Distinction between Condition and Warranty

Corporate Law

Presented by

Asim Hafeez Usman Nawaz Umer Lodhi Akeel Akmal Abdur Rauf

Presented to Madam

Presented to Madam Urooj Bashir

Condition and Warranty Defined

A condition is a Stipulation essential to the main purpose of the contract the breach of which gives the aggrieved party a right To repudiate the contract And to maintain an action for damages for loss suffered A warranty is a Stipulation Collateral to the main purpose of the contract, the breach of which gives the aggrieved party a right To sue for damages only And not to avoid the contract itself

Distinction between Condition and Warranty

Condition 1. As to Value A condition is a Stipulation essential to the main purpose of the contract Warranty 1. As to Value A warranty is a Stipulation collateral to the main purpose of the contract

Distinction between Condition and Warranty

Condition 2. As to Breach The breach of condition gives the aggrieved party a right to repudiate the contract as well as claim damages Warranty 2. As to Breach The breach of warranty gives the aggrieved party a right to claim damages only

Distinction between Condition and Warranty

Condition 3. As to Treatment A breach of condition may be treated as a breach of warranty Warranty 3. As to Treatment A breach of Warranty cannot be treated as breach of condition

Description
There is no hard and fast rule as to which stipulation is a condition and which one a warranty. Sec 12(4) explains whether a stipulation in a contract of sale is a condition or a warranty depends in each case upon the construction of the contract

Description
The Court therefore is not to be guided by the terminology of the parties but has to look to the intention of the parties by referring to the terms of the contract, its construction and the surrounding circumstances to judge whether a stipulation was a condition or a warranty. The most suitable test to distinguish between the two is that if the stipulation is such that its breach would be fatal to the rights of the aggrieved party, then such a stipulation is a condition and where it is not so the stipulation is only a warranty.

Implied Conditions
1 Condition as to title Sec. 14(a). In every contract of sale, the first implied condition on part of the seller is that, in the case of a sale, he has the right to sell the goods and that, in the case of an agreement to sell, he will have the right to sell the goods at the time when the property is to pass. Ordinarily the seller has the right to sell the goods if either he is the owner of the goods or hes owners agent.

Implied Conditions

2. Sale by description In a contract of sale of goods by description; it is an implied condition that the goods shall correspond with the description. If the goods are not according to the description, the buyer can reject the goods. If the seller supplies different goods, the buyer is not bound to accept such goods.

Implied Condition

3. Sale by Sample

in case of sale by sample, the goods must be supplied according to a sample agreed. It is subjected to the following conditions Sec 17. the bulk shall correspond with the sample in quality. the buyer shall have reasonable opportunity to compare the bulk with the sample. the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.

Implied Conditions

4. Sale by Sample as well as by Description

When the goods are sold by sample as well as by description, there is an implied condition that the bulk of the goods shall correspond with the sample and the description.

Implied Conditions
5. Condition as to fitness or quality
This condition applies if the following requirements are fulfilled a. The buyer should inform the seller about the purpose of the goods b. The buyer should rely on sellers skill and judgment c. The seller must be a dealer in the goods of that type

Implied Conditions

6. Condition as to Merchantability

The term Merchantable means that the goods must be fit for the purpose for which such goods are used. Where goods are bought by description from seller who deals in goods of that description whether he be the manufacturer or not the implied condition is that the goods shall be of merchantable quality.

Implied Conditions
7. Condition as to Wholesomeness
Wholesomeness means beneficial for health. This condition applies only in contract of sale of eatables and provisions. In such cases goods must not only be merchantable but wholesome too.

Implied Warranties

1. Quiet Possession

It is an implied condition that the buyer shall have and enjoy quiet possession of the goods. If the quite possession of the buyer is disturbed by any other person having a superior title than the seller, he can claim damages from the seller

Implied Warranties

2. Freedom from encumbrances

It is implied warranty on the part of the seller that, the goods shall be free from any encumbrance or charge in the favor of a 3rd party. If the possession of the buyer is disturbed due to such charge in favor of 3rd party, he can claim damages.

Implied Warranties

3. Usage of trade

An implied warranty on the part of the seller as to quality or fitness for a particular purpose may be annexed by the usage of trade.

Implied Warranties

4. Disclosure of Dangerous Goods

The implied warranty on the part of the seller is that if the goods are of a dangerous nature he shall warn the ignorant buyer of the probable danger. In case of breach of this duty he shall be liable to buyer for damaged caused to him by the reason of the breach of the seller