Concept of Condition and Warranty - Introduction
When we purchase various products we tend to check the manufacturing date and company, expiry date or year of the expiry of the warranty, check the nutritional count if it is a food product and so on. We perform a thorough quality check and go through the terms and conditions before purchasing any product. Especially if we purchase electronic goods like a laptop we are more careful than ever in checking for its specs, manufacturer and seller, the quality of the piece and the year until when its warranty is valid.
When we go for intangible services too, we tend to check the reliability of a service provider and quality of services offered before making a decision, be it checking into a 5-star hotel, booking vacation packages or installing WiFi at home.
A sales agreement happens when a buyer and a seller thus engage in a material transaction. Warranty and conditions are two important components of this transaction.
What are a Condition and Warranty?
Conditions can be defined as certain obligations, terms or provisions that are associated with the transaction between a buyer and seller. Breach of these conditions can lead to cancellation of agreement and violation of warranty. The non-offending party can also claim appropriate reimbursements and cancel the existing contract as well. A warranty can be expressed or implied.
What are the Types of Conditions?
Implied conditions are those terms that are not explicitly stated but rather understood and legalised as per the law -
Implied Understanding Regarding Title - Here, it is implied that the seller can sell his goods with all rights and transfer ownership to the buyer. It is understood that before the transaction takes place, the seller is the owner of the goods. In case of any defects, the buyer can claim damages as per the conditions and warranty. It is implied that no fraudulent third party charges will be imposed upon the goods.
Implied Knowledge of Quality and Fitness - The buyer engages in a transaction with the seller with the belief that about the seller’s skill, that he can sell appropriate goods and the seller is aware of the intentions of the buyer.
Sale by Description - If the goods are being sold as per the description of the product, then the warranty and conditions will be in accordance with the same. If there is a sample involved as well, then the warranty and conditions will again conform to both.
Sale by Sample - When products are being sold as per the samples earlier marketed, it is implied that the warranty and conditions for the bulk products have to match the quality of the original sample. Buyers should receive sufficient time to compare what they purchase with the quality of the sample and check for defects if any.
Expressed Conditions - The terms and conditions that are explicitly stated in the sale agreement are known as express conditions. Buyers should go through this and have a complete understanding before purchasing.
FAQs on Understanding Condition and Warranty in Contracts
1. What are a 'condition' and a 'warranty' in a contract of sale under the Sale of Goods Act, 1930?
In a contract of sale, a condition is a stipulation that is essential to the main purpose of the contract. Its breach gives the aggrieved party the right to cancel the contract. A warranty, on the other hand, is a stipulation that is collateral or secondary to the main purpose of the contract. Its breach only gives the aggrieved party the right to claim damages, but not to reject the goods and cancel the contract.
2. What is the primary difference between a condition and a warranty in terms of legal remedy?
The primary difference lies in the remedy available upon a breach. A breach of a condition is considered a substantial failure and allows the innocent party to repudiate the contract (cancel it) and claim damages. A breach of a warranty is less severe, so the innocent party can only claim damages for the loss suffered but cannot cancel the entire contract.
3. What are the key types of implied conditions in a contract of sale?
Implied conditions are not explicitly written but are presumed by law to exist in a contract of sale to protect the buyer. Key types include:
- Condition as to Title: The seller has the right to sell the goods.
- Condition as to Description: The goods must correspond with the description provided by the seller.
- Condition as to Sale by Sample: The bulk of goods must match the quality of the sample.
- Condition as to Quality or Fitness: The goods must be reasonably fit for the purpose specified by the buyer.
- Condition as to Merchantability: The goods must be of a commercially saleable quality.
4. Can you provide a real-world example to illustrate the difference between a condition and a warranty?
Certainly. Imagine you buy a car specifically stating to the dealer that you need it for off-road mountain racing. If the car delivered is not capable of off-road driving, this is a breach of a condition because it fails the main purpose of your purchase. You can return the car and get a refund. However, if the car is perfectly capable of off-road driving but its music system is faulty, this is a breach of a warranty. It is a secondary issue, so you can only claim damages for repairing or replacing the music system, not return the car.
5. Why is a breach of condition treated more severely than a breach of warranty?
A breach of condition is treated more severely because a condition is a term that forms the very foundation of the contract. Its violation defeats the core purpose for which the contract was made. A warranty is an additional promise or a secondary stipulation. Its breach does not undermine the main purpose of the contract, but merely causes some loss to the aggrieved party. Therefore, the law provides the stronger remedy of contract cancellation only when the fundamental basis of the agreement is broken.
6. How do 'implied' conditions and warranties protect a buyer who may not be an expert?
Implied terms provide a legal safety net for buyers. The law automatically inserts these terms into contracts to ensure fairness and prevent sellers from exploiting a buyer's lack of knowledge. For example, the implied condition as to merchantable quality ensures that goods are fit for their ordinary purpose, even if the buyer didn't explicitly ask for it. This shifts some of the risk from the buyer to the seller, balancing the 'Caveat Emptor' (let the buyer beware) principle.
7. Under what circumstances can a breach of condition be treated as a breach of warranty?
A buyer may have to treat a breach of condition as a breach of warranty in the following situations:
- Voluntary Waiver: When the buyer chooses to waive the condition and not cancel the contract.
- Acceptance of Goods: When the buyer has accepted the goods (or part of them) and cannot reject them, they can only claim damages.
- By Law: If the contract is non-severable and the buyer has accepted the goods, the breach of any condition can only be treated as a breach of warranty.
8. What is the significance of the term 'stipulation' in the context of conditions and warranties?
In contract law, a stipulation refers to any term, promise, or provision within the agreement. The Sale of Goods Act categorises these stipulations based on their importance to the contract's main purpose. A stipulation that is fundamental and essential is called a 'condition'. A stipulation that is less important and collateral to the main purpose is called a 'warranty'. Therefore, understanding 'stipulation' is key to classifying the terms of a contract and determining the legal remedies available if a term is broken.
