Saturday, May 04, 2013

For June' 2013 ICWAI Stage I Examination: Paper 6

Condition and Warranty: sale of goods act
Section 12(2) states that a condition is a stipulation which is essential to the main purpose of the contract. The breach of a condition gives rise to a right to treat the contract as repudiated or broken.
Example:  A buys from B hair oil advertised as pure coconut oil. The oil turns out to be mixed with herbs. A can return the oil and claim the refund of price.

Section 12(3) states that a warranty is a stipulation which is collateral to the main purpose of the contract. The breach of a warranty gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.
Example:  A while selling his car to B, stated the car gives a mileage of 12 kms per litre of petrol. The car gives only 10 kms per litre. B cannot reject the car. It is breach of warranty. He can only claim damages for the loss due to extra consumption of petrol.

Condition VS warranty
Basis of Difference
Essential to the main purpose of the contract.
Collateral to the main purpose of the contract.
Terminate the contract.
Cannot terminate the contract but can only claim damages
Breach of condition=breach of warranty .
Breach of warranty not equal to breach of condition.

Implied Conditions:
1. Condition as to title: Right to sell the goods.

2. Sale by description: Goods shall correspond with the description (Section 15).

3. Sale by sample: (a) Bulk shall correspond with the sample (b) Reasonable opportunity of comparing the bulk with the sample. (c) Free from any defect, rendering them unmerchantable.

4. Sale by description as well as sample(Sec. 15): Goods must correspond both with the sample and with the description.

5. Condition as to quality or fitness: No such implied condition, the buyer must examine the goods thoroughly before he buys them in order to satisfy himself about the suitability. However, in the following instances, the condition as to quality or fitness applied: 
(a) Where the buyer, expressly or by implication makes known to the seller the particular purpose for which he needs the goods and depends upon the skill and judgement of the seller  

(b) An implied condition as to quality or fitness for a particular purpose may also be annexed by the usage of trade. [Section 16(3)]

6. Condition as to merchantability: Goods should be commercially saleable under the description by which they are known in the market at their full value.

7. Condition as to wholesomeness: Good quality. For e.g. C bought a bun containing a stone which broke one of C’s teeth. Held, he could recover damages.

Implied warranties
1. Warranty of quiet possession, not distured possession: No defect in title of goods.

2. Warranty of freedom from encumbrances: Goods are not subject to any charge or right in favour of a third party.

3. Warranty to disclose dangerous nature of goods: Must warn the buyer of the probable danger, otherwise he will be liable for damages.