The Classification of Conditions in the Sale of Goods Act

Conditions are laid down in the Sale of Goods Act, 1930 in between Sec. 11 to Sec. 17. Condition generally refers to promises and the duties they generate. It is usually an event of significance but this is not always obvious as the parties in between them, if they so wish can even make an insignificant event a condition. Condition can be termed as some operative fact. Thus any event can be a condition. Whether a stipulation is a condition or not can be decided only after looking at the contract in the light of the surrounding circumstances and then deciding on the intention of the parties. This intention is the keyword in most of the cases. The present day contracts consists of almost all the possible events as conditions refer to some operative fact which has not yet occurred but which must occur so as to prevent frustration of the contract.

Tests for a term to be a condition

A term will be a condition if it satisfied one of the following four tests:

1. when the statute provides that it is a condition;
2. if a binding authority requires a court to hold that it is a condition; if every breach, or
3. if the consequences of every breach, goes to the root of the contract; or,
4. if the parties have agreed that it is to be treated as a condition.

The first three of these tests are mentioned in the statute, but the fourth option remains with the parties.

Express condition is those which are mutually agreed by the parties face to face, that one of them shall be able to terminate the contract on the happening of a breach of a particular term by the other. But it does not automatically entitle the other party to the full benefits which flow from that term being a condition. The express agreement gives an option to bring the contract to an end on the breach of that term, but such an option is no different to an option to bring a contract to an end on the happening of any defined event. The fact that the event prescribed is a breach is immaterial. There is an option, but the option does not affect the nature of the event upon which that option is exercisable. It is misleading in so far as they suggest, that a term is a condition where there is agreement by the parties that its breach is to give rise to the innocent party being able to act as though the term breached were a condition, because the court has the right to investigate whether it is the substance of the agreement that the term is a true condition, or merely the form. If it is just the form, then the term will in nominate and the, quantum of damages will depend upon whether the breach was repudiatory at common law.

Conditions can be classified into two categories:

1. Express conditions
2. Implied conditions

Express condition is a condition which has been expressly stated in the terms of the contract and failure of which will allow one party to either repudiate the contract in whole or claim for damages. On the other hand, implied conditions are those which have not been expressly stated but which the law presumes to be so inherently a part of the contract that it need not be laid down in clear and written terms but are to be understood by the parties.

Implied conditions are those which law presumes in every contract of sale of goods unless a contrary intention appears from the terms of contract.

Implied Conditions again can be divided into two head : (1) Implied condition and (2) Implied warranty.

Implied Conditions as mentioned in statute are :

Condition as to title as mentioned in Sec. 14(a) : There is a implied condition on the part of the seller that (i) in case of sale, he has a right to sale the goods, and (ii) in case of an agreement to sell, he will have a right to sell the goods at the time when the property is passing.

Example : X buys a stolen car from Y, a thief, without knowing its nature. Afterwards A demanded the same from X. X had to return the goods. X can demand the full amount from Y as he had no right to sell the goods when the property is passing [1] .

(2) Condition in case of sale by description title as mentioned in Sec. 15: Where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with description. The main idea is that the goods supplied must be same as were de­scribed by the seller. Sale of goods by description include many situations as under:

(i) Where the buyer has never seen the goods and buys them only on the basis of description given by the seller.

Example : X bought a reaping machine from Y who described it to be one year old and used only to cut 50 to 60 acres but X found that the machine extremely old. X was entitled to reject the machine because machine did not correspond with the description given by the seller [2] .

(ii) Where the buyer has seen the goods but he buys them only on the basis of description given by the seller.

Example : The buyer bought after seeing certain goods which were described by the seller as “dating from seventeenth century” but he found them of eighteenth century. The buyer was entitled to reject the goods because goods did not correspond with the description given by the seller [3] .

(iii) Where the method of packing has been described.

Example : X purchased from Y 5000 tins of canned fruit to be packed in cases each con­taining 50 tins but Y supplied cases containing 25 tins. X was entitled to reject the goods because the goods were not packed according to the description [4] .

But if the goods do not correspond with the description but such goods are fit for buyer’s purpose, even then the buyer may reject the goods and the seller can not take the defence by saying that the goods will serve the buyer’s purpose.

(3) Condition in case of sale by sample as mentioned in Sec. 17: A contract of sale is a contract for sale by sample when there is a term in the contract, express or implied, to that effect. Such sale by sample is subject to the following three conditions:

(i) The goods must correspond with the sample in quality.

(ii) The buyer must have a reasonable opportunity of comparing the bulk with the sample.

(iii) The goods must be free from any defect which renders them unmerchantable and which would not be apparent on reasonable examination of the sample. Such defects are called latent defects and are discovered when the goods are put to use. It may be noted that the seller cannot be held liable for apparent or visible defects which could be easily discovered by an ordinary prudent person.

Example : X bought from Y certain quantity of worsted coating equal to sample. The coating was equal to sample but due to a latent defect, the cloth was found to be unfit for making coats. The buyer was entitled to reject the goods because the defect contained in the sample was not apparent on reasonable examination of the sample [5] .

(4) Condition as to quality and fitness title as mentioned in Sec. 16 (1): 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 satisfy himself about the quality as well as the suitability of the goods. This is expressed by the maxim caveat emptor (let the buyer beware).

Exception to this Rule: There is an implied condition that the goods shall be reasonably fit for a particular purpose described if the following three conditions are satisfied:

(i) The particular purpose for which goods are required 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 judgment.

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

Example: X asked a car dealer to suggest him car suitable for touring purposes. The dealer suggested a ‘Buggatl Car.’ Accordingly, X purchased it but found it unsuitable for touring purpose. The car dealer is liable for breach of condition as to fitness because X who relied upon his skill and judgement is entitled to reject the car and have refund of the price paid [6] .

Example: X bought a set of false teeth from Y a Dentist. But the set was not fit for Xs mouth. X rejected the set of teeth and claimed the refund of price. It was held that X was entitled to do so as the only purpose for which he wanted the set of teeth was not fulfilled [7] .

Though there are some circumstances under which Condition as to Fitness not Applicable as per the provision to Section 16(1). They are :

(i) Where the buyer fails to disclose to the seller any abnormal circumstances.

Example: X bought tweed coat and found unfit for her abnormally sensitive skin. The seller was not liable because the cloth was fir for anyone with a normal skin and she did not inform the seller about her abnormally sensitive skin [8] .

(ii) Where the buyer buys a specified article under its patent or other trade name and does not rely upon the skill and judgment of the seller.

Example: X asks a chemist to supply ‘Bournvita’ as health drink. He found no improvement in his health in spite of its prolonged use. He is not entitled to claim any compensation because there was no condition as to fitness because goods are bought under patent name.

The implied condition as to fitness for a particular purpose applies to goods whether or not the buyer has examined the goods.

(5) Sale by Sample as well as by Description as mentioned in Sec. 15: If the sale is by sample as well as by description, the goods must correspond with the sample as well as the description.

Example : X bought from Y foreign refined rapeseed oil which was warranted to be equal to sample. The oil supplied was equal to the sample. The sample was actually a mixture of rapeseed oil and hemp oil. X was entitled to reject the goods because the goods supplied did not correspond with the description [9] .

(6) Condition as to Marchantable quality as mentioned in Sec. 16 (2): 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’ means that the quality and condition of the goods must be such that a man of ordinary prudence would accept them as the goods of that description. Goods must be free from any latent or hidden defects.

Example: X bought from a dealer a bottle of wine. While opening its cork in the normal manner, the bottle broke off and injured X’s hands. X was entitled to claim damages because the bottle was not of merchantable quality [10] .

Circumstances under which Condition as to Merchantable Quality not Applicable [Provision to Section 16(2): There shall be no implied conditions as regards defects which the buyer could have discovered if the buyer has examined the goods.

Example: X purchased glue from Y. The glue was packed in barrels and every facility was given to X for its examination but X did not examine the contents. X could not reject the goods by saying that they are not merchantable because opportunity of examining the goods was given to X but he did not examine [11] .

It is to be noted to be here that (i) the implied condition as to merchantable quality applies to goods whether or not the goods are sold under a patent or trade name and (ii) The implied condition as to merchantable quality applies to goods whether or not the buyer relies on the skill and judgment of the seller.

(7) Condition as to wholesomeness: In case of eatables or provisions or foodstuffs, there is an implied condition as to wholesomeness. Condition as to wholesomeness means that the goods shall be fit for human consumption.

Example X bought milk from Y’s dairy. The milk contained typhoid terms. X’s wife con­sumed milk, became infected and died. Y was liable for damages because the milk was not fit for human consumption [12] .

(8) Condition Implied by Custom as mentioned in Section 16(3): Condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.

Example: X sold certain drugs by auction to Y. In case of sale by auction, there was a trade custom to declare any sea damage in the goods. But the goods were sold without such declaration. Such goods were round to be sea damaged; it was held Y could reject the goods and claim the refund of the price because the sale without such declaration meant that the goods were free from any sea damage [13] .

Implied Warranties as mentioned in statute are :

Warranty as to quit possession as mentioned in Sec. 14 (b): There is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. The reach of this warranty gives buyer a right to claim damages from the seller.

Example X sold a second hand Radio to Y who spent Rs 100 on the repairs of this radio. This radio was seized by the police as it was a stolen one. Y filed a suit against X for the recovery of damages for breach of warranty of quite possession including the cost of repairs. It was held that Y was entitled to recover the same [14] .

Warranty of freedom from encumbrances as mentioned in Sec. 14 (c): There is an implied warranty that the goods are free from any charge or encumbrance in favour of any third person if the buyer is not aware of such charge or encumbrance. The breach of this warranty gives buyer a right to claim damages from the seller.

Example: X borrowed Rs 500 from Y and hypothecated his radio with Y as security. Later on X sold this radio to Z who bought in good faith. Here, Z can claim damages from X because his possession is disturbed by Y having a charge.

Warranty as to quality or fitness for a particular purpose annexed by usage of trade as mentioned in Sec. 16 (3): An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. It may similarly be excluded by the usage [15] .

Warranty to Disclose Dangerous Nature of Goods: In case of goods of dangerous nature the seller must disclose or warn the buyer of the probable danger. If the seller fails to do so, the buyer may make him liable for breach of implied warranty.

Example: X purchased a tin of disinfectant powder which required to be opened with special care. X’s wife while opening the tin was injured as the powder flew into her eyes. Held, the seller was liable for the injury sustained by X’s wife because of breach of warranty [16] .