BCOC-133 BUSINESS LAW CHAPTER-17 CONDITION AND WARRANTIES CONDITION AND WARRENTY:-

 

BCOC-133 BUSINESS LAW CHAPTER-17 CONDITION AND WARRANTIES

CONDITION AND WARRENTY:-

1. Definitions:

- Condition:
A condition is a crucial term in a contract, the breach of which gives

the innocent party the right to terminate the contract and sue for damages.

- Warranty:
A warranty is a less vital term compared to a condition. The breach of

a warranty gives the innocent party the right to sue for damages, but it does not entitle them to terminate the contract.

 2. Distinction between Condition and Warranty:

• -  Nature:
  -Condition: Goes to the root of the contract.
  - Warranty : Less vital, ancillary to the main purpose.

• -  Effect of Breach:
  - Condition: Breach gives the right to terminate and claim damages. - Warranty: Breach gives the right to claim damages only.

• -  Intention of the Parties:
  - Condition: Considered essential; parties are presumed to intend strict

  fulfillment.
  -Warranty: Less critical; parties are presumed to intend substantial but

  not strict fulfillment.

  - Time Factor:
  - Condition: Must be fulfilled at the exact time specified. - Warranty: Time is not usually of the essence.

  3. KINDS OF CONDITIONS AND WARRANTIES :

  1. Implied Condition: Implied conditions are those not expressly mentioned in the contract but are automatically inserted by law to protect the interests of the parties involved.

• Fitness for Purpose: Goods sold must be reasonably fit for the purpose they are intended for.

• Merchantable Quality: Goods should be of a quality acceptable within the trade.

• Correspondence with Description: Implies that goods must correspond with any description applied to them.

  2. Sale by Description:

  A sale by description occurs when goods are sold based on a pre-stated description, rather than the buyer examining each item individually.

• -Reliance on Description: The buyer relies on the accuracy of the description provided by the seller.

• Legal Consequences:-If the goods do not match the description, the buyer has the right to reject them.

  3. Sale by Sample:
  In a sale by sample, the buyer is shown a sample of the goods, and the contract is based on the assumption that the bulk will correspond to this sample.

  • Representative Nature:-The sample is meant to represent the entire lot of goods.

  • Condition of Goods:-The buyer can reject the goods if they do not conform to the sample in quality.

  4. Sale by Sample as well as Description:
  When a contract involves both a sample and a description, the buyer must ensure that the bulk of the goods not only matches the description but also corresponds to the sample.

• Dual Criteria:-Both the description and the sample serve as criteria for the conformity of the goods.

• Comprehensive Understanding: This provides the buyer with a more comprehensive understanding and assurance regarding the goods.

  5. Condition as to Quality or Fitness: This condition implies that the goods sold must be of a certain quality or fitness for a particular purpose.

• Fitness for a Specific Purpose: Goods must be suitable for the purpose the buyer made known to the seller.

• Merchantable Quality: Goods should be of a quality acceptable within the trade.

• Exceptions: Exceptions may arise if the buyer examines the goods or if the defects are apparent.

  6. Condition as to Wholesomeness:

  This condition is particularly relevant to the sale of food and perishable items, ensuring that the goods are fit for consumption.

• Health Standards: Goods must meet health and safety standards.

• Fitness for Consumption: The buyer expects that the goods are

  fit for human consumption.                                                                                             7. Implied Warranties:

  Implied warranties are assurances not explicitly stated but automatically presumed by law to exist in certain transactions.

• Warranty of Merchantability: Goods sold must be of a standard quality and fit for their intended purpose.

• Warranty of Fitness for a Particular Purpose: If the seller knows the buyer's specific purpose, the goods must be suitable for that purpose.

  These explanations provide a detailed overview of each topic, covering the key points and considerations.

  4. WHEN BREACH OF A CONDITION IS TO BE TREATED AS A BREACH OF A WARRANTY

  When a contract involves both conditions and warranties, and a condition is breached:

  • If the innocent party chooses to continue with the contract: The breached condition becomes a warranty for the remainder of the contract.

• If the innocent party decides to terminate the contract:- The breach is treated as a breach of condition, and the innocent party can sue for damages.

5. Doctrine of Caveat Emptor: Definition:-“Let the buyer beware”

1. Limited Seller's Duty:
• Explanation: Sellers are not obligated to disclose all details about

goods. Buyers must actively seek information and inspect items before purchase.

2. Information Asymmetry:
• Explanation:-Sellers typically have more information than buyers.

Buyers are responsible for actively seeking information or inspecting goods.

3. Risk and Reward with the Buyer:
• Explanation: Buyers assume both risks and rewards upon

purchase. If issues arise post-purchase, buyers bear the consequences.

4. Buyer's Duty to Inspect:
• Explanation: Buyers must inspect goods before purchase.

Neglecting this duty may limit legal recourse if issues arise later.

5.Implied Agreement:
• Explanation By entering a transaction, buyers implicitly agree to

Caveat Emptor. It emphasizes the buyer's responsibility for due diligence and understanding the goods' condition.