Introduction:
Since independence, India has made tremendous improvements especially in the field of commerce and trade. Thus, due to the dynamic nature of the commercial world, parliament felt a need for enacting a separate act for the regulation of contracts
The Sale of Goods Act, 1930, came into existence on 1st July. 1930. Before the coming of this act, all the law relating to the sale of goods was governed by the Indian Contract Act, 1872 (Section 76 to 123). Judicial decisions, as well as changing conditions, had made the provisions of the Indian Contract Act, 1872, quite obsolete with the present time. Therefore, the Sale of Goods Act, 1930 superseded the aforesaid act
Before we proceed further with our topic, it would be wise to understand that what contract of sale actually is? Section 4(1) of Sale of Goods Act, 1930, defines 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. So a contract of sale must have all essential conditions in order to be a valid contract, the following conditions are:-
- There must be a contract between two parties, for instance, buyer and seller
- Goods shall be a subject matter of contract. It must be noted that goods herein contained “Movable goods”
- The seller should transfer or agree to transfer the property in goods to the buyer
- The buyer should have paid consideration to the seller for transferring the ownership in the goods
Scope
Due to the vastness of the Sale of Goods Act, we will limit our research to warranty and remedy for warranties, as it is not possible to explain each and every provision of this aforementioned act. Product liability under the Consumer Protection Act, 2019 has also been discussed in the article.
History of Warranties in India
The concept of warranties traces its origin during the era of Chandragupta, where during the times it was the duty of the state to protect its citizens from fraudulent and dishonest activities. The trade and commerce field during that time were more organised and civilised. Also, severe punishments were to be awarded to people in case of smuggling or adulteration
In the end, ancient laws relating to warranties lost its relevancy and many eminent formulated a new concept of conditions and warranties. However, while formulating the law, they were heavily inspired by the ancient laws
Understanding the Meaning of Warranties
In order to understand better, in a contract of sale there may be certain stipulations or terms. Such terms or stipulations may either be conditions or warranties. If the said term forms the basis of such contact, then it will be considered as a condition under section 12(2) of the Sale Of Goods Act, 1930, whereby if the said condition is not essential or collateral to the contract, it will be labelled as warranties under section12(3). In the other words, warranty is an assurance either expressly or impliedly, provided by the seller or manufacturer about the quality, durability, and performance of the said goods. In case of a defect in the goods, it is the seller’s obligation to replace or repair the defective goods under warranty clause. A qualified buyer may sue the seller for breach of warranty if he fails to discharge the warranty.
Now the main question arises before us that which term or stipulation is a condition or a warranty, whether which stipulation is a warranty or a condition is a fact in issue to be decided by the court in each case. It should be noted that it depends entirely on the construction or drafting of the contract by the parties, this has been defined under section 12(4) of the Sale of Goods Act, 1930
While deciding the fact in issue, the Court would look upon the intention of parties in reference to the stipulations laid down in the contract of sale and its surrounding circumstances. For example, Mr A has made a contract of sale with Mr B, for delivery of 100 packets of brown bread on the occasion of Mr A’s daughter’s birthday on 10th October by a carrier, here the date of delivering of bread is a condition precedent in the contract whereas delivery by the carrier is a warranty, as it is collateral to the contract.
Therefore, it depends on the stipulations decided by the parties to a contract. It is immaterial whether a condition may become a warranty under a contract
Consequencies in Case of Breach of Warranty by the Buyer or Seller
The main distinction between a breach of warranty and condition is that in the latter case, the buyer has the right to reject the goods and treat the contract repudiated, whereas in the former case, the buyer can only sue the seller for breach of warranty. The reason behind this law is simple, as conditions form the basis of the main contract, its execution must have to be done by the seller in order to avoid goods being rejected. On the other hand, breach of warranty is not considered very serious, since it is only collateral to the main purpose of the contract
It must be noted that in case of breach of warranty, the buyer cannot repudiate or reject the goods, they can only sue the seller for damages which is the only remedy available to them under section 59(1) of the Sale of Goods Act, 1930[1]
Thus, for instance, if it has been decided between a buyer and seller that a certain sum should be paid in advance by the buyer before delivery of goods, In case, if the buyer defaults in the payment, the seller could only sue him for compensation and he cannot deny him the possession of goods, because section 11 states that time of payment of the price shall be deemed as a warranty. Section 55 of the Sale of goods states that if the time of the performance of the contract is the essential constituent of the contract, then delays in the performance by the person would make the contract voidable
It was held in Mathew Varkey vs. T.C. Abraham[2] that in case of absence of transfer of title or registration the purchaser or the buyer cannot claim for the breach of conditions or warranties against the seller
Remedy for Breach of Warranty under Sale of Goods Act, 1930
The Sale of Goods Act, 1930 provides certain remedies to the buyer against the seller (Section 57 to 59) and in case of breach of warranty by the seller, the buyer may resort to suing the seller for damages under section 59 of this aforesaid act. From the hereinabove points and cases, it has been established that in case of breach of warranty, the buyer does not has a right to repudiate or reject goods. He can only claim damages from the seller, it could be inferred from section12 (3).
Section 59(1) expressly provides that where there is a breach of warranty by the seller or where the buyer was compelled or treats the breach of a condition on the part of the seller as a breach of warranty, the buyer shall be deemed to have waived off his right to reject the goods but the buyer may have an option either to set up against the seller the breach of warranty diminution or extinction of the price or sue the seller for damages. Thus, it is well established that buyer cannot reject the goods
Therefore, under section 59(1) a buyer has a lot of options by which it can avail the remedy. However, this section does not deal with cases in which there is false misrepresentation by the seller or under a contract of sale where there is a stipulation of rejecting the goods in case of breach of warranty. It is submitted that this section is silent about fraud by the seller. It must be noted that section 59 is not an exhaustive section, dealing with breach of warranty. The court has the discretion while measuring the amount of damages to take the course of section 73 of the Indian Contract Act, 1872[3]
There is an exception to section 59 if due to impossibility or anything, the fulfilment of warranty will be excused by the law under section 56 of the Indian Contract Act, 1872, and the buyer will be barred from claiming the damage. It must be noted that apart from rejecting the goods or claiming damages for breach of condition or warranties, a buyer can also sue a seller under the law of torts if by the negligent act or goods of the seller has resulted in loss or harm to the buyer
In Clarke v. Army & Navy Cooperative Society Ltd[4] the plaintiff purchased a tin of disinfectant powder from the defendant. The lid of the tin being defective, on the opening of the lid by the plaintiff, the contents of the tin were splashed on her face causing injuries to her eyes, In an action against the defendant, who knew that there was a defect in the tin omitted to inform the plaintiff about the defect. Hence, the court awarded compensation in favour of the plaintiff.
An implied warranty is something which the law presumes to have been included in the contract of sale unless decided by the parties, Implied warranties are binding on the parties, Therefore, a seller is bound to follow the warranty, Implied warranties and conditions have been defined in section 14 to 17 of the Sale of Goods Act, 1930. Under section 62, the parties are free to make any agreement and they are not barred by the implied conditions or warranties
Implied warranty against encumbrances- Section 14(C) states that goods offered by the seller should be free of encumbrance or any charge in the favour of the third party. Then in any case of a charge, the buyer is entitled to get compensation. However. If the buyer had a reason to believe or knowledge that said goods were of charge, he would be barred from claiming compensation
Concept of Product Liability under Consumer Protection Act, 2019
The concept of breach of warranty has become obsolete with the passage of time due to its irregularities, such as the doctrine of privity precluded the buyers or consumers from claiming the relief if they had not been a party to the contract, thus, it used to cause great prejudice to the affected consumers.
Realising the ineffectiveness of the Sale of Goods Act, 1930, parliament went on to introduce the concept of product liability under the Consumer Protection Act, 2019. Earlier Consumer Protection Act of 1986 did not include product liability or any provision relating to consumer’s remedies. Product liability implies liability on the service provider, manufacturer, and vendor of goods to provide compensation to consumers in case their defective goods or services causes harm to the customer. The act imposes certain duties and liabilities on the manufacturer as existing laws related to goods in Sale of Goods Act, 1930 and the Indian Penal Code, 1860.
The concept of product liability owes its existence to a Latin principle caveat venditor which means ‘Let the seller beware’ places burden on the seller for any issue which may a consumer suffers during the issue of that product or service. Earlier the liabilities of sellers were governed by the law of contract and law of torts. Contract Act was based on warranty whereas the law of torts based on negligence. These laws, however, proved ineffective against the sellers as the buyer has to prove that seller owed responsibility to the buyer and he has made committed a breach of warranty. Sellers mostly would get away from the responsibility due to loopholes in the law
Airbus Industrie V. Laura Howell [5] Linton was the first case in India which stressed the importance of product liability. The facts of the case are, an aircraft, a scheduled flight from Bombay to Bangalore, in the course of flight while attempting to land at Bangalore airport contacted ground before the beginning of runaway and immediately hit the boundary wall whereby causing damage to the aircraft. Many crew members and passengers had suffered injuries due to the crash. In a plea to recover the costs for damages, it was contended that Texas Court was a more appropriate Court for adjudicating the matter as India did not have product liability laws. Rejecting the contention, the Karnataka High Court held that a mere non-availability of law is not a ground for debarring the jurisdiction of the court, Hence, the court decided the case on the law of torts while stressing the need for specific legislation.
Conclusion
Winding up our topic we’re now able to understand the relevancy of Sale of Goods Act, 1930 and the Consumer Protection Act, 2019 in the commercial world. The Parliament by law has also introduced the concept of product liability to safeguard the consumers from the dangerous and defective goods and services of manufacturers.
In the end, we could observe the emergence of new principles of law and hence liabilities on the sellers to ensure fair trade practices
References:
[1] Svenska Handels Banken V. M/s Indian Charge Chrome, A,I,R,1994,S.C. 624
[2] Mathew Varkey vs. T,C, Abraham, A.I.R ,2001
[3] Bombay High Court in city and Corporation of Maharashtra Vs. Nagpur Steel and Alloys, A.I.R. 1992
[4] (1903) K.B. 155
[5] ILR 1994 KAR 1370
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