Implied Conditions and Warranties under the Sale of Goods Act

The Sale of Goods Act came into effect on 1st July 1930 and deals with the contracts or agreements related to sale/purchase of goods. The contract of sale of goods, whereby a seller transfers or agrees to transfer the property in the goods to the buyer for a specific consideration, i.e. price, has following main essentials for its validity:

1. Two consenting parties
   • Buyer – A person who buys or agrees to buy goods.
   • Seller – A person who sells or agrees to sell goods.
2. Goods- Form the subject-matter for the contract of sale.
3. Transfer of the property- may or may not involve physical delivery of the goods.
4. Price- consideration for the goods.
5. All the essentials of a valid contract (1)

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Understanding the terms

Goods

Section 2(7) of the Sale of Goods Act, 1930 defines Goods as any kind of moveable property (which is not an actionable claim or money) or land (including stock and shares, growing crops, grass, and things that are attached to or form a part of the land) which is agreed to be sold, under the contract of sale.

Goods form the subject-matter for the contract of sale against which the buyer pays a consideration (price for the good) at the time of completion of the contract. Goods can be classified into 3 types on the basis of their quality (2):

Existing goods- The goods that are agreed to be the subject matter of the contract by the parties and are under the possession of the seller at the time of formation of the contract are referred to as existing goods. These can further be divided into two categories:

• Ascertained or Specific Goods- The goods that are specifically a part of, are identified and agreed upon at the time when a contract of sale is made, are ascertained goods (3).

For example, when a customer selects a particular painting/artwork to buy from the seller at the time of formation of the contract, the painting/artwork is an ‘ascertained good’ since the customer contracted to purchase that specific painting/artwork only.

• Unascertained Goods- The goods that are not explicitly identified among similar goods at the time of formation of the contract are unascertained goods.

For example, A contracts to buy one sack of rice from B. Here, the subject-matter of the contract, i.e. rice is not identified specifically by the buyer at the time of formation of contract but is under the possession of the seller.

1. Future goods- The goods that are not present with the seller or are not under his possession at the time of formation of the contact but promises to produce, manufacture or acquire the same in order to fulfil the contract (4). When the seller has produced/manufactured/ acquired the goods, as agreed upon during the formation of the contract and are suitable to be transferred to the buyer, the goods are said to be in a deliverable state (5), and the buyer is bound to take delivery of the goods, so produced. For example, A contracts to buy a car from B after it is manufactured by B.
2. Contingent goods- Section 31 of the Indian Contract Act 1872 defines contingent contract as, ‘a contract to do or not to do something, if some event collateral to such contract, does or does not happen’ which means such contracts which are dependent on some other event or contract. A contingent good in a similar sense means, a good, the acquisition of which by the seller depends upon a contingency which may or may not happen (6). For example, A agrees to deliver a T.V. set to B when he receives the same from the vendor upon fulfilment of his contract with the vendor (between the seller and the vendor).

The central concept of condition and warranty with respect to the subject matter of the contract of sale, i.e. goods is explained in section 12 of the Sale of Goods Act, 1930 as a ‘stipulation’ in the contract of sale which may be a condition or warranty.

Deliverable State

Section 20 and 21 of the Sale of Goods Act 1930 elaborate on the concept of ‘Specific goods in a deliverable state’ and ‘Specific goods to be put into a deliverable state’ respectively.

‘Deliverable state’ refers to the condition of the goods such that the buyer under the contract is bound to accept the goods delivered to him by the seller according to the contract. ‘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 of the price or the time of delivery of the goods, or both, is postponed’ (7) whereas for the ascertained goods that are not in their deliverable state at the time of formation of the contract, and the seller needs to do something in order to put the good in a deliverable state, the possession of the good in deliverable state passes to the buyer as soon as he receives the notice of the same.

Condition

‘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’ (8).

A condition is referred to as, an essential element attached to the subject matter of an agreement which is mentioned by the buyer to the seller and is either expressed or implied while entering into the contract. The buyer can refuse to accept the goods delivered by the seller, in case of non-compliance with the condition mentioned by the seller in the contract. The condition may be expres or implied.

If while entering into a contract, the buyer mentions (in words or writing) that the goods are to be delivered to him before a given date, the date is taken as a condition to the contract since the buyer expressed it. Whereas, if a buyer contracts to buy a red-coloured saree for her ‘wedding’ which is to be held on a date mentioned to the seller, then the time is the implied condition for the contract. Even if the buyer doesn’t mention the date of delivery (but has mentioned the date of the wedding or occasion), it is implied on the part of the seller that the garment is to be delivered before the mentioned date of the wedding. In this case, the seller is bound to deliver the garment before the date of the wedding as the delivery of the garment after the said date of the wedding is of no use to the buyer and the buyer can refuse to accept the same since the condition to the contract is not fulfilled.

Warranty

‘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’9.

A warranty is referred to as extra information given with respect to the desired good or its condition. The warranty is of secondary importance to the contract for its fulfilment. Non-compliance of the seller to the warranty of the contract does not render the contract repudiated and hence, the buyer cannot refuse to buy the good but can only claim compensation from the buyer.

Implied Conditions and Warranties under the Sale of Goods Act

Section 14-17 of the Sale of Goods Act, 1930 deal with the implied conditions and warranties attached to the subject matter for the sale of a good which may or may not be mentioned in the contract.

Implied Condition

Condition as to Title [Section 14(a)]

Section 14(a) of the Sale of Goods Act 1930 explains the implied condition as to title as ‘in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass’.

This means that the seller has the right to sell a good only if he is the true owner and holds the title of the goods or is an agent of the title holder. When a good is sold the implied condition for the good is its title, i.e. the ownership of the good. If the seller does not own the title of the said good himself and sells it to the buyer, it is a breach of condition. In such a situation the buyer can return the goods to the seller and claim his money back or refuse to accept the good before delivery or whenever he learns about the false title of the seller.

CASE LAW: Rowland v Divall, 192210 – The plaintiff had purchased a car from the defendant and was compelled to return it to the true owner after having used it for a while. The plaintiff then sued the defendant for the purchase money, since the defendant didn’t receive the consideration as per the condition of the title of ownership.

Sale by Description (Section 15)

Section 15 of the Sale of Goods Act, 1930 explains that when a buyer intends to buy goods by description, the goods must correspond with the description given by the buyer at the time of formation of the contract, failure in which the buyer can refuse to accept the goods.

Sale by Sample (Section 17)

When the goods are to be supplied on the basis of a sample provided to the seller by the buyer while the formation of a contract the following conditions are implied:

• Bulk supplied should correspond with the sample in quality
• Buyer shall have a reasonable opportunity to compare the goods with the sample
• The good shall be free from any apparent defect on reasonable examination by the buyer.

Sale by sample as well as Description (Section 15)

When the sale of goods is by a sample as well as a description the bulk of the goods should correspond with both, i.e. description and sample provided to the seller in the contract and not only sample or description.

Condition as to Quality or Fitness (Section 16)

The doctrine of Caveat Emptor is applicable in the case of sale/purchase of goods, which means ‘Buyer Beware’. The maxim means that the buyer must take care of the quality and fitness of the goods he intends to buy and cannot blame the seller for his wrong choice. However, section 16 of the Sale of Goods Act 1930 provides a few conditions which are considered as an implied condition in terms of quality and fitness of the good:

• When the buyer specifies the purpose for the purchase of the good to the seller, he relied on the sound judgment and expertise of the seller for the purchase there is an implied condition that the goods shall comply with the description of the purpose of purchase.
• When the goods are bought on a description from a person who sells goods of that description (even if he doesn’t manufacture the good), there is an implied condition that the goods shall correspond with the description. However, in case of an easily observable defect that is missed by the buyer while examining the good is not considered as an implied condition.

Implied Warranty

Enjoy Possession of the Goods [Section 14(b)]

Section 14(b) of the Act mentions ‘an implied warranty that the buyer shall have and enjoy quiet possession of the goods’ which means a buyer is entitled to the quiet possession of the goods purchased as an implied warranty which means the buyer after receiving the title of ownership from the true owner should not be disturbed either by the seller or any other person claiming superior title of the goods. In such a case, the buyer is entitled to claim compensation and damages from the seller as a breach of implied warranty.

Goods are free from any charge or encumbrance in favour of any third party [Section 14(c)]

Any charge or encumbrance pending in favour of the third party which was not declared to the buyer while entering into a contract shall be considered as a breach of warranty, and the buyer is be entitled to compensation and claim damages from the seller for the same.

Conclusion

The provision of Implied conditions and warranties are provided in the Sale of Goods Act in order to protect the buyers in case of any fraud by the seller. However, it is seller’s duty in the first place to look for the obvious defects and enquire about the quality of the product before entering into a contract of sale of goods since a seller cannot be held guilty for a customer’s wrong choice.

In order to ensure purchase of an appropriate good by the seller, it is suggested that the buyer conveys the purpose and gives a reasonable description of the goods so desired.