Conditions and Warranties

● The ordinance defines warranty but not condition

Warranty means

● An agreement

● With reference to goods which are the subject of a sale contract

● But collateral to the main purpose of such contract

● Breach gives rise to claim for damages

● But no right to reject goods + treat the contract as repudiated

Condition

● A stipulation essential to the main purpose of the contract of sale.

● Breach of a condition gives the buyer the right to repudiate the contract

KIA Motors v. Consumer Affairs Authority

● Dr. Gunaratne purchased a KIA Sorento with post-sale issues (coolant leakage, A/C
malfunction).

● CAA ordered full replacement of the vehicle.

● KIA challenged the decision, citing procedural unfairness, proportionality, and

compliance with express warranty.

● CAA failed to assess breach of warranty vs condition.

● Implied warranties (fitness for purpose, merchantable quality) coexist with express
warranties.

● KIA had addressed issues per express warranty.

● No expert evidence showed car was unfit or diminished in value.

● CAA acted irrationally by overriding evidence and adopting an emotional view.

● Writ of Certiorari issued to quash the CAA’s decision – it was unreasonable,

disproportionate, and legally flawed.
Section 11

● Time of payment is not of the essence unless stated in the contract

● The term “month” refers to a calendar month, unless agreed otherwise.

Section 12

● 12(1) Buyer may waive a condition or treat its breach as a warranty instead of
repudiating the contract

● 12(2): Whether a term is a condition or warranty depends on the construction of the

contract, not merely the terminology used.

● Even a condition called a "warranty" may still legally be a condition (based on intent
and effect).

● 12(3) In a not severable contract where the buyer has accepted goods/part OR where
contract is for specific goods, breach of condition can only be treated as a warranty
unless the contract says otherwise

● 12(4) This does not apply to condition or warranties where fulfilment is excused by
law due to impossibility/otherwise

Section 13 – Implied Terms

Unless otherwise stated, every contract of sale includes:
(a) Seller’s right to sell (implied condition). (agreement to sell 🡪 right to sell the goods when
the property is to pass)
(b) Buyer’s quiet possession (implied warranty).
(c) Goods must be free from undisclosed third-party claims (implied warranty).

Section 14 – Sale by Description

● There is an implied condition that goods correspond with the description.

● If sold by sample and description, goods must conform to both.

Section 15 – Implied Conditions of Quality and Fitness

Unless excluded:
(1) If buyer relies on seller’s expertise and states the purpose (expressly or impliedly), and
goods are of a description which it is in the course of the seller’s business to supply, there is
an implied condition that the goods are reasonably fit for that purpose.
o Exception: No implied condition if the goods are sold under a patent/trade
name.
(2) If sold by description from a seller who deals in such goods of that description, they must
be of merchantable quality.
o Exception: If buyer examines goods, implied condition excluded for defects
discoverable by inspection.
(3) Conditions may be annexed by trade usage.
(4) Express warranties do not override implied warranties unless inconsistent.

Section 16 – Sale by Sample

If contract expressly or impliedly refers to sale by sample, it includes:
(a) Implied condition that bulk matches the sample.
(b) Buyer must have a reasonable opportunity to compare.
(c) Goods must be free from hidden defects not apparent on inspection.

Transfer of Property and Risk

Section 17 – Unascertained Goods
Contract for the sale of unascertained goods 🡪 No transfer of property until goods are
identified and ascertained.

Section 18 – Specific goods

Specific goods 🡪 property passes at the time intended by the parties, based on contract terms,
conduct, and circumstances.

Section 19 – Rules for ascertaining intention

● Rule 1

Where there is an unconditional contract for the sale of specific goods, in a

deliverable state, the property in the goods passes to the buyer when the contract
 is made, and it is immaterial whether the time of payment or the time of delivery, or
both, be postponed
Tokyo Cement sells 100 bags of cement to Maga Construction. Tokyo cement has the
exact quantity in stock and agrees to deliver them on a later date. The property in the
100 bags of cement passes to Maga when they enter into the contract, even though
delivery is delayed

● Rule 2

Where there is a contract for the sale of specific goods, and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state, the
property does not pass until such thing be done and the buyer has notice thereof
Hameedia agrees to make a suit for a customer. The property in the suit (the finished
product) does not pass to the customer until Hameedia completes the tailoring and the
customer is notified

● Rule 3

Where there is a contract for the sale of specific goods in a deliverable state, but the
seller is bound to weigh, measure, test, or do some other act or thing with
reference to the goods for the purpose of ascertaining the price, the property does
not pass until such act of thing be done and the buyer has notice thereof.
Farmer Mudiyanse sells a specific load of paddy to Nipuna Mills, but the price is
determined by the weight of the paddy. The property in the paddy does not pass to the
Nipuna until the Mudiyanse weighs the paddy and informs the Nipuna of the weight,
which is necessary to determine the price

● Rule 4

When goods are delivered to the buyer on approval, or " on sale or return ", or other
similar terms, the property therein passes to the buyer-
(a) when he signifies his approval or acceptance to the seller, or does any other act
adopting the transaction
If Samayanthi takes a dress on approval for 7 days and wears it out without
returning it, this would be considered an act adopting the transaction, and the
property would pass to Samayanthi.
If no time is fixed for the return of the goods, then the property passes to the
buyer after a reasonable time.
What constitutes a "reasonable time" depends on the circumstances of the
case, including the nature of the goods and the conduct of the parties
 (b) if he does not signify his approval or acceptance to the seller, but retains the goods
without giving notice of rejection, then, if a time has been fixed for the return of the
goods, on the expiration of such time, and, if no time has been fixed, on the expiration
of a reasonable time. What is a reasonable time is a question of fact.
Mudalali receives a shipment of Onions on Monday and the contract doesn't
specify a return time, a reasonable time might be a few days or a week, since
onions are more quickly perishable – circumstances would be the nature of the
goods, the buyer's ability to inspect them, and other relevant factors.

● Rule 5

(1) Where there is a contract for the sale of unascertained or future goods by
description, and goods of that description and in a deliverable state are
unconditionally appropriated to the contract, either by the seller with the assent
of the buyer or by the buyer with the assent of the seller, the property in the goods
thereupon passes to the buyer. Such assent may be express or implied, and may be
given either before or after the appropriation is made
• Unascertained or Future Goods: These are goods that are not yet identified or that
will be produced or acquired in the future.
• Appropriation: This means setting aside or designating specific goods to fulfill the
contract.
• Unconditional Appropriation: The goods must be set aside without any conditions
or reservations.
• Deliverable State: The goods must be in a state that the buyer is obligated to take
delivery of them.
• Assent: This refers to the agreement or approval of the buyer or seller, which can be
express (stated directly) or implied (indicated by actions or conduct).
Mudiyanse agrees to sell 100 bushels of paddy to a Araliya Mills, and then sets aside
100 bushels of paddy that match the description and are in a deliverable state. Araliya
Mills approves of this selection (either before or after the selection by Mudiyanse),
the property in those 100 bushels of paddy passes to the buyer.
(2) Where in pursuance of the contract, the seller delivers the goods to the buyer or to a
carrier or other bailee (whether named by the buyer or not) for the purpose of transmission
to the buyer, and does not reserve the right of disposal, he is deemed to have
unconditionally appropriated the goods to the contract

● Pursuance of the Contract: The delivery must be done as part of the agreed-upon
terms of the sale contract.
● Delivery to Buyer or Carrier: The seller must either hand the goods directly to the
buyer or deliver them to a carrier (even one chosen by the buyer) for the purpose of
getting them to the buyer.

● No Reservation of Disposal: The seller cannot retain the right to decide where the
goods go or who gets them after the delivery to the carrier. It can only be destined for
the buyer

● Unconditional Appropriation: Once these conditions are met, the goods are
considered irrevocably dedicated to fulfilling the specific contract, meaning the
seller cannot later claim them for another purpose.

• Don Carolis agrees to sell 100 chairs to Alvin Silva, and Don Carolis delivers them to
Pickme Transport Services for transport to Alvin Silva, and doesn't retain any control
over the shipment. The chairs are deemed to be unconditionally appropriated to that
specific contract