“A warranty is that term of the contract which is collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated under sale of goods act, 1930
Introduction
The Sale of Goods Act is an Act to define and amend the law relating to the sale of goods. It also governs the contracts relating to sale of goods. It came into force on 1st July 1930. The contracts for sale of goods are subject to the general principles of the law relating to contracts. A contract for sale of goods has, however, certain specific features such as, transfer of ownership of the goods, delivery of goods rights and duties of the buyer and seller, remedies for breach of contract, conditions and warranties implied under a contract for sale of goods. There are few formalities in terms of the formation of simple contracts. A contract may be made under deed, in writing.
· Buyer: means a person who buys or agrees to buy goods.
· Seller: means a person who sells or agrees to sell goods.
· Delivery: means a voluntary transfer of possession from one person to another.
· Bill of lading: is a receipt of goods shipped on board of a ship, signed by the person who contracts to carry them and states the terms on which the goods are delivered to and received by the ship.
· Fault: is a wrongful act or default.
· Property: means general property in goods and not merely a special property. For example: A owns goods and pledges them to B. A has a general property in the goods, whereas B has a special property (or interest) in them.
· Quality of goods: includes the condition or state of the goods.
· Goods: According to section 2(7) of the Sale of Goods Act, 1930, Goods means every kind of movable property, other than actionable claims and money; and includes stocks, shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.
Thus we can define goods as every kind of movable property except actionable claims and money.
According to Sec. 4 of the Sale of Goods Act, a contract of sale is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. It consists of four contracts:
· Bilateral contract.
· Money consideration.
· Transfer of property.
· Goods.
· Work & Labour. (Painting, carpentry etc.)
· Essentials of a valid contract.
Essential Elements of a Contract of Sale
· The parties must be competent to contract.
· There must be mutual consent
· There must be transfer of property i.e. there must be transfer of general property in goods and not merely specific property
· The buyer must pay or promise to pay, a price in money.
Thus, a sale must be the result of a contract, in pursuance, whereof, a transfer of property takes place on payment of a price. The contract may be oral or in writing. It may even be inferred from the conduct of the parties. It must however, originate in an offer and its acceptance.
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Such a contract may be absolute or conditional.
· Sale: When under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale.
· Agreement to sell: The transfer of property in the goods that is to take place at a future time, or subject to some conditions, thereafter to be fulfilled, it is called an agreement to sell. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
A condition is a stipulation essential to the main purpose of the contract, the breach of which gives a right to treat the contract as repudiated i.e. to deny.
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 a right to reject the goods and treat the contract as repudiated. Breach of a condition may be treated as breach of warranty. Breach of warranty cannot be treated as breach of condition. The warranty has not been satisfactorily defined. A less serious obligation, perhaps ancillary to the contract is warranty. Remedy for breach of warranty: Damages only.
An Example:
X sells machineries to Y. The contract between X and Y states that the machineries to be sold should be fit for work for at least one year and this is the essential term in the contract. So, if it any problem to Y within one year of the sale, Y is entitled to claim of damage the machineries had caused if there had been a warranty attached to the contract.
Implied Terms: Sale of Goods Act
· Terms may be implied in fact or by law.
· A term implied in fact is usually a term which the court assumes the parties would have agreed, had they thought about it.
· A term implied by law is not necessarily ‘implicit’ in the contract at all, but is imposed on the parties by the court, regardless of whether they would have agreed to it or not. Some terms are implied by common law, some by statute.
· Every term implied by law belongs to a particular class of contracts, for example, consumer contract have their own set of implied terms; and employment contracts have their own implied terms.
· English law uses terms implied by statute as one of the tools to enforce consumer protection. This is a particularly important subset of terms implied by law, and will be treated first.
A contract is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between or among them. The elements of a contract are “offer” and “acceptance” by “competent persons” having legal capacity who exchanges “consideration” to create “mutuality of obligation.”[1] Proof of some or all of these elements may be done in writing, though contracts may be made entirely orally or by conduct. The parties may be natural persons or juristic persons. A contract is a legally enforceable promise or undertaking that something will or will not occur. The word promise can be used as a legal synonym for contract. Although care is required as a promise may not have the full standing of a contract, as when it is an agreement without consideration.
According to the Indian Contract Act, an agreement enforced by law is a contract. Contract law varies greatly from one jurisdiction to another, including differences in common law compared to civil law, the impact of received law, particularly from England in common law countries, and of law codified in regional legislation.
A breach of contract are occurs where a party to a contract fails to perform, precisely and exactly, his obligations under the contract. This can take various forms for example, the failure to supply goods or perform a service as agreed. Breach of contract may be either actual or anticipatory. Actual breach occurs where one party refuses to form his side of the bargain on the due date or performs incompletely. Anticipatory breach occurs where one party announces, in advance of the due date for performance, that he intends not to perform his side of the bargain. The innocent party may sue for damages immediately the breach is announced.
Breach of a Contract of Sale of Goods:
In a contract for the sale of goods, the usual measure of compensatory damages is an amount equal to the difference between contract price and contract price. In situation in which the buyer breaches and the seller has not yet produced the goods, compensatory damages normally equal lost profits on the sale, not the difference between the contract price and market price. The breach of warranty lawsuits may be distinct from revocation of contract suits; in the case of the breach of warranty, the buyer’s item is repaired or replaced while breach of contract involves returning the item to the seller.
Sale of Goods Act 1930
Section 12:
As per Section 12(1) a stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.
(2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated.
(3) 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.
(4) Whether a stipulation in a contract of sale is condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition.
Section 13:
As per Section 13(1) Where a contract of sale is subject to any condition to the fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for relating the contract as repudiated.
(2) Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.
(3) Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility of otherwise.
Section 14:
As per Section 14 in a contract of sale, unless the circumstances of the contract are such as to show a different intention there is-
(a) an implied condition on the part of the seller that, 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 good is to pass.
(b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods.
(c) an implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time when the contract is made.
What happens if the seller delivers wrong quantity of goods to the buyer?
Followings are the consequences in cases where the seller delivers wrong quantity of goods to the buyer:
Where the seller delivers to the buyer, a quantity of goods less than he contracted to sell, the buyer has the option to reject the goods or, to accept them. If the buyer accepts the goods, so delivered, he is bound to pay for them at the contract price.[2]
For example, Mr. A. orders 100 boxes of pens from Mr. B, at the rate of Tk. 2000/- per box. Mr. B delivers only 60 boxes. Now, Mr. A has the option to reject the entire delivery of 60 boxes or, he may accept the 60 boxes. If, Mr. A, accepts the boxes, he must pay for them at the contract price, i.e. Tk. 2000/- per box.
Where the seller delivers to the buyer a quantity of goods, greater than he contracted to sell, the buyer may accept the goods, included in the contract and, reject the rest or, he may reject the whole. If the buyer accepts the whole of the goods, so delivered, he shall pay for them at the contract rate.
Where the seller delivers to the buyer the goods, he contracted to sell, mixed with goods of a different description, not included in the contract, the buyer may accept the goods, which are in accordance with the contract, and, reject the rest, or, may reject the whole.
Opinion:
Warranty is often a part of the contract while a good is transferred from the seller to the buyer which has been agreed on by both the parties knowingly.
In contract law, a warranty has various meanings but it generally means a guarantee or promise<href=”#cite_note-1″>http://en.wikipedia.org/wiki/Warranty – cite_note-1[3] which provides assurance by one party to the other party that specific facts or conditions are true or will happen. This factual guarantee may be enforced regardless of materiality which allows for a legal remedy if that promise is not true or followed.
A warranty may be express or implied, depending on whether the warranty is explicitly provided (typically written) and the jurisdiction. Warranties may also state that a particular fact is true at one point in time or that the fact will be continuing into the future (a “promissory” or continuing warranty). Warranties provided in the sale of goods (tangible products) vary according to jurisdiction, but commonly new goods are sold with implied warranty that the goods are as advertised. In the United States, various laws apply, including provisions in the Uniform Commercial Code which provide for implied warranties.[4] However, these implied warranties were often limited by disclaimers.
Warranties are violated when the promise is broken or the goods are not as expected. The seller may honour the warranty by making a refund or a replacement. The statute of limitations depends on the jurisdiction and contractual agreements. Refusing to honour the warranty may be an unfair business practice. The breach of warranty lawsuits may be distinct from revocation of contract suits; in the case of the breach of warranty, the buyer’s item is repaired or replaced while breach of contract involves returning the item to the seller.[5] For violating the warranty, the buyer may claim for damage but not reject the goods.
Conclusion
A contract is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between or among them. The elements of a contract are “offer” and “acceptance” by “competent persons” having legal capacity who exchanges “consideration” to create “mutuality of obligation.”
As per Section 12(1) a stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated. 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.
Warranty conditions in the sale agreement have very important role for the successful completion of a transaction. Sometimes the seller may breach sale contract terms and the buyer may reject the goods. But the breach of warranty contract by seller does not give right to the buyer to reject the goods. But the breach gives the right to claim for damages from the seller. When the goods is delivered and the buyer accepted the goods, breach of warranty of any terms by the seller will not amount to rejection of goods, but it gives right of claiming damages by the buyer.[6] Sometimes the buyer considers it a reason to reject the goods purchased him by citing any breach of warranty by seller.
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[1] Leonard, G. (2006). Elements of a Contract: Nashville: B&H Publishing Group Retrieved from
http://contracts.uslegal.com/elements-of-a-contract/, 18 February, 2013
[2] Skinner v. Mid-America Pipeline Co., 490 U.S. 212, 218 (1989) (citing Yakus v. United States, 321 U.S. 414,
426 (1944)
[3] Hogg M. (2011). Promises and Contract Law: Comparative Perspectives, p. 48. Cambridge University Press
[4] Warranties in Sales of Goods. LexisNexis Study Outlines.
[5] Davis T. (2009). UCC Breach of Warranty and Contract Claims: Clarifying the Distinction. Baylor Law
Review.
[6] Law Teacher: The Law Essay Professionals, Retrieved on 30 March, 2013, Retrieved from:
http://www.lawteacher.net/contract-law/collateral-contracts.php