Explain the meaning and scope of Conditions treated as Warranty, adding illustrations.

Question: Explain the meaning and scope of Conditions treated as Warranty, adding illustrations. [BJS 1975]

Find the answer to the Law of Sale of Goods only on Legal Bites. [Explain the meaning and scope of Conditions treated as Warranty, adding illustrations.]

Answer

Section 13 of the Sale of Goods Act, 1930 talks about situations when the condition is treated as a warranty. As a result, the buyer loses his right to reject the goods but he is entitled to claim damages from the seller.

This shall happen in the following cases:

a. Waiver by the buyer - Section 13(1) when a contract of sale is subject to any condition to be fulfilled by the seller, the buyer has the right to waive the condition precedent or treat that condition precedent as a breach of warranty because these conditions are for the benefits of the buyer, therefore the buyer has the right to waive it. In that case, the buyer can only recover the damages and once the buyer exercises this option, he cannot compel the seller for its fulfilment.

In the case of City and Industrial Development Corp. of Maharashtra Ltd v. Nagpur Steel and Alloys Ltd, AIR 1992 Bom 55, the seller supplied oversized goods to the buyer and the buyer was fully aware of it so instead of rejecting it, he paid the amount of 58 goods out of 60, and all this amounted to waiver by the buyer of his right to make the seller liable to pay the balance price.

b. Non-severability of contract - According to section 13(2), when the buyer has accepted the goods or a part of goods which are not severable, the breach of the condition on the part of the seller will be considered as a breach of warranty, unless any contrary term of the contract is present, and the buyer can no longer repudiate the contract, but he is entitled to claim damages from the seller. As per section 42, a buyer is deemed to have accepted the goods under three conditions:

• When he intimates to the seller that he has accepted them, or
• When the goods have been delivered to him and he does an act in relation to them which is according to the ownership of the seller or
• When after the lapse of a reasonable time, he retains the goods without informing the seller that he has rejected them.

But if the contract is severable, and the buyer has accepted part of the goods, he still can exercise his right to reject the remaining goods. In the case of Hardy and Co. v. Hillerner and Fowler, (1923) 14 LI.L.Rep.106, the seller sold wheat to the buyer, when the wheat was unloaded at the destination port, the buyer resold and dispatched a portion of it to the sub-purchaser and later discovered that the wheat was not according to the contract quality and then the buyer sent the notice to the seller for rejection of the contract. It was, therefore, held that since the transfer of the possession to the sub-purchaser was inconsistent with the ownership of the seller and hence that barred an end to the buyer’s right of rejection and the buyer could not reject the goods.

Excused by law due to impossibility - According to Section 13(3) when any contract of sale is excused under the law due to the impossibility of the act, then the conditions can still be treated as warranty. The impossible acts are defined under section 56 of Indian Contract Act. This section mentions that any agreement to do an impossible act is void. Condition is reduced to warranty only under remedial purpose because goods cannot be recovered once it is sold to another party.

Illustration:

Suppose X purchases a washing machine from Y. The contract specifies that the washing machine will be delivered on a particular date. However, Y fails to deliver it on that specific date. Section 13 allows X to treat the breach of timely delivery as a warranty, and X can claim damages for any loss incurred due to the delay, but X cannot cancel the entire contract.