of section 16 makes it clear that there is no implied warranty or condition as to quality of fitness of goods for any particular purpose, except those specified in Sale of Goods Act or any other law. This is the basic principle of caveat emptor i.e. buyer be aware. However, there are certain stipulations which are essential for main purpose of the contract of sale of goods which go the root of contract and non-fulfilment these cause frustration of contract. These are termed as 'conditions'. Other stipulations, which are not essential are termed as 'warranty'. Both of these are collateral to a contract of sale of goods. Contract cannot be avoided for breach of warranty, but aggrieved party can claim damages.

A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. [section 12(1)]. A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. [section 12(2)]. 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 to a right to reject the goods and treat the contract as repudiated. [section 12(3)]. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract. [section 12(4)].

Where a particular stipulation in contract is a condition or warranty depends on the interpretation of terms of contract. Mere stating 'Conditions of Contract' in agreement does not mean all stipulations mentioned are 'conditions' within meaning of section 12(2).

Express and Implied Conditions

Generally conditions which are agreed to by the parties, are commonly referred to as express conditions. Express conditions are usually consisted language like "if", "on condition that", "provided that", "I the even that", and "subject to". But usually in a dispute it is the court which decides the nature of a particular clause by the process of interpretation.

If an agreement does not make an event a condition then the court may supply a term to that effect. Such conditions will be referred to as "implied" conditions, since a court uses the process of implication to determine whether to supply a term that makes an event a condition or not, and if yes then what term to supply. The distinction between express and implied conditions is of practical importance because the rule of strict compliance is limited to express conditions.

Now the problem arises before court that when and how a

Chapter 1 : Historical Development

To understand the history of “condition" first we have to understand what is the background of the statute – Sale of Goods Act, 1930. As per the 8th Law Commission Report, the history of this Act is as follows:

Until the first of July, 1930, the law of sale of goods in India was governed by Chapter VII (sections 76 to 123) Legislation of the Indian Contract Act, 1872. The Indian Contract Act itself being based on the English Common Law, the law relating to the sale of goods in India followed the princi­ples of the English Common Law, including the Law Merchant. The English law of sale of goods was codified in 1893 by the enactment of the Sale of Goods Act which embodied the basic Common Law principles after adapting them to meet the needs of a growing society.

In India, by 1920 it was found that the law relating to the sale of goods contained in Chapter VII of the Indian Contract Act was not adequate to meet the needs of the community and that some of the provisions of this branch of the law required alteration in the light of new developments in mercantile transactions. The accretions to the law made by judicial decisions in England which were embodied in the Sale of Goods Act of 1893 were not to be found in the analogous provisions contained in the Indian Contract Act. It was also considered necessary to embody the law relating to sale of goods in a separate enactment.

Hence, in 1926-27 an exhaustive examination of the case-law bearing on the portions of the Contract Act dealing with the sale of goods was made by the Legislative Department. As a result of this examination, a draft Bill was prepared in 1928. In 1929 a Special Committee consisting of eminent lawyers examined the draft Bill and the draft Bill as revised by this Committee and, subsequently, by a Select Committee of the Legislature, was enacted as the Indian Sale of Goods Act, 1930 (III of 1930), section 65 of which repealed Chapter VII 'of the Indian Contract Act, 1872.

The Act, as passed, was mainly based on the provisions of the English Act of 1893, modified in the light of subsequent judicial decisions in England and India.

Having carefully Examined the provisions of the scape of Act in the light of judicial decisions in India since 1930, the development of the law relating to the sale of goods in other countries, the suggestions made by various com­mercial bodies and individuals as well as the requirements of the modern welfare State, we have reached the con­clusion that the provisions of the Act do not require any radical change.

Now it’s time to know the history of Condition and warranty, which has a very long history in India. We can found the same in famous “Arthasashtra" written by the great Koutilya or Chanakya in almost 4th Century B.C. Arthasastra is considered as one of the best book on “science of political economy" [1] system has ever written.

During Chandragupta’s period, in which Kautilya lived, good trade practices were prevalent. For example, “Goods could not be sold at the place of their origin, field or factory. They were to be carried to the appointed markets (panya sala) where the dealer had to declare particulars as to the quantity, quality and the prices of his goods which were examined and registered in the books." Every trader was required to take a license to sell. A trader from outside had to obtain permission. The superintendent of commerce fixed the whole-sale prices of goods as they entered the Customs House. He allowed a margin of profit to fix retail prices. Speculation and cornering to influence prices were prohibited. Thus, the State bore a heavy responsibility for protecting the public against unfair prices and fraudulent transactions. There were severe punishments for smuggling and adulteration of goods. For example, public health was guarded by punishing adulteration of food products of all kinds, including grains, oils, alkalies, salts, scents and medicines.

The ancient law relating to warranties of land was full of subtleties and intricacies; it occupied the attention of the most eminent writers on the English law, and it was declared by Lord Coke, that the learning of warranties was one of the most curious and cunning learnings of the law; but it is now of little use even in England. The warranty was a covenant real, whereby the grantor of an estate of freehold, and his heirs, were bound to warrant the title; and either upon voucher, or judgment in, a writ of warrantia chartae, to yield other lands to the value of those from which there had been an eviction by paramount title the heir of the warrantor was bound only on condition that he had, as assets, other lands of equal value by descent.

Warranties were lineal and collateral.

Lineal means, when the heir derived title to the land warranted, either from or through the ancestor who made the warranty.

Collateral warranty was when the heir's title was not derived from the warranting ancestor, and yet it barred the heir from claiming the land by any collateral title, upon the presumption that he might thereafter have assets by descent from or through the ancestor; and it imposed upon him the obligation of giving the warrantee other lands, in case of eviction, provided he had assets.

The statute of Anne, annulled these collateral warrantees, which bid become a great grievance. Warranty in its original form, it is presumed, has never been known in the United States. The more plain and pliable form of a covenant has been adopted in its place and this covenant, like all other covenants, has always been held to sound in damages which after judgment may be recovered out of the personal or real estate, as in other cases.