Introduction

Under the Sale of Goods Act, 1930, stipulations in a contract of sale are
classified as either conditions or warranties. A condition is a term essential to
the core of the contract, and its breach entitles the aggrieved party to
repudiate the contract. A warranty, being a secondary stipulation, allows only a
claim for damages upon breach. However, Section 13 of the Act provides
exceptions where a breach of condition may be treated as a breach of warranty
—for example, if the buyer waives the condition, accepts the goods, or if the
contract is indivisible. These exceptions provide flexibility, ensuring that
commercial transactions remain fair and practical even when minor breaches
occur.

Conditions and Warranties – Sale of Goods Act, 1930

In a contract of sale, the terms or stipulations between the buyer and seller
may either be:

Conditions, or
Warranties

1. Condition [Section 12(2)]

A condition is a stipulation that is essential to the main purpose of the contract.

Breach of a condition gives the right to repudiate the contract and also claim damages.

Example:
A lady orders a red saree to be delivered by registered post before 15th January, her
wedding day.The colour of the saree and date of supply are conditions, as they are vital to
the purpose of the contract.

2. Warranty [Section 12(3)]

A warranty is a stipulation that is collateral or secondary to the main purpose of the

contract.
 Breach of a warranty does not allow repudiation, but the affected party may claim
damages.

Example (continued):

The mode of dispatch (registered parcel) and time of payment are warranties because
they are of secondary importance.

Stipulation as to time

In contracts, stipulations as to time refer to deadlines for performance or payment.

According to Section 55 of the Indian Contract Act, 1872, if time is of the essence of the
contract and there is delay in performance, the contract becomes voidable at the option of
the promisee. However, if time is not essential, the promisee can only claim damages for
delay.

As per Section 11 of the Sale of Goods Act, 1930, time of payment is generally not of the
essence of the contract. Therefore, delay in payment does not cancel the contract but
entitles the seller to claim compensation. However, the parties may expressly agree to make
time of payment essential. If so, non-payment on time allows contract termination.

Also, if time has been extended by agreement, the new date is treated as essential. But one
party cannot unilaterally fix a time and repudiate the contract for non-performance by that
date.

> Example: A agrees to sell goods to B, with a clause that payment must be made by 1st July,
failing which the contract will be cancelled. B fails to pay on time. Since the time of payment
was made essential, A can terminate the contract .

Consequences of Breach of a Condition or Warranty

In a contract of sale under the Sale of Goods Act, 1930, the terms of the contract are
classified as conditions and warranties.

1. Breach of Condition

A condition is a fundamental stipulation essential to the main purpose of the contract (Sec.
12(2)). If a condition is breached, the aggrieved party has the right to:

Repudiate (cancel) the contract, and

 Reject the goods, and
Claim damages for the loss suffered.

> Example: A lady orders a red saree to be delivered by 15th January for her wedding on 16th.
The seller delivers a black saree or delivers it late on 18th January. This is a breach of
condition, so the buyer can reject the saree, treat the contract as repudiated, and claim
damages.

2. Breach of Warranty

A warranty is a minor or collateral stipulation to the main contract (Sec. 12(3)). Its breach
does not permit repudiation of the contract. The aggrieved party can only:

Claim for the damages but

Cannot reject the goods or cancel the contract.

> Example: If the buyer agrees to pay the price by 15th December and pays late on 25th
December, the seller cannot cancel the contract. As per Section 11, time of payment is not of
the essence, so it's treated as a warranty, and the seller can only claim compensation

3. Conversion of Condition into Warranty

Under Section 13 of the Sale of Goods Act, if the buyer accepts the goods or elects not to
repudiate the contract despite a breach of condition, then the condition is treated as a
warranty, and the buyer can only claim damages.

Doctrine of Caveat Emptor: “Let the Buyer Beware”

Definition:

The Doctrine of Caveat Emptor means that the buyer is responsible for examining and
ensuring the quality and suitability of the goods before purchase. If the goods turn out to be
defective, and the defect could have been identified through proper inspection, the buyer
cannot hold the seller liable, unless there is fraud or misrepresentation.

Legal Basis:

Section 16 of the Sale of Goods Act, 1930:

“There is no implied warranty or condition as to the quality or fitness for any particular
purpose of goods supplied under a contract of sale.”
Key Principle:

The seller is only obliged to make goods available. It is the buyer's duty to:

Inspect the goods

Examine their quality
Ensure the product is suitable for their purpose

Illustrative Example:

A person buys a second-hand car without checking its condition. Later, the car shows engine
issues. Since the buyer failed to inspect the car properly, the seller is not liable.
→ Caveat Emptor applies.

Exceptions to the Doctrine of Caveat Emptor (Section 16)

Even though the principle places the burden on the buyer, the law recognizes seven major
exceptions:

1. Fitness for Buyer’s Purpose – Section 16(1)

If the buyer informs the seller about the specific purpose and relies on the seller’s skill or
judgment, the seller must supply suitable goods.

Example:
A buyer asks for waterproof paint. The seller provides regular paint, which later peels off.
→ Seller is liable.

2. Sale under Trade Name

If the buyer purchases a product by brand or trade name, he cannot hold the seller
responsible for defects unless misrepresented. The buyer is seen as relying on the brand, not
the seller.

Example:
Buying a branded mobile phone directly based on the company name.
→ Caveat Emptor applies – seller not liable.

3. Sale by Description – Section 15

If goods are sold based on a description, they must match the description. Otherwise, the
seller is liable.

Example:
A buyer orders "pure cotton bedsheets" online. On delivery, the material is polyester.
→ Seller is liable.
4. Merchantable Quality – Section 16(2)

Goods must be of merchantable quality—that is, suitable for resale and use in the market. If
not, and the buyer purchased in the ordinary course of business, the seller is liable.

Example:
Milk packets sold at a grocery store are found to be spoiled.
→ Seller is liable.

5. Sale by Sample and Description – Section 15

If goods are sold by both sample and description, they must match both. If either is
mismatched, the buyer can hold the seller liable.

Example:
Buyer inspects a carpet sample and orders more of the same. Delivered carpets are of lower
quality.
→ Seller is liable.

6. Trade Usage – Section 16(3)

If a particular trade usage or custom implies certain conditions about the goods, the seller is
bound by it, and Caveat Emptor does not apply.

Example:
In an industry, stainless steel is the standard material for surgical tools. A seller delivers iron
tools instead.
→ Seller is liable.

7. Fraud or Misrepresentation by Seller

If the seller conceals defects or gives false information about the product, he cannot escape
liability.

Example:
A seller knowingly sells a defective generator as "brand new" without disclosing the issue.
→ Seller is liable due to misrepresentation.

Case laws

1. Baldry v. Marshall (1925)

Judgment: The court held that since the buyer had made
known the particular purpose (touring), and the car was unfit
for that purpose, there was a breach of condition under the
implied term. The buyer was entitled to repudiate the
contract.

2. Rowland v. Divall (1923)

Judgment: The seller had no legal title to sell the car. This
amounted to a breach of implied condition as to title (Section
14). The court allowed the buyer to recover the full price,
even though he had used the car for some time.

---

3. Nichol v. Godts (1854)

Judgment: The court ruled that when a sale is by sample and

description, the goods must conform to both. Even if they
match the sample but not the description, it is a breach of
condition, and the buyer is entitled to reject the goods.

4. Dr. S.K. Kapoor v. LIC of India (1964)

Judgment: The court held that the buyer (insured) failed to

read the terms properly and raised a dispute later. The court
applied the principle of caveat emptor (let the buyer
beware), ruling in favor of the seller (LIC), as there was no
concealment

Conclusion

In conclusion, the distinction between conditions and

warranties under the Sale of Goods Act, 1930 plays a crucial
role in determining the remedies available for breach of
contract. A breach of condition allows the aggrieved party to
repudiate the contract, while a breach of warranty allows
only for damages. However, under Section 13, in certain
circumstances, a breach of condition may be treated as a
breach of warranty to promote fairness.

Additionally, the principle of caveat emptor—let the buyer

beware—also applies, placing a duty on the buyer to examine
goods before purchase. Yet, this rule has exceptions,
particularly when the buyer relies on the seller's skill or
judgment, or where implied conditions under Sections 14 to
17 are not met. Thus, the law strikes a balance between
buyer's responsibility and seller's obligation, ensuring just
outcomes in commercial dealings.