INSTITUTE FOR EXCELLENCE IN

HIGHER EDUCATION, BHOPAL

2015-16

For partial fulfilment of degree of Bachelor

of Commerce
Accounts Honors

Conditions and Warranties

SUBMITTED BY:

SUBMITTED TO

Faizan Khan

Mrs. Nidhi Masih

B.COM III YR A/C B

(Commerce department)

113113

Certificate
1 | Page

This is to certify that Faizan Khan is a regular student of

Institute for Excellence in Higher Education. He has
conducted an authentic project report on the topic
Conditions and Warranties and has completed his
Mercantile Law Project successfully under the able guidance
of Mrs. Nidhi Masih. The Project is being prepared for his
honors papers of B.Com part III (Accounts Honors) for
examination 2015-16 and is being submitted thereof.

Mrs. Nidhi Masih

(Commerce department)

DECLARATION
I hereby declare that the project entitled Conditions and
Warranties submitted to Institute of Excellence in Higher

2 | Page

Education, is record of original work done by me under the

guidance of Mrs. Nidhi Masih (Department of commerce).
Any inferences, research or similarity is purely coincidental.

Acknowledgement
I would like to take this opportunity to thank Dr. M.L. Nath
(Director, Institute for Excellence in Higher Education,
Bhopal), Dr. S.S. Vijayvargiya (Head of commerce
department) and Mrs. Nidhi Masih (Teacher guide) to have
provided me with such a great opportunity to work on this
Mercantile Law project.

3 | Page

Last, but not the least, I would like to thank my family,

friends and all those who helped me in some way or the others
in the successful completion of this research project.

Faizan Khan
B.com III year
Accounts Honors
Section B
Roll No. 113113

INDEX

S.
NO
1

PARTICULARS
INTRODUCTION OF SALES OF GOODS ACT 1930

PAGE
NO.
1-4

4 | Page

INTRODUCTION OF CONDITION AND WARRANTY

5-6

HISTORY OF CONDITION AND WARRANTY

CONDITIONS

7-17

WARRANTY

18-22

CONDITION VS WARRANTY

23-25

CHANGE OF A CONDITION INTO A WARRANTY

26

STIPULATION AS TO TIME

27

CASE STUDIES

28

CASE STUDY LIST

S.
NO
1

PARTICULARS
Case Study 1: Bunge Corp v Tradax Export SA

PAGE
NO.
8

Case Study 2: Thompson v LMS Railway

5 | Page

Case Study 3: Butterworth v Kingsway Motors (1954)

10

Case Study 4: Toepfer v Warinco AG (1978)

12

12

Case Study 5: Raynham Farm v Symbol Motor Corporation

(1987)
Case Study 6: Microbeads v Vinhurst Road Markings Ltd

Case Study 7: Hartley v Hymans (1920)

28

Case Study 8: Bence Graphics v Fasson UK (1996)

28

19

6 | Page

INTRODUCTION OF SALES OF
GOODS ACT 1930
The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act
apply to contract of Sale of Goods also. Basic requirements of contract i.e. offer and
acceptance, legally enforceable agreement, mutual consent, parties competent to contract;
free consent, lawful object, consideration etc. apply to contract of Sale of Goods also.
The law relating to the sale of goods is codified in the Sale of Goods Act, 1930. It defines
sale and agreement to sell as a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price and provides that there may be a contract of sale
between part owner and another and that the contract of sale may be absolute or conditional.
According to the provisions of this act, a contract of sale is made by an offer to buy or sell the
goods for a price and the acceptance of such offer. The act further provides that the contract
may provide for the immediate delivery of the goods or immediate payment of the price or
both or for the delivery or payment by installments or that the delivery or payment or both
shall be postponed. Provisions are made in this Act for existing or future goods, perishable
goods, ascertainment of price, conditions and warranties, effects of the contract, delivery to
career, duties of seller and buyer, buyers right of examining the goods, liability of buyer for
neglecting or refusing the delivery of goods, rights of unpaid seller, suits for breach of the
contract, sale, etc.
The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act
apply to contract of Sale of Goods also. Basic requirements of contract i.e. offer and
acceptance, legally enforceable agreement, mutual consent, parties competent to contract;
free consent, lawful object, consideration etc.

Definition of Sales
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.1
A contract may be absolute or conditional.2
Thus, following are essentials of contract of sale: It is contract - all requirements of
contract must be fulfilled. It is of goods - transfer of property is required. Contract is
between buyer and seller, Sale should be for a price. A part owner can sale his part to another
part-owner.

1 defined under section 4(1) of the sale of goods act,1930

2 As defined under section 4(2) of the sale of goods act,1930
1 | Page

A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of
such offer. The contract may provide for the immediate delivery of the goods or immediate
payment of the price or both, or for the delivery or payment by installments, or that the
delivery or payment or both shall be postponed. 3

How Contract of sale is made?

A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of
such offer. The contract may provide for the immediate delivery of the goods or immediate
payment of the price or both, or for the delivery or payment by installments, or that the
delivery or payment or both shall be postponed. Subject to the provisions of any law for the
time being in force, a contract of sale may be made in writing or by word of mouth, or partly
in writing and partly by word of mouth or may be implied from the conduct of the parties.
Thus, credit sale is also a sale. A verbal contract or contract by conduct of parties is valid.
E.g. putting goods in basket in super market or taking food in a hotel.

Essential characteristics of the contract of Sale

of goods:
1. Parties to the contract:
There are two main parties to the contract a buyer and a seller.
Buyer: a person who buys or agrees to buy goods4
Seller: a person who sells or agrees to sell goods5
The two parties are essential for making a sale valid. The contract may between a part owner
and another, but if joint owners distribute property among themselves as per mutual
agreement, it is not considered as sale as there are no two parties. One party must make the
exchange of goods with the second party. One individual cannot act as a self-seller as well as
a self-buyer.
2. Property:
Section 2 (11) describes property as the general property in goods, and not merely a special
property. General property means transfer of all ownership rights and special property
means limited rights transfer. Transfer of property in sale refers to the transfer of ownership.
A mere transfer of possession is not termed as sale under the Sale of Goods Act 1930. If
goods are given for hire, lease, hire purchase or pledge, general property is not transferred

3 As defined under section 5(1) of the sale of goods act,1930

4 As defined under section 2(1) of the sale of goods act,1930
5 As defined under section 2(13) of the sale of goods act,1930
2 | Page

and hence it is not a sale. Similarly if goods remain in possession of seller after sale
transaction is made, the possession is with the seller, but property is with the buyer.
3. Price:
Every contract involves a consideration. Under the contract of Sale of Goods, the
consideration is money. Price under Section 2 (10) of the Sale of Goods Act 1930 is, the
money consideration for a sale of goods. To make a sale, the exchange must involve money.
If goods are exchanged against goods the transaction is barter and not covered by the act.
However, consideration may be partly in money and partly in goods.
a. Ascertainment of price: The price in a contract of sale may be fixed by the contract or
may be left to be fixed in manner thereby agreed or may be determined by the course of
dealing between the parties. Section 9(1) Where the price is not determined in accordance
with the foregoing provisions, the buyer shall pay the seller a reasonable price which will be
dependent on the circumstances of each particular case.
4. Goods:
every kind of movable property other than actionable claims and money; and includes stock
and 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.6
The goods included are of tangible nature. Goods are said to be in a "delivered state" when
they are in such state that the buyer would under the contract be bound to take delivery of
them .Goods are the subject matter of the contract. A contract of exchange made between the
buyer and the sellers without transfer of goods will not hold good to the contract of sale of
goods.
Kinds of Goods:
Goods are identified on the basis of state or condition of purchase into three broad categories:
a. Existing Goods: As mentioned in Section 6(1), these are the goods which are in existence
and are physically present in the sellers possession. They are further classified as:
a) Specific goods: these are the goods identified and agreed upon at the time
the contract is made.7
b) Ascertained goods: these are identified after the formation of the contract.
c) Unascertained goods/generic goods: these are the goods which are not
specifically identified or agreed upon at the time of the contract of sale.
b. Future Goods: goods to be manufactured or produced or acquired by the seller after
making of the contract of sale.8
6 As per section 2 (7) of the sale of goods act,1930)
7 As per section 2 (14) of the sale of goods act,1930
8 As per section 2 (6) of the sale of goods act,1930
3 | Page

c. Contingent Goods: According to Section 6(2), a contract for the sale of goods the
acquisition of which by the seller depends upon a contingency which may or may not
happen are called contingent goods.
5. Sale and Agreement to sell:
Sale is of goods is a contract whereby the seller transfers or agrees to transfer the property
in goods to the buyer, for a price. 9
Where under a contract of sale the property in the goods is transferred from the seller to the
buyer, the contract is called a sale, but where the transfer of the property in the goods is to
take place at a future time or subject to some condition thereafter to be fulfilled, the contract
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. 10

INTRODUCTION OF CONDITION
AND WARRANTY
9 As per section 4 (1) of the sale of goods act,1930
10 As per section 4 (3) of the sale of goods act,1930
4 | Page

Every kind of contract includes some specifics terms or stipulations regarding the goods of
exchange, the price to be paid, buyers or sellers, the quality of goods, delivery, time of
payment and performance etc.
Opening Para of section 16 makes it clear that there is no implied warranty or condition as to
quality of fitness of goods for any particular purpose, except those specified in Sale of Goods
Act or any other law. This is the basic principle of caveat emptor i.e. buyers beware.
However, there are certain stipulations which are essential for main purpose of the contract of
sale of goods. These go the root of contract and non-fulfillment will mean loss of foundation
of contract. These are termed as conditions. Other stipulations, which are not essential, are
termed as warranty. These are collateral to contract of sale of goods. Contract cannot be
avoided for breach of warranty, but aggrieved party can claim damages. A breach of condition
can be treated as breach of warranty, but vice versa is not permissible.
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 a 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. Whether a stipulation in a contract of sale is a condition or a warranty depends in
each case on the construction of the contract. A stipulation may be a condition, though called
a warranty in the contract.
Some stipulations are essential for the main purpose of the contract. These go to the root of
contract and non-fulfillment will mean loss to the foundation of the contract. These are major
contracts called conditions.
Some stipulations are collateral to contract of sale of goods. These are the minor stipulations
of as called, warranty.
Section 62 allows the implied terms and conditions to be excluded by express agreement or
by previous dealings or by usage. The courts have always been hostile towards parties relying
on exemption clauses, and have, wherever possible use the contra proferentem rule, i.e.
exclusion clause are construed strictly against the party seeking to rely on them. This can be
seen in the case of Wallis11.

Wallis Sen and Wells v Pratt & Haynes12

There was a sale of common sainfoin seed. A clause in the contract excludes warranties
express or implied, as to growth, description, or any other matters. The seller delivered giant
sainfoin, and the buyers having accepted it, claimed damages.
11 Wallis Sen and Wells v Pratt & Haynes [1911] AC 394
12 [1911] AC 394 and http://swarb.co.uk/wallis-v-pratt-hl-1911/
5 | Page

Held: the sellers were not protected by the exemption clause because it referred only to
warranties, whereas they had broken a condition.

HISTORY OF CONDITION AND

WARRANTY
This section is in effect an additional definition or interpretation section and supplies a want
long felt in India. At the time when the contract act was passed the phrase 'warranty' had been
and used with several different meanings and shades of meaning, and the difficulty had been
increased by some of those meanings overlapping some of the meanings of the word
'condition'. The contract Act used the word 'warranty' in this ambiguous sense and did not
define it. The result was that the court had to decide on the construction of each section
whether the word warranty was used in the strict sense in which it was used1, or in the wider
sense of the English 'condition', as it was in s 1182. The present act avoids this confusion and
uses the words 'condition' and warranty and draws a clear distinction between the two.13

CONDITIONS
A condition is a fundamental term going to the root of the contract. In other words,
Conditions set down the primary obligations of the parties. It is a term (oral or written) which
goes directly 'to the root of the contract', or is so essential to its very nature that if it is broken
the innocent party can treat the contract as discharged. That party will not therefore be bound
to do anything further under that contract.
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.14
13 http://www.ssrn.com/abstract=847526
14 According to 12 (2)
6 | Page

Condition form the basis of the contract. Its breach give irreparable loss to the aggrieved
party, and give the aggrieved party the right to cancel the contract, refuse to accept the goods
and even recover payment.
Whether a stipulation in a contract of sale is a condition or a warranty depends in each case
on the construction of the contract. A stipulation may be a condition, though called a warranty
in the contract Mere stating Conditions of Contract in agreement does not mean all
stipulations mentioned are conditions within meaning of Section 12(2).
Condition generally refers to promises and the duties they generate. It is usually an event of
significance but this is not always the case as the parties if they so wish can even make an
insignificant event a condition. Condition can be defined as some operative fact Almost any
event can be a condition and whether a stipulation is a condition or not can be decided only
after looking at the contract in the light of the surrounding circumstances and then deciding
on the intention of the parties. In present day contracts all conditions refer to some operative
fact which has not yet occurred but which must occur so as to prevent frustration of the
contract.
Example: A consulted B, a car dealer, and told him that he wanted to purchase a car 'suitable
for touring purpose'. B, suggested that a 'Bugatti' car would be fit for the purpose. Relying
upon this statement, A bought a 'Bugatti' car. Later on, the car turned out to be unfit for the
touring purpose. A wanted to reject the car and demanded the refund of the price. It was held
that A was entitled to reject the car and to have the refund of the price. In this case, the
suitability of the car, for touring purpose, was a condition of the contract. It was so important
that its non-fulfillment defeated the very purpose for which A bought the car.
When a term will be a condition?
The leading textbooks on contract state that a term will be a condition if it satisfied one of the
following four tests, namely
(a) If statute provides that it is a condition;
(b) If a binding authority requires a court to hold that it is a condition; if every breach, or
(c) If the consequences of every breach, goes to the root of the contract; or,
(d) If the parties have agreed that it is to be treated as a condition.
The first three of these tests involve well established principles, but the fourth yet remains to
be clearly established.
Express agreement by the parties that one of them shall be able to terminate the contract on
the happening of a breach of a particular term by the, other does not automatically entitle the
other party to the full benefits which flow from that term being a condition. The express
agreement gives an option to bring the contract to an end on the breach of that term, but such
an option is no different to an option to bring a contract to, an end on the happening of any
defined event; the fact that the event prescribed is a breach is immaterial. There is an option,
7 | Page

but the option does not affect the nature of the event upon which that option is exercisable.
The, textbooks therefore, are misleading in so far as they suggest, that a term is a condition
where there is agreement by the parties that its breach is to give rise to the innocent party
being able to act as though the term breached were a condition, because the court has the
right to investigate whether it is the substance of the agreement that the term is a true
condition, or merely the form. If it is just the form, then the term will in nominate and the,
quantum of damages will depend upon whether the breach was repudiatory at common law.

Case Study 1: Bunge Corp v Tradax Export SA15

Bunge Corp is a case that illustrates these difficulties. The argument of the Hong Kong Fir
approach was rejected in Bunge Corp, where it was affirmed that the question of whether
the partys benefit has been deprived completely is relevant only after it has been decided
that the term is innominate. In Bunge, Lord Roskill said the basic principles of construction
for determining whether or not a particular term is a condition remain as before the need of
certainty. The court held it was a condition because of the need for certainty when dealing
with a time clause in a mercantile contract. Although not adopted, the court in Bunge did
consider Hong Kong Firs intermediate term approach, showing that it is a leading case which
should be acknowledged.
Moreover, the uncertainty of this Hong Kong Fir approach created risk when terminating a
contract. The court may, years later, claim that the withdrawal was previously wrongly
decided. Innocent party will then have to pay the loss suffered by the other party because of
the wrong termination.
Having been criticized for its uncertainty, Hong Kong Firs intermediate term approach still
survived. With these difficulties, the courts and judges still choose to make it prevail, proving
that the English law system values highly the flexibility which it has brought about.
Therefore, Hong Kong Fir must be an influential key case and common law in English Law
of Contract. Lord Wilberforce and Lord Scaxman both regarded its effect on contract law
highly. Lord Wilberforce called Hong Kong Fir seminal which has become classical. Lord
Roskill in Bunge acclaimed that Hong Kong Firs judgment was a landmark in the
development of one part of our law of contract in the 20th century.

Case Study 2: Thompson v LMS Railway16

The plaintiff who could not read gave her niece the money to buy an excursion ticket. On the
face of the ticket was printed "Excursion, For Conditions see back"; and on the back, "Issued
subject to the conditions and regulations in the company's time-tables and notices and
excursion and other bills." The conditions provided that excursion ticket holders should have
no right of action against the company in respect of any injury, however caused. The plaintiff
stepped out of a train before it reached the platform and was injured.
15 [1981] 2 All E.R. 524
16 [1930] 1 KB 41
8 | Page

The trial judge left to the jury the question whether the defendants had taken reasonable steps
to bring the conditions to the notice of the plaintiff. The jury found that they had not but the
judge, nevertheless, entered judgment for the defendants. The Court of Appeal held that the
judge was right. The Court thought that the verdict of the jury was probably based on the fact
that the passenger had to make a considerable search to find the conditions; but that was no
answer. Lord Hanworth MR said that anyone who took the ticket was conscious that there
were some conditions and it was obvious that the company did not provide for the price of an
excursion ticket what it provided for the usual fare. Having regard to the condition of
education in this country, it was irrelevant that the plaintiff could not read.

Express Conditions
Conditions that are agreed to by the parties, are commonly referred to as express conditions.
Express conditions are usually denoted by language such as "if", "on condition that",
"provided that", "I the even that", and "subject to" to make an event a condition. But usually
in a dispute it is the court which decides whether an agreement makes an even a condition by
the process of interpretation.

Implied Conditions
1. Condition as to Title (Section 14 (a))
In a contract of sale, unless the circumstances of the contract are such as to show a different
intention, there is an implied condition on the part of the seller that
(a) In the case of sale, he has a right to sell the goods, and (b) 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.
Example: R bought a car from D and used it for four months. D had no title to the car and
consequently R had to hand it over to the true owner. Held, R could recover the purchase
money (Rowland v Divall, (1923) 2 K.B.500).
Want of title to the goods is not the only factor because of which the seller may not have a
right to sell the goods. If a vendor can be stopped by process of law from selling, he has not
the right to sell. If the goods sold bear labels infringing the trade mark of a third person, the
seller has no right to sell them. In Niblett v Confectioners materials Co. the sellers sold to the
buyers tins of condensed milk c.i.f from New York to London. Some of the tins were bearing
the labels marked Nissly Brand which was the trade mark of a third person, Nestle Co. At
the instance of the Nestle Co. the Commissioners of Customs detained the goods. The buyers
had to remove those labels before taking delivery of those tins of condensed milk. Having
suffered a loss, by selling the tins of condensed milk without proper labels at a lower price,
the buyers sued the sellers to claim compensation. The Court of Appeal held that the sellers
had made a breach of condition that they had a right to sell the goods and as such they were
bound to pay damages for the loss suffered by the buyers.
9 | Page

It may further be noted that where a seller having no title to the goods at the time of the sale,
subsequently acquires the title (e.g. by paying off the true owner) before the buyer seeks to
repudiate the contract, that title feeds the defective titles of both the original and subsequent
buyers and it will then be too late for the buyer to repudiate the contract (Patten vs Thomas
Motors).

Case Study 3: Butterworth v Kingsway Motors

(1954)
A Jowett Javelin car was acquired by A on hire-purchase terms. Before completing the
payments A sold the car to B (mistakenly believing that she had a right to sell, as long as she
kept up the payments). B, who of course had no title, sold to C, who sold to Kingsway
Motors. They sold the car to Butterworth, who used the car for 11 months before discovering
the defect in title. Thereupon he wrote to Kingsway repudiating the contract. One week later,
A completed her hire-purchase payments (including the option to purchase) and so the hirepurchase company no longer had a claim to the car. Butterworth sued Kingsway for breach of
the implied condition that the seller had good title, claiming a refund of the purchase price. A,
B, and C were joined to the action and each party claimed up the line similarly for breach of
contract. Held Butterworth was entitled to a refund, despite enjoying 11 months use of the
car. However, the other parties were only entitled to damages for breach of warranty. This is
because when A completed her payments, title passed to her from the hire-purchase company;
this title was fed down the line to B, C and Kingsway. It never came to Butterworth, though,
because he repudiated before A acquired the title. Thus, the others all received title, albeit
belatedly.
2. Condition as to Description (Section 15)
Sometimes, the goods are sold by description. In such cases, the implied condition is that the
goods shall correspond with the description. The term correspondence with description
means that the goods purchased by the buyer must be the same which were described by the
seller. If subsequently, it is discovered that the goods do not correspond with the description,
the buyer may reject the goods and claim the refund of the price, if already paid.
Example: A purchased from B a car, which he had never seen. B described the car as a brand
new. However, on delivery, A found that the car was used and repainted. And thus A returned
the car to B. It was held that the sale was by description and the car did not correspond with
the description. In this case, A was entitled to reject the car. (Based on Varley v whipp (1900)
1 Q.B.513)
It may, however, be noted that the buyer can reject the goods only if the sale is by description,
and the goods do not correspond with the description. The buyer is given the right to reject
the goods because a person cannot be compelled to buy a thing different from the thing he
contracted to buy. In Bower v Shand (1877) 2 AC 455, Lord Blackburn emphasized this
condition in the following words:
If you contract to sell peas you cannot oblige a party to take beans. If the description of
articles tendered is different in any respect it is not the article, bargained, and the other party
is not bound to take it.
10 | P a g e

It will be interesting to know, that the term sale by description has not been defined in the
Sale of Goods Act. However, it generally means the sale when the goods are described in the
contract as of particular kind or class, e.g., Basmati Rice, Long staple Cotton, Desi Wheat,
etc. The sale will also be by description when the identity or quality of the thing is describe,
e.g., Brand New Car, Maruti 85 Model etc. The term sale by description includes the
following situations:
(a) Sometimes, the buyer has never seen the goods but he buys on the basis of description
given by the seller. In such cases the goods must correspond with the description given by the
seller.
Example: A purchased a sewing machine which he had never seen. The seller (B) described
the machine as Brand New. But on delivery, A found that the machine was extremely old.
In this case, the sale is by description, and A is entitled to reject the machine as it does not
correspond with the description given by the seller.
Where the buyer has seen the goods but he relies not on what he has seen but what was stated
to him and the deviation of the goods from the description is not apparent.
Example: In an auction sale of a set of napkins and table cloths, these were described as
dating from the seventeenth century. The buyer bought the set after seeing it. Subsequently
he found the set to be an eighteenth century set. Held he could reject the set.17
Example: A advertised his car for sale as a Herald Convertible, white 1961 Model. B
examined the car and bought it. Subsequently, B discovered that the car was made of two
parts which had been welded together. And only one part was of 1961 Model, whereas the
other part was of old model. It was held that the sale was by description and B could reject
the car as it did not correspond with the description. In this case, although B has examined
the car, but he relied upon the description given by the seller (A).18
Example: A sold to B, 3000 tins of Australian fruits which were agreed to be packed in cases
each containing 30 tins. A delivered the substantial portion of the fruits in cases containing 24
tins. It was held that the method of packing was of part of the description. Therefore, B was
entitled to reject all the goods.19
Thus, once it is proved that the sale is by description, then the goods must correspond with
the description. If they do not correspond, the buyer may reject them and the seller cannot
take the defence by saying that they will serve the buyers purpose.
But where the goods correspond with the description, the buyer is bound to take the delivery
for whatever worth they may be otherwise.

17 (Nicholson & Venn v Smith Marriott, (1947) 177 L.T. 189).

18 (Beale v Taylor (1967) 1 WLR 1193))
19 [Moore & Co. v Londover Co. (1921) 2 KB 519 CA].
11 | P a g e

Case Study 4: Toepfer v Warinco AG (1978)

Toepfer v Warinco AG (1978) Under a contract for the sale of fine-ground soya bean meal,
the sellers supplied coarse-ground meal. The buyers rejected it. Held the word fine-ground
was a word of description and so the buyers were entitled to reject for breach of the implied
condition that the goods would correspond with the description.

Case Study 5: Raynham Farm v Symbol Motor

Corporation (1987)
Raynham purchased a new Range Rover car from Symbol, who were motor dealers.
However, the particular Range Rover delivered had, before the sale, been seriously damaged
by fire and restored to as new condition. When Raynham discovered this, they tried to reject
the car, claiming that it did not correspond with the description of new. Held as there would
always be a lurking doubt as to the soundness of the car after the damage and repair, it could
not properly be described as new. Thus there was a breach of the condition implied by s 13
of the SGA and Raynham were entitled to reject.
3. Sale by Sample (Sec 17)
The sale is by sample where there is a term in the contract express or implied to that effect.
There are three implied conditions when the goods are supplied according to the sample
i) that the bulk shall correspond with the sample in quality;
ii) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;
Example: A agreed to sell to B two parcels of wheat. The sample of wheat was shown to B.
The buyer (B) went to As warehouse to examine the wheat. One parcel, which was lying in
the sellers (As) warehouse, was shown to B. But A refused to show the other parcel to B,
which was not in the warehouse. It was held that the buyer could put an end to the contract. 20
Example: Some mixed worsted coatings were sold by sample. The goods when supplied
corresponded to the sample but it was found that owing to a latent defect in the cloth, coats
made out of it would not stand ordinary wear and were therefore, unsaleable. The same defect
existed in the sample also but could not be detected on a reasonable examination. Held, the
buyer was entitled to reject the cloth.21

4. Sale by Sample as well as Description (Section 15)

When the goods are sold by sample as well as description it is not sufficient that the bulk of
the goods corresponds with the sample if the goods do not also correspond with the
description. Sometimes there may be a difference between the sample and the description of
the goods. In such a case, the fact that the goods supplied conform to the sample but do not

20 [Lorymere v Smith (1822) 1 B & C 1].

21 (Drummond & Sons v Van Ingen).
12 | P a g e

agree with the description entitle the buyer to reject the goods because the fundamental
condition in every contract is that the goods should correspond to the description.
In Wallis v Pratt there was a contract of sale by sample of seed described as English
Sainfoin. But the seller giving no warranty express or implied as to growth, description, or
any other matters. The seed was sown and when the crop was ready it was discovered the
seed supplied and the sample shown were not of English Sainfoin seed but of giant
sainfoin seed. It was held that there was a breach of condition and the buyer was entitled to
recover damages.
In Nichol v Godts there was sale of foreign refined rape oil, warranted only equal to
samples. The oil supplied though corresponded with the sample, was adulterated with hemp
oil. The jury found that the admixture was not commercially known as foreign refined rape
oil and therefore, it was held that since the oil supplied was not in accordance with the
description, the buyer was entitled to reject the same.

5. Condition as to quality or fitness (Section 16)

Normally, in a contract of sale, there is no implied condition as to quality or fitness of the
goods for a particular purpose. The buyer must examine the goods thoroughly before he buys
them in order to satisfy himself that the goods will be suitable for the purpose for which he is
buying them.
The implied condition as to quality or fitness will operate if the following conditions are
satisfied.
1. The buyer requires the goods for a particular purpose.
2. The buyer makes known to the seller that particular purpose.
3. The sellers business is to sell such goods, whether the he is the actual producer or not.
The particular purpose for which the goods, are required has to be made known to the seller.
This may be done either expressly or impliedly. A particular purpose is the purpose expressly
or impliedly communicated to the seller, for which the buyer buys the goods. Where an
article is fit for one particular purpose alone, and turns out to be unsuitable for that purpose,
when used, it is easy to see that the condition as to fitness has been broken. But where an
article is capable of being applied to a variety of purposes,. the buyer must notify the specific
purpose he has in mind, and if this is not shown, the buyer will have no remedy because it
was unfit for that purpose.
Example: (a) A who had no special knowledge of hot water bottles went to the shop of a
chemist and asked for a hot water bottle. He was shown a bottle which the chemist said will
not stand boiling water but was intended to hold hot water. A bought the bottle. After a few

13 | P a g e

days, while using it, it burst and injured his wife. It was found that the bottle was not fir for
use as a hot water bottle and therefore, the chemist was liable for damages. 22
Example: (b) A bought a set of false teeth from B, a dentist. But the set was not fit for As
mouth. A rejected the set of teeth and claimed the refund of price. It was held that A was
entitled to do so as the only purpose for which he wanted the set of teeth was not fulfilled.
Example: (c) A bought a tweed coat from B. After wearing the coat for some time, A
developed a dermatitis (skin trouble). It was discovered that coat was fit for the use of a
normal man. And As skin trouble was due to his oversensitive skin. The court held that the
implied condition as to fitness for buyers purpose was not broken, as the coat was fit for the
use of a normal man. In this case, it was As duty to disclose the fact of this over sensitiveness
to the seller at the time of sale.
Where, however, the goods are sold under its patent or trade name, there is no implied
condition as to its fitness for any particular purpose. Thus, when a patent smoke consuming
furnace was ordered by the plaintiff by its patent name, for his brewery and the same being
forwarded to him proved useless, it was held that the buyer had no cause of action against the
seller. But the situation will be quite different where the buyer asks the seller to supply an
article of a named make and indicates to the seller that he relies on his skill and judgement,
for its being fit for a particular purpose. Implied condition as to quality or fitness will apply
even though the article is described in the contract by its trade name.
Example: P applied to D for a motor car suitable for touring. D said that the Bugatti car, their
speciality would suit, and showed P a specimen. P then ordered for a Bugatti car. The car
delivered proved to be unsuitable for touring purposes. P was entitled to reject the car and
could recover back the purchase money 23

6. Implied Condition of Merchantable Quality

Section 15 provides that when the goods are bought by description there is an implied
condition that the goods supplied shall answer that description. According to this Sub
Section, there is a further implied condition in such a case that the goods supplied shall be of
merchantable quality. Where;
1. The goods are bought by description
2. From a seller who deals in the goods of that description (whether he is the
manufacturer/producer or not)
There is an implied condition that the goods shall be of merchantable quality. The term
merchantable quality has not been defined in the Act. It means that the article is of such
quality and in such condition that a reasonable man acting reasonable would after a full
22 [Priest v Last (1903) 2 KB 148]

23 [Baldry v Marshall (1925) 1 KB 260].

14 | P a g e

examination accept it under the circumstances of the case in performance of his offer to buy
that article, he buys for his own use or to sell again.
The goods should be immediately saleable under the description by which they are known in
the market. Merchantability, however, does not mean that the goods should be of first quality.
Goods may be unmerchantable not only because of some defect in their physical condition,
but also, because of some other circumstances as for example;
1. Where they infringe a trade mark, or
2. The use of them is dangerous or injurious in a way not to be expected from goods of the
kind, or
3. They are unfit for use.
Examples: (a) P asked for a bottle of Stones Ginger Wine at Ds restaurant. While P was
drawing the cork, with a cork screw, the bottle broke at the neck and injured him. It was held
that the sale was by description and since the bottle was not of merchantable quality. P was
entitled to recover damages. 24
Example (b) A manufacturer supplied 600 horns under contract. The horns were found to be
dented, scratched and otherwise of faulty manufacturer. Held, they were not of merchantable
quality and therefore, the sellers suit for price was dismissed 25
Example (c) A radio set was sold to a layman. The set was defective form the beginning and
it did not work in spite of repairs. Held, the purchaser could return the set and claim refund.26
All such defects as make the goods unmerchantable are of two kinds, called patent defects
and latent defects. Patent defects are those which can be found on examination by a person of
ordinary intelligence with the exercise of due care. Latent defects are those which cannot be
discovered on such examination. There is an implied condition on the sellers part that the
goods are free from latent defects.
In case of patent defects where an opportunity is afforded to the buyer to examine the goods,
but the buyer makes only a casual examination of the goods, this will amount to an
examination within the meaning of this section, and the seller would not be liable to for the
defects which such an examination ought to have revealed.
Example: B went to Ts warehouse to buy some glue. The glue was stored in barrels and
every facility was given to B for its inspection. B did not have any of the barrels opened, but
only looked at the outside. He then purchased the glue. Held, as an examination of the inside

24 [Morelli v Fitch and Gibbons (1928), 2 KB 636]

25 [Jackson v Rotax Motor & Cycle Co. (1910) 2 k.b. 397).
26 [R.S.Thakur v H.G.E.Corp, AIR (1971) Bom. 971]
15 | P a g e

of the barrels would have revealed the nature of the glue, and as B had an opportunity of
making the examination, there was no condition as to merchantable quality.27
Comparison between the condition as to the fitness of goods for buyers purpose, and
condition as to merchantability. The following table gives the comparison between the two:
S. No

Condition as to Fitness of Goods for Buyers

Purpose

Condition as to Merchantability

The buyer must rely on the skill and

judgment of the seller.

The buyer is not required to rely

on the skill and judgment of the
seller.

When the goods are sold under patent or

trade name then the condition as to fitness
for buyer's purpose IS not applicable i.e., it
IS excluded.

Under patent or trade name ,

then the condition as to
merchantability is applicable,
i.e. It is not excluded.

There may be cases In which the goods are

not fit for buyer's use but they may be
merchantable.

There may not be such cases.

7. Condition as to Wholesomeness
In the case of eatables and provisions, in addition to the implied condition as to
merchantability, there is another implied condition that the goods shall be wholesome.
Example: F bought milk from A. The milk contained germs of typhoid fever. Fs wife took
the milk and got infection as a result of which she died. Held, F could recover damages [Frost
v Aylesbury Dairy Co Ltd., (1905) 1 K.B. 608]

27 [thornett & Fehr v Beers & Sons, 1919 1 K.B. 486].

16 | P a g e

WARRANTY
A warranty is a term of the contract which is collateral or subsidiary to the main purpose of
the contract. It is therefore not so vital as to affect a discharge of the contract. A breach of
warranty only entitles the innocent party to an action for damages; he cannot treat the
contract as discharged.
A warranty is stipulation collateral to the main purpose of the contract, the breach of which
gives rise to a claim for damages but not to the right to reject he goods and treat the contract
s repudiated28
In brief, where the fulfillment of the main purpose of the contract depends on the fulfillment
of the stipulation, the stipulation is condition and where it is not so, the stipulation is only a
warranty. There is no specific rule as to which stipulation is a condition and which one is a
warranty. Section 12(4) of the Act states whether a stipulation in a contract of sale is a
condition or a warranty depends in each case on the construction of the contract as a whole.
The court is not guided by the terminology used by the parties to the contract. A stipulation
may be a condition though called a warranty in the contract. Thus the court has to look to the
intention of the parties by referring to the terms of the contract, its construction and
surrounding circumstances to judge whether a stipulation was a condition or a warranty.

Examples
(a): A person purchases a vehicle which is warranted quiet and smooth to drive. If the vehicle
turns out to be noisy and inconvenient to drive, the buyers only remedy is to claim damages.
But if instead of buying a particular vehicle, a person asks a dealer to supply him with a quiet
and smooth vehicle and the dealer supplies the person with a noisy one, the stipulation is a
condition, and the buyer can return the vehicle. Besides, the buyer can also claim damages for
breach of the contract.
28 According to section 12(3)
17 | P a g e

(b): A made a contract for the sale of cashew-nuts. According to the terms of sale, the total
bad nuts shall not exceed 20 per cent of the total. The purchaser entered into the contract
relying upon the description. The above term being a basic element of the description of the
goods agreed to be supplied, the purchaser was entitled to reject the goods if the bad nuts
exceeded the stipulated percentage. He could also claim back the part of price paid to the
seller. [Antony Thomas v Ayuppuni Mani; 1959 Kerala LT 1271]
From the above examples, it is clear that an exactly similar term may be a condition in one
contract and a warranty in another, depending upon the construction of the contract as a
whole.
The breach of a warranty entitles the aggrieved party to only claim and recover damages.
However, the aggrieved party cannot refuse from accepting the goods, or repudiate the
contract. The breach of a warranty does not cause any irreparable loss to the party.
In commercial and consumer transactions, a warranty is an obligation or guarantee that an
article or service sold is as factually stated or legally implied by the seller, and that often
provides for a specific remedy such as repair or replacement in the event the article or service
fails to meet the warranty.
The breach of a warranty is not considered as a breach of condition. Warranty is of a minor
and secondary nature. A breach of warranty occurs when the promise is broken, i.e., a product
is defective or not as should be expected by a reasonable buyer.
In a contract for the sale of goods, a warranty, once breached, gives rise to a claim for
damages, but not a right to reject the goods sold and treat the contract as repudiated. A
condition, however, is part of the root of the contract and allows the injured party to rescind
and/or seek damages. Warranties may be express or implied. This can be seen in the above
case.

Case Study 6: Microbeads v Vinhurst Road

Markings Ltd 29
Prismo held a patent for a machine for making white lines on roads. The complete
specification was published in November 1970. It was entitled to institute proceedings for
infringement in 1972, when the letters patent were granted.
At the beginning of 1970, Vinhurst brought a machine for making white lines from
Microbeads.. property in the machine passed before Nov 1970. Vinhurst knew nothing about
the patent; it found the machine unsatisfactory and didnt pay Microbeads. Microbeads sued
for the price. Vinhurst alleged breach of the term of fitness for purpose, and claimed that
Microbeads did not have the right to sell the machine and Vinhurst did not have quiet
possession.

29 (1975) 1 ALL ER 529

18 | P a g e

Lord Denning found that because the sale had occurred prior to the grant of the patent, there
was no breach of the condition that the seller had the right to sell the goods. They were
entitled to do whatever they liked with them at the time. However, he found a breach of the
implied warranty for quiet possession. He found that the words to have and enjoy applied
not only at the time of sale but for to future enjoyment.

When is a condition considered to be a warranty?

According to the Sale of Goods Act, a condition is taken as warranty for repudiation purpose
under the following:
i.

Where a contract of sale is subject to any condition to be 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 treating the contract as repudiated.

ii.

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.

iii.

Nothing in this section shall affect the case of any condition or warranty
fulfillment of which is excused by law by reason of impossibility or otherwise.

Time of payment is not essence of contract but time of delivery of goods is, unless specified
otherwise unless a different intention appears from the terms of the contract, stipulations as to
time of payment are not deemed to be of the essence of a contract of sale. Whether any other
stipulation as to time is of the essence of the contract or not depends on the terms of the
contract. As a general rule, time of payment is not essence of contract, unless there is specific
different provision in Contract. In other words, time of payment specified is warranty. If
payment is not made in time, the seller can claim damages but cannot repudiate the contract.

Stipulation of time and essence of contract:

a) When time is stipulated regarding the payment of price: Time of payment is not
considered the essence of the contract unless a different intention appears from the
terms of the contract. Thus if payment is not made in time the seller cannot avoid the
contract but can claim damages.
b) When time is stipulated regarding delivery of goods: time of delivery of goods is
normally considered essence of the contract. Thus non performance at stipulated time
will render the contract voidable at the option of the buyer.

19 | P a g e

Express Warranties
It is a warranty which has been expressly agreed upon by both the parties at the
time of contract of sales. It may be noted that it is open to both the parties to
include in their contract any number of expressed warranties.

Implied Warranties
It is a warranty which the law implies into the contract of sale. In other words it is the
stipulation which has not been included in the contract of sale in express words. But the law
presumes that the parties have incorporated it into their contract. It will be interesting to know
that implied warranties are read into every contract of sale unless they are expressly excluded
by the express agreement of the parties. These may also be excluded by the course of dealings
between the parties or by usage of trade [Section 62]. It may be noted that sometimes there is
conflict between the express and implied warranties. In such cases, the express terms shall
prevail and the implied terms shall not be considered.

1. Warranty of Quiet Possession: [Sec. 14(b)]

In every contract of sale the first implied warranty on the part of the seller is that the buyer
shall have and enjoy quiet possession of the goods. If the quiet possession of the buyer is in
any way disturbed by a person having a superior right than that of the seller, the buyer can
claim damages from the seller. Since disturbance of quiet possession is likely to arise only
where the sellers title to goods is defective, this warranty may be regarded as an extension of
the implied condition of the provided for by Section 14 (a).
In the case of Mason v Bhumingham, the plaintiff purchased a second hand typewriter for
pound 20 from the defendant. She thereafter spent a sum pound 11-10sh., for getting it
overhauled and putting in order. Unknown to the parties the typewriter had been stolen and
the plaintiff was compelled to return the same to its true owner. In an action by the plaintiff
against the defendant it was held that the defendant had made a breach of warranty implied in
a contract of sale of goods that the buyer shall have and enjoy quiet possession of the goods.
The plaintiff was entitled to recover not only the sum of pound 11-10sh, the amount spent on
overhauling, as the same was the loss arising naturally in the usual course of things.
2. Implied Warranty of Freedom from Encumbrances
There is an implied warranty on the part of the seller that the goods are free from any charge
or encumbrance. A breach of this warranty will occur when the buyer discharges the amount
of encumbrance. This warranty will not apply where such Encumberances are declared to the
buyer when the contract is made or he has notice of them. Where there is a breach of this
implied warranty, the remedy of the buyer is to sue for damages.

20 | P a g e

Example: A, the owner of the watch pledges it with B. After a week, A obtains possession of
the watch from B for some limited purpose and sells it to C. B approaches C and tells him
about the pledge affair. C has to make payment of the pledge amount to B. There is breach of
this warranty and C is entitled to claim compensation A.
3. Disclosure of Dangerous Nature of Goods
There is another implied warranty on the part of the seller that in case the goods are
inherently dangerous or they are likely to be dangerous to the buyer and the buyer is ignorant
of the danger, the seller must warn the buyer of the probable danger. If there is a breach of
this warranty, the seller will be liable in damages.
In Clarke v Army and navy Co-operative Society Ltd. (1903) 1 K.B. 155, C purchased a tin
of disinfectant powder from A. A knew that the tin was to be opened with special care
otherwise it might prove dangerous. He also knew that C was ignorant about it but did not
warn C. C opened the tin whereupon the disinfectant powder flew into her eyes causing
injury. Held, A was liable in damages to C as he should have warned C of the probable
danger.

21 | P a g e

CONDITIONS VS WARRANTIES
Stipulations that is essential for main purpose of contract. Non-fulfillment of such will mean
loss of foundation of contract. These are termed as Conditions. Stipulations not essential are
termed as warranty. Aggrieved Party may claim damages.
The difference between conditions and warranties can be illustrated in two cases from the late
19th century. In Poussard v Spiers and Pond30 , Madame Poussard was under contract to
appear in an operetta for the season. In fact she was unavailable because of illness until one
week after the season had started. It was held that the obligation to perform from the first
night was a condition and the producers were entitled to terminate her contract. In Bettini v
Gye31 , Bettini was under contract to appear in concert for a season. The term required him to
be in London for rehearsals six days before the season started. When Bettini arrived three
days late, Gye refused to accept his services. It was held that Bettinis late arrival was simply
a breach of a warranty so Gye was himself in breach by terminating Bettinis contract.
A breach of a condition does not automatically cause a contract to be terminated, but it gives
the innocent party a choice about how to proceed. They may choose to cancel (repudiate)
the contract
And claim damages and rescission, or they may choose to carry on with (affirm) the
contract and claim damages.
Lets take another example. Tom, a self-employed sales representative, bought a new car for
10,000. He paid a deposit of 5,000 and agreed to pay the balance in installments. The first
time Tom drove the car the engine failed. The manufacturer was prepared to replace the
engine, which was covered by its guarantee.
It is an implied condition under Section 14 of the Sale of Goods Act 1979 that goods sold
must be of a satisfactory quality. This leaves Tom with two possible options on how he
should legally proceed:
a) He may repudiate the contract, and claim rescission and damages. Repudiation
means that Tom is no longer bound to make any payments on the car.
Rescission enables him to recover his deposit of 5,000 and any installment
payments. In addition, he may recover damages to compensate him for any
additional costs such as having the car towed to a garage, the cost of hiring a
car or arranging alternative transport.

30 (1876) 1 QBD 410

31 (1876) 1 QBD 183
22 | P a g e

b) He may accept the manufacturers promise to repair the car in other words,
he may affirm the contract and recover damages only for example,
compensation as under the first option. In this option Tom has, in effect,
chosen to treat the breach as one of warranty rather than that of condition.

So what about warranty?

In this case, warranty is a relatively unimportant term. The innocent party is not entitled to
repudiate a contract simply for a Breach of a warranty and is restricted to a claim for
damages. In fact, if the innocent party should proceed by repudiating the contract following a
breach of warranty, they are no longer innocent, but have acted in breach of contract32 .
Imagine, for example, that Tom discovered the car radio was faulty and needed to be
replaced. This is a relatively minor breach and entitles Tom to be compensated for the cost of
a replacement radio. Tom would not, however, be entitled to repudiate the contract to
purchase the car.
Unfortunately, contracting parties do not always make it clear whether a particular term is a
condition or a warranty. This can create many problems but, in general, the law allows parties
freedom of contract in that they are free to classify terms as they choose. What may appear to
be a minor issue to one person may be of crucial importance to another. It is down to the
courts therefore to determine the intention of the parties involved.
Even where the parties use the word condition or warranty to describe a particular term,
the courts have stated that this will not in itself be conclusive. In Schuler AG v Wickman
Machine Tools Sales Ltd33 a term described as a condition required Wickman to make
weekly visits over a four and- a-half year period to six named firms, a total of 1,400 visits.
Wickman failed to make some of the weekly visits so Schuler terminated the contract. It was
held that Schuler acted in breach by repudiating the contract. Even though the word
condition had been used to describe the term, the House of Lords did not believe that it was
the parties intention that a failure to make a single visit would give Schuler the right to
terminate.

Conditions:
a) Breach gives rise to rescind; with the rescission buyer can demand a return of the
purchase money, unless he has, with knowledge of the facts, held on to the bargain so
as to waive the condition
b) Right to sell; not undertake to give good title; seller still in breach even if transaction
comes within an exception to name that and buyer is able to get a goods title

32 see Bettini v Gye (1876) 1 QBD 183

33 [1974] A.C. 235
23 | P a g e

c) for Sale Of Good s.14, buyer not deprived of right to get back purchase money
because cannot restore goods which, from the nature of the transaction, are not the
goods of the seller at all, and which the seller therefore has no right to under any
circumstances.34
d) Ground: total failure of consideration; not matter car used before found out condition
breached35.

Warranties:
a) Breach gives rise to remedy in damages and will not be able to reject the goods
b) S.14 (1) (b) and 14(2) (b) irrelevant that seller not know of encumbrance or charge
c) Still breached where encumbrances or charges arise after sale and passing of property;
condition as to title not breached but warranty as to quiet possession and free from
encumbrances or charges breached.36
d) Scope of right to quiet possession:
i.

Breach where buyers possession disturbed by lawful act of 3p who asserts a

superior title or a right which impairs the buyers title or his freedom to
possess and use the good

ii.

Breach where tort committed by seller himself or his agents

iii.

Not breach where stranger who has no connection with seller commits a tort
which interferes with buyers rights

The points of distinction between a Condition and a Warranty may be summed up as

under:
1. A condition is a stipulation which is essential to the main purpose of the contract. A
warranty is a stipulation which is collateral to the main purpose of the contract.
2. A breach of condition gives right to repudiate or rescind the contract and also a right to
claim damages. Breach of warranty provides right to claim damages only. A breach of
warranty does not entitle a buyer to reject the goods.
3. A breach of condition may be treated as a breach of warranty by the aggrieved party
and accordingly the aggrieved party may not repudiate the contract. But a breach of
warranty cannot be treated as a breach of condition.
34 See Rowland v Divall [1923] All ER Rep 270
35 See Rowland v Divall [1923] All ER Rep 270
36 See Microbeads v Vinhurst Road Markings Ltd (1975) 1 ALL ER 529
24 | P a g e

CHANGE OF A CONDITION INTO

A WARRANTY
Section 13 deals with cases where breach of condition would be treated as a breach of
warranty only and as a consequence, a contract is not avoided. The buyer has to be contended
with a claim for damages only. These cases are as follows:

Where the buyer elects to treat breach of condition as a breach of warranty. This is to say,
he only claims damages and does not elect to repudiate the contract.
Where the buyer altogether waives the performance of the condition. Once the buyer has
waived his right, he cannot afterwards insist on its fulfillment. Waiver may be express or
implied.
Where the contract of sale is non-severable/indivisible and the buyer has accepted either
the whole goods or any part thereof. In such a case, a breach of any condition by seller
can only be treated as a breach of warranty, unless there is a term of the contract, express
or implied, to the contrary. Indivisible contracts are those where price for a lot,
comprising goods of different qualities, as such is fixed and not fixed per unit or per bag
or per ton, etc.

Taking possession or delivery of the goods does not amount to their acceptance. According to
Section 42, the buyer is deemed to have accepted the goods:
a) when the seller is intimated by him about the acceptance of goods; or
b) When he does any act in relation to goods which is inconsistent with the ownership of
the seller, e.g. the buyer puts his mark on goods; or
c) When he continues to retain the goods even after the lapse of reasonable time without
intimating the seller that he has rejected them.
d) Where the fulfillment of any condition or warranty is excused by law by reason of
impossibility or otherwise.

25 | P a g e

STIPULATION AS TO TIME
The stipulations as to time may be of two types:
i) As to time of payment;
ii) Other stipulations as to time e.g., with regard to the performance of the contract.
Regarding the importance of various stipulations as to time Section 11 of the Act provides as
under:
Unless a different intention appears from the terms of the contract, stipulation as to time of
payment are not deemed to be of the essence of a contract of sale. Whether any other
stipulation as to time is of the essence of the contract or not depends on the terms of the
contract.
It may be noted that the general rule stated in Section 11 is that the time of payment of the
price is not deemed to be of the essence of the contract. Therefore, in case of delay in the
payment of the price by the buyer, the seller cannot avoid the contract for that reason but he
can only claim compensation for the same. The parties are, however, free to express a
different intention in their contract. They may make the time of the payment of the price as of
the essence of the contract.
Stipulations as to time, except as regards time of payment are usually of the essence of the
contract. Where the parties to the contract stipulate that time as regards delivery of goods,
payment or any other factor shall form the essential terms of the contract, time shall than be
regarded as a condition in construction of a contract for sale of the goods, breach of which
shall provide right to the aggrieved party to cancel the contract. Example (a) : A sold certain
goods to B. The payment was to be made on delivery of goods. B failed to pay after the
goods had been in part delivered. A did not send further deliveries. It was held that delivery
was subject to the condition of payment and the condition being broken, A had the right to
bring an action for the recovery of goods. [Bishop v Shillitoz Band A 329]
A contract was made for the sale of goods c.i.f. Antwerp. The delivery was required to be
given in October. However, due to a strike in the port of loading the goods were not shipped
until November. It was held that the buyer could refuse to take delivery of goods. [J. Aron &
Co. v Comptoir Wegimont. (1921) 3 K.B. 435]

Case Studies
26 | P a g e

Case Study 7: Hartley v Hymans (1920)

By a contract for the sale of cotton yarn, delivery was to be made in weekly instalments of
11,000 lbs each between September and November 1918. It was a term of the contract that
the deliveries would be punctual. In the event the deliveries were short and late, continuing
into March of the following year. During this period the buyer regularly complained and
asked for better deliveries. In March the buyer eventually cancelled the contract. The seller
brought an action for damages for refusing to take delivery of the remaining yarn.
Held in ordinary commercial contracts for the sale of goods the rule clearly was that time was
of the essence with respect to delivery; thus the term requiring punctual delivery was a
condition. However, the buyer, by his conduct, had waived his right to treat late deliveries as
a breach of a condition. He was also estopped from doing so. In fact, a new agreement was
created that delivery may be made within an extended and reasonable period. The seller was
entitled to damages.

Case Study 8: Bence Graphics v Fasson UK (1996)

CA Over a number of years the buyers purchased vinyl film to make into decals, which
would be used to label cargo containers. The sellers were aware that the buyers would be
selling the decals to other companies. It was a term of the contract that the film would survive
in good condition for five years. The buyers used most of the film and sold the resultant
decals. However, it turned out that the film supplied would not last five years, because of a
latent defect: it contained insufficient stabiliser to protect it from the effects of ultra violet
light. That would cause the final product (the decals) to fade in sunlight and become illegible.
The buyers claimed damages for breach of warranty. The trial judge awarded damages based
upon s 53(3) of the SGA, that is, the difference between the actual value of the goods at the
time of delivery and their value if they were up to contract quality. And as the latent defect
rendered the goods valueless, the damages amounted to a refund of the purchase price
(564,328). The buyer had received no complaints from their customers, and so they had
suffered no loss; the damages were a windfall. The sellers appealed.
Held (2:1) the appeal was allowed. Section 53(3) provided a prima facie rule only. Section 53
codifies the common law (1st) rule of Hadley v Baxendale (see above, 14.2.2) that the
damages should be based upon the loss directly and naturally resulting, in the ordinary
course of events, from the breach. The loss could have been greater than the purchase price
(for example, if sub-buyers had sued the buyers because their containers had gone missing) or
nil, because the buyers had suffered no loss. In this case, the buyers were awarded damages
only for the remainder of the film which they could not use. This amounted to 22,000. They
were granted further an indemnity against any subsequent claims by their sub-buyers.

27 | P a g e

BIBLOGRAPHY
A Textbook Of Mercantile Law (Commercial Law) (English) 4th Edition By P.P.S
Gogna
Mercantile Law (English) 13th Edition By S. Chand
Mercantile Law by KC Garg.
Briefcase on Commercial Law By Michael Connolly
Business Law- Notes [on Scribd.com]

7 | Page