NATIONAL LAW UNIVERSITY ODISHA, CUTTACK
LAW OF CONTRACT -2
PRIVITY TO CONTRACT
BY –
AKULA SAI SAKETH (23BA012)
BA LLB | SEMESTER- II | BATCH 2023-28
UNDER THE GUIDANCE OF
PROF. SONAL SINGH
ACKNOWLEDGEMENT
I would like to thank my subject teacher, Prof. Sonal Singh sir, for giving me an
opportunity to work on this topic and for being a constant guide throughout the
completion of this project. I am also indebted to the library department of NLU
Odisha for providing me with access to valuable sources that made the completion
of this project possible.
TABLE OF CONTENT
Contents
ACKNOWLEDGEMENT.........................................................................................................
TABLE OF CONTENT.............................................................................................................
Introduction................................................................................................................................
Defination...................................................................................................................................
Condition....................................................................................................................................
Types of Condition.....................................................................................................................
Time is essence..........................................................................................................................
Warranty.....................................................................................................................................
Types of warranty......................................................................................................................
Whne is condition considered as warranty...............................................................................11
Cavent Emptor.........................................................................................................................12
BIBLOGRAPHY.....................................................................................................................14
Introduction
The sale of goods contract holds significant importance in business transactions
and is regulated by the Sale of Goods Act 1930, which was previously included in
the Indian Contract Act, 1872. Due to its extensive application, a distinct
legislation was deemed necessary, though the foundation of this law remains rooted
in the Indian Contract Act. Both legislations complement one another, with the
fundamental provisions of the formal being applicable to sale contracts.
Condition and warranty are that areas in the legal agreement of sale that establish
equal protection to the buyer and seller, promoting them to have an equitable
transaction and the end of deal. In this paper we shall understand the chapter of
Condition and warranty in the act by understanding the relevant provisions and
case law on the same.
Definition
Certain requirements must be met as specified in the contract of sale or any other
agreement. The condition serves as a crucial prerequisite upon which the entire
contract is built, while a warranty is a written assurance repair or replacement is
done by seller if it has any defects. Sections 11 to 17 of the Act provide guidance
on the aspects related to Conditions and Warranties. Section 12 of the Act
distinguishes between condition and warranty, with the determination depending
on the understanding and application of the provision. The interpretation must
focus on the application not the wording used.
Condition
According to the Sale of Goods Act, 1930, a condition is a fundamental aspect of
the contract and essential for its fulfilment. Breaching a condition allows the
affected party to consider the contract as terminated. In simpler terms, the buyer
can choose to cancel the contract or reject the goods, if the seller fails to meet a
condition. If the buyer has beforehand given the consideration, they can request a
refund and seek compensation for the contract breach.
Types of condition
Expressed condition
The term "condition" in a legal agreement refers to a statement specifying a
requirement or obligation within the contract. These conditions, essential for the
contract's operation, are included by mutual consent of both parties.
Implied condition
Several implied conditions are presumed by parties in various types of sale
contract. These are mentioned in Sections 14 to 17 of the Act. These implied
conditions, unless explicitly agreed otherwise, are considered to be incorporated
into the contract itself.
1. Implied condition as to the title
One such implied condition pertains to the title of the goods. In every sales
contract, it is implied that the seller:
i. holds the title for selling the goods
ii. In an agreement to sell, he/she holds the right to sell the goods during the time of
fulfilling the contract.
If the seller lacks the title to sell the goods, the buyer has the right to reject the
goods and seek a refund of the full price paid.
In Rowland v. Divall1, a party purchased a motor car which was second-hand from
another party and paid for it. The buyer was deprived of the car, after six months,
because the seller did not have the title to sell it. It was ruled that the buyer is
entitled to get his consideration back.
2. Implied condition as to the description
1
Rowland v. Divall [1923] 2 KB 500 CA
Moving on to Section 15 of the Sale of Goods Act, it is implied in a contract of sale
that the goods should match the description provided. If the goods do not match the
description, the buyer has the option to reject them.
Pointing to Section 16(2) of the Act, it is a condition that goods must be of
merchantable quality, meaning they should be of a standard that a reasonable
person would accept. For example, if A purchases a bunch of iron rods from B
which is damaged by rust, rendering it unfit for use, the condition of
merchantability is breached. It is important to note inspection of the goods can be
done by the buyer before assenting to the contact. However, merely having the
opportunity to inspect without actually doing so does not waive the buyer's rights.
If a defect is discovered within a reasonable time after inspection, the buyer may
reject the goods even if initially accepted.
Implied conditions, especially for consumable items, dictate that they must be
wholesome, sound, and reasonably fit for their intended purpose.
In Varley v. Whipp2, plaintiff got a reaping machine once description that it was an
year old and can cut 50 to 60 acres. But plaintiff later found that the machine was
too old and didn’t respond properly. So, he returned the same. Seller later brought
an action against the buyer and failed at the same.
3. Implied condition as to sale by sample
According to Section 17 of the Sale of Goods Act, in a contract of sale by sample,
the below implied conditions may apply:
1. The actual products must correspond to the sample in terms of quality, size,
color, etc.
2. The buyer must have a reasonable opportunity to compare the goods with the
sample.
3. Additionally, the goods must be free from any defects that would make them
unfit for sale.
2
Varley v. Whipp [1900] 1 QB 513
In Azemar v. Casella3, Buyer has order long staple Salem cotton as per disruption
and there was a term in the contract saying that reasonable allowance shall be
allowed if it was of inferior quality but not returned. Instead of long Salem cotton,
the plaintiff got western madras cotton, which is of interior quality. The court held
that plaintiff is not bound to accept the goods despite the terms laid.
4. Implied condition as to the sample and description
Referring to Section 15 of the Act, 1930, where both a sample and a description of
a product are provided, the goods shall conform to both sample and description.
In the case of Nichol v. Godts4, where ceitain oil was sold, the delivered oil
matched the sample however, contained a some amounts of other oils. It was
determined that consideration paid by the buyer shall be returned to him.
Time as an Essence
Sec 11 deals with the stipulation of time where the question of when time is
considered as an essence to the contract is discussed.
1. Stipulation as to time
Section 11 says, “Unless a different intention appears from the terms of the
contract, stipulations as to time of payment are not deemed to be of the essence of a
contract of sale. Whether any other stipulation as to time is of the essence of the
contract or not depends on the terms of the contract”
It has two parts: one concerning with the time of payment and other with
stipulations as to time
Act says that time is not an essence to the contract unless the parties specify the
same.
In the case of Martindale v. Smith5, where the seller and buyer came to an
agreement to buy oats where the buyer as to make the payment within the period of
12 weeks but fails to do so. Buyer asks for initiation of the contract to which seller
3
Azemar v. Casella (1867) 2 CP 431
4
Nichol v. Godts 156 E.R. 410
5
Martindale v. Smith, (1841) 1 QB 389
refuses and sells off the oat to another. Buyer sue for the breach and court held that
seller is not entitled to sell the goods and made him liable for the same.
In Orissa Textile Mills v. Ganesh Das6, court held that mercantile contracts usually
contract liked to an another one, thus time is usually an essence in these types of
contracts.
2. Stipulation as to time of payment
Similar to the previous case, timely payment are also not considered to be essence
of the contract. In the same case above, court held that the failure of payment
doesn’t create a right to seller to terminate the contract. However, seller can
terminate the contract if buyer doesn’t pay for the goods in a reasonable period.
Stipulation as to the performance of the other terms
Time is concerned to as condition in the contract in below circumstances
i. Parties have mutually assented to treat time as essence
ii. Injury in caused if there is any delay in fulfilling the contract
iii. If time is required to be concerned to be essential to the nature and necessity to the
contract
In Browes v. Shand7, contract existed between parties for supply of madras rice
during March and April and there exists as condition where buyer can reject good
upon delay. Only one eighty of the batch was dispatched in the month of march and
the rest in February only. Early delivery didn’t injure the buyer in any manner, but
buyer terminated the contract later. Courts held that buyer is entitled to terminate
the contract
In Hartley v. Hymans8, there existed a contract to sell 1000lbs of cotton yarn once a
week from September. Failure of supply within stipulated deals to termination was
also mentioned in the contract. Plaintiff didn’t supply any yarn until October and
supplied only 5000lbs, defendant although accepted them initially later terminated
the contract. Court holding, defendant liable, said the acceptance of goods initially
waived the right of defendant to terminate the contract.
6
Orissa Textile Mills v. Ganesh Das AIR 1961 Pat 107 (109)
7
Browes v. Shand, (1877) 2 App Cas 455
8
Hartley v. Hymans, (1920) 3 KB 475 (484)
Warranty
Warranty is an extra provision and a written guarantee is secondary to the condition
of the contract. In the event of a frustration of warranty, the aggrieved party can’t
terminate the entire contract but has right to seek damages. Whereas in a breach of
condition, the buyer can reject the goods; in the case of a breach of warranty, the
buyer cannot treat the goods as rejected.
In Harrison v. Knowles and Foster9, Buyer brought the ships where the particulars
of the details of the ships were provided. In the same, it was mentioned that the
dead weight capacity of the ship is 460 tons but was only 360 in actual. Plaintiff
brought an action was breach of warranty as it was mutually agreed that the dead
weight would not be considered as condition but rather covered under warranty.
Types of Warranty
1. Expressed Warranty:
A warranty is said to be express if the terms of the same are mutually agreed and
are included in the contract.
2. Implied Warranty:
Implied warranties are assumed to be part of the contract of sale even if they are
not explicitly stated. Conditioned to the contract, the below are the implied
warranties:
- Warranty as to undisturbed possession:
Section 14(2) of the Act implies a warranty that the buyer will have uninterrupted
possession of the goods. If there is any disturbance with the possession of buyer,
they can sue the seller for breach of warranty.
9
Harrison v. Knowles and Foster, (1917) 2 KB 606
In Mason v. Burmingham10, the buyer was deprived of the radio he brought from
the seller as it was stolen i.e. defendant didnot own the same. The court asked to
pay the damaged incurred by the plaintiff, holding defendant liable.
- Warranty as to freedom from encumbrances:
Section 14(3) implies a warranty that the goods are free from any charges or
encumbrances in favor of a third-party unknown to the buyer. However, buyer will
lose the claim if he was aware of the same while entering the contract.
For example, A hypothecates his car for a sum if money to B and sell the same car
to C. If, in future, C is deprived of the possession or injured because of the same he
has right to collect the damages from A.
- Implied warranty to disclose the dangerous nature of goods sold:
If the goods that are inherently or likely to be dangerous are sold, and the buyer is
unaware of this fact, then duty falls on the seller to warn the buyer of the potential
threat. The seller is liable for breach of warranty, if occurred.
In Clarke v. Army and Navy Cooperative Society Ltd11, Clarke bought a disinfectant
power that need to be opened in a specific manner in which Clarke’s wife doesn’t
which causes an injury to her eye causing loss of vision. Court held the buyer was
entitled for damages for the breach of warranty.
- Implied warranty of fitness for a particular purpose
In situations where there's an implied warranty of fitness for a specific purpose, the
buyer relies heavily on the seller's expertise to provide suitable goods. The buyer
seeks to customize the goods for a particular use, and it's expected that the seller
guarantees the goods will meet that purpose. This warranty is specific to the buyer's
intended use and isn't related to the seller's overall business.
Section 16 of the Sale of Goods Act outlines certain provisions regarding implied
conditions regarding quality or fitness:
10
Mason v. Burmingham [1949] 2 KB 545
11
Clarke v. Army and Navy Cooperative Society Ltd [1903] 1 KB 155
1. If the buyer explicitly or implicitly communicates the need for a product to serve
a specific purpose, and relies on the seller's expertise, the descripted must align
with the good provided by the seller regarding their business.
2. The goods must be purchased from a seller who deals with items of the same
kind, and they must be of merchantable quality.
3. If the goods are examined by the seller and found to be free of any potential
faults that could affect the buyer in the future, there's no obligation for the seller to
provide an implied warranty.
4. None of the conditions or warranties mentioned in this section override the
implied warranty or condition.
When are the conditions interpreted to be warranty
Section 13 of the Sale of Goods Act specifies the circumstances under which a
breach of condition may be treated as a breach of warranty. There are three main
scenarios outlined in this section:
1. Waiver by the buyer:
Condition shall be considered as warrant of buyer waives the formal and considers
it as latter.
In City and Industrial Development Corpn. of Maharashtra Ltd. v. Nagpur Steel
and Alloys Ltd12, Court held that the Seller is not liable as the buyer has waived his
right to claim damages by accepting the products delivered by the seller, despite of
they being oversized and didn’t give them any opportunity to replace the same
added to that also made that payment.
2. Buyer's election:
If the buyer chooses to consider the breach of condition as a breach of warranty, it
will be treated as such.
3. Acceptance of goods:
12
City and Industrial Development Corpn. of Maharashtra Ltd. v. Nagpur Steel and Alloys Ltd AIR
1992 Bom 55
In cases where the contract is indivisible and the buyer has accepted the whole or
part of the goods, the condition is deemed to be a warranty. As a result, the contract
cannot be terminated, but damages can still be claimed. This acts as an estoppel
against the buyer.
Rule of Caveat Emptor
Rule of Caveat Emptor i.e. Buyer beware is highlighted in the section 16 of the act
where condition have been laid as to when a condition or warranty would be
considered as Implied. During the 19th century, the concept of caveat emptor
reflected the prevailing attitude towards consumers, where businesses' interests
took precedence over those of consumers. This principle placed the burden on
buyers to inspect products before purchase. Consequently, purchasers were
expected to safeguard their interests by verifying that the quality and condition of
the product met their requirements.
In Ward v. Hobbs13 case, court didn’t hold the defendant liable for selling an
unhealthy pig to the buyer despite of buying paying for the healthy pig. Court
opined that although the act of selling would amount to fraud, silence amount to
the loss of the buyer, submission of fact is not an obligation from the side of the
seller in this case.
The rule of the Caveat Emptor has gradually lost its relevance and exception has
started to form in legal jurisprudence
One such case is Jones v. Bright14, where court said that “It is the duty of the court
in administering the law to lay down rules calculated to prevent fraud, to protect
persons who are necessarily ignorant of the qualities of a commodity they purchase
and to make it the interest of manufacturers and those who sell, to furnish the best
article that can be supplied. I wish to put the case on a broad principle. If a man
sells an article he hereby warrants that it is merchantable-that is, fit for some
purpose. If he sells it for a particular purpose he thereby warrants it fit for that
purpose”
13
Ward v. Hobbs, (1878) 4 App Cas 13
14
Jones v. Bright, (1829) 5 Bing 533
Conclusion
Condition and warrant are two such areas in the sale of Goods act that was ever
essential in putting both buyer and seller in an equitable position. They
complement the conditions for rendering a contract void or voidable by getting
more specific with the scenarios that are recurring and common in the sale of
goods.
During the buying or selling of goods, both parties establish certain conditions
regarding payment methods, delivery, quality, quantity, and other essential aspects.
These stipulations can be classified as either conditions or warranties, depending
on the circumstances. A critical Understanding these concepts is crucial as they
safeguard the rights of the involved parties in the event of a contract breach.
Bibliography
Concept of Condition and Warranty under the Sale of Goods Act
https://blog.ipleaders.in/condition-warranty/
Sale of Goods - Chapter 4 - Conditions and Warranties <
http://student.manupatra.com/Academic/Abk/Sale-of-Goods/Chapter4.htm>
Conditions And Warranties Under Sale Of Goods Acts 1930 <
https://www.legalserviceindia.com/legal/article-4071-conditions-and-
warranties-under-sale-of-goods-acts-1930.html>
