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Topic 4: CONDITIONS AND WARRANTIES

Introduction:
When forming a contract, a party may make a statements with a view to inducing the other party to enter in to the contract. Such statements when made before entering into the contract are known as Representation. Such representations may or may not be part of the contract and this depends upon the intention of the parties. So the representations which become a part of the contract are called as Stipulations. And the representations which do not form part of contract are merely expression of opinion and their non-fulfilment does not give rise to any legal consequences.

Definitions:
According to Section 12 (1) of Sale of Goods Act, 1930
“A stipulation in a contract of sale with reference to goods which are subject matter thereof, may be a condition or a warranty.”



Condition u/s 12 (2)
“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.”
For example: A seller contracted to supply Basmati XI Quality Rice to a buyer within a month. But the seller supplied basmati of some other quality, which amounted to breach of condition, hence the buyer can repudiate the contract and thereby reject the goods.

Warranties u/s 12 (3)
“A warranty is a stipulation collateral to the main purpose of the contract, the breach of which give rise to a claim for damages but not to reject the goods and treat the contract as repudiated.”
For example: A seller contracted to supply Basmati XI Quality Rice to a buyer within a month. The seller could not supply the rice within one month, it amounted to breach of warranty and buyer can only claim damages for late delivery.



DIFFERENCES BETWEEN CONDITION AND WARRANTY

Basis

Condition

Warranty

1.       Meaning

Condition
is a stipulation as to the main purpose of the contract U/S 12(2).

Warranty
is a stipulation collateral t the main purpose of the contract U/S 12(3).

2.       Consequences of breach

Breach of
condition can repudiate the contract.

Breach of
warranty does not repudiate the contract, at the most a claim for damages can
be made.

3.       Scope

Condition
is a wider term.

Warranty
scope is narrow.

4.       Interchangeability

U/S
13(1) a buyer can opt to treat a condition a warranty and have a recourse to a
smaller remedy of claiming compensation only.

A warranty
can never be treated as a condition.

5.       Compulsory interchangeability

U/S
13(2) where the contract of sale is not severable (divisible) and the buyer
has accepted part goods, the breach of condition is to be compulsorily
treated as breach of warranty.

No such
compulsion exists for a warranty to be treated as a condition.

6.       Example

A
seller contracted to supply basmati XI quality rice to buyer at Rs 100 per
kg. He however supplied an inferior quality rice at 80 per kg. the buyer
either repudiate the contract or accept it and claim compensation at 20 per
kg.

A seller
contracted to supply basmati XI quality rice to buyer at 100per kg. he
supplied the agreed quality at agreed price but he delivered them late by 15
days. Held it amounted to breach of warranty and only a claim for damages
could be made.



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