ICAI Notes- Unit 2: Conditions & Warranties - CA Foundation PDF Download

 Page 1


  BUSINESS LAWS  
 3.26 
 
LEARNING OUTCOMES 
UNIT – 2: CONDITIONS & WARRANTIES 
 
After studying this unit, you would be able to understand: 
? About Stipulation as to time 
? Conditions and warranties in a contract of Sale 
? About the implied conditions and warranties. 
? The doctrine of ‘caveat emptor’. 
 
 
 
 
2.1 STIPULATION AS TO TIME (SECTION 11) 
As regard to time for the payment of price, unless a different intention appears from the terms 
of contract, stipulation as regard this, is not deemed to be of the essence of a contract of sale. 
But delivery of goods must be made without delay. Whether or not such a stipulation is of the 
essence of a contract depends on the terms agreed upon. 
Price for goods may be fixed by the contract or may be agreed to be fixed later on in a specific 
manner. Stipulation as to time of delivery are usually the essence of the contract. 
Stipulation with Reference to Goods
Condition
Essential to main purpose of 
the contract
Breach-repudiation
Warranty
Collateral to main purpose of 
the contract
Breach-claim for damages
UNIT OVERVIEW 
© The Institute of Chartered Accountants of India
Page 2


  BUSINESS LAWS  
 3.26 
 
LEARNING OUTCOMES 
UNIT – 2: CONDITIONS & WARRANTIES 
 
After studying this unit, you would be able to understand: 
? About Stipulation as to time 
? Conditions and warranties in a contract of Sale 
? About the implied conditions and warranties. 
? The doctrine of ‘caveat emptor’. 
 
 
 
 
2.1 STIPULATION AS TO TIME (SECTION 11) 
As regard to time for the payment of price, unless a different intention appears from the terms 
of contract, stipulation as regard this, is not deemed to be of the essence of a contract of sale. 
But delivery of goods must be made without delay. Whether or not such a stipulation is of the 
essence of a contract depends on the terms agreed upon. 
Price for goods may be fixed by the contract or may be agreed to be fixed later on in a specific 
manner. Stipulation as to time of delivery are usually the essence of the contract. 
Stipulation with Reference to Goods
Condition
Essential to main purpose of 
the contract
Breach-repudiation
Warranty
Collateral to main purpose of 
the contract
Breach-claim for damages
UNIT OVERVIEW 
© The Institute of Chartered Accountants of India
 
    
 
3.27 
THE SALE OF GOODS ACT, 1930 
2.2  INTRODUCTION - CONDITIONS AND WARRANTIES 
At the time of selling the goods, a seller usually makes certain statements or representations 
with a view to induce the intending buyer to purchase the goods. Such representations are 
generally about the nature and quality of goods, and about their fitness for buyer’s purpose. 
When these statements or representations do not form a part of the contract of sale, they are 
not relevant and have no legal effects on the contract. But when these form part of the 
contract of sale and the buyer relies upon them, they are relevant and have legal effects on 
the contract of sale. 
A representation which forms a part of the contract of sale and affects the contract, is called 
a stipulation. However, every stipulation is not of equal importance. Some of these may be 
very vital while others may be of somewhat lesser significance. The more significant 
stipulations contained in a contract of sale of goods have been called as “Conditions”, while 
the less significant stipulation have been given the name “Warranties”.  
Condition and warranty (Section 12): A stipulation in a contract of sale with reference to 
goods which are the subject thereof may be a condition or a warranty. [Sub-section (1)] 
“A condition is a stipulation essential to the main purpose of the contract, the breach of which 
gives rise to a right to treat the contract as repudiated”. [Sub-section (2)] 
Example 1: P wants to purchase a car from Q, which can have a mileage of 20 km/litre. Q pointing 
at a particular vehicle says “This car will suit you.” Later P buys the car but finds out later on that this 
car only has a top mileage of 15 km/ litre. This amounts to a breach of condition because the seller 
made the stipulation which forms the essence of the contract. In this case, the mileage was a 
stipulation that was essential to the main purpose of the contract and hence its breach is a breach 
of condition. 
“A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives 
rise to a claim for damages but not to a right to reject the goods and treat the contract as 
repudiated”. [Sub-section (3)].  
Whether a stipulation in a contract of sale is a condition or a warranty depends in each case 
on the construction of the contract. A stipulation may be a condition, though called a warranty 
in the contract. [Sub-section (4)] 
Example 2: Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes 
to promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it from 
Shyam. The car turns out to be unfit for touring purposes. Here, the term that the ‘car should 
be suitable for touring purposes’ is a condition of the contract. It is so vital that its non-
fulfilment defeats the very purpose for which Ram purchases the car. Ram is therefore entitled 
to reject the car and have refund of the price.  
© The Institute of Chartered Accountants of India
Page 3


  BUSINESS LAWS  
 3.26 
 
LEARNING OUTCOMES 
UNIT – 2: CONDITIONS & WARRANTIES 
 
After studying this unit, you would be able to understand: 
? About Stipulation as to time 
? Conditions and warranties in a contract of Sale 
? About the implied conditions and warranties. 
? The doctrine of ‘caveat emptor’. 
 
 
 
 
2.1 STIPULATION AS TO TIME (SECTION 11) 
As regard to time for the payment of price, unless a different intention appears from the terms 
of contract, stipulation as regard this, is not deemed to be of the essence of a contract of sale. 
But delivery of goods must be made without delay. Whether or not such a stipulation is of the 
essence of a contract depends on the terms agreed upon. 
Price for goods may be fixed by the contract or may be agreed to be fixed later on in a specific 
manner. Stipulation as to time of delivery are usually the essence of the contract. 
Stipulation with Reference to Goods
Condition
Essential to main purpose of 
the contract
Breach-repudiation
Warranty
Collateral to main purpose of 
the contract
Breach-claim for damages
UNIT OVERVIEW 
© The Institute of Chartered Accountants of India
 
    
 
3.27 
THE SALE OF GOODS ACT, 1930 
2.2  INTRODUCTION - CONDITIONS AND WARRANTIES 
At the time of selling the goods, a seller usually makes certain statements or representations 
with a view to induce the intending buyer to purchase the goods. Such representations are 
generally about the nature and quality of goods, and about their fitness for buyer’s purpose. 
When these statements or representations do not form a part of the contract of sale, they are 
not relevant and have no legal effects on the contract. But when these form part of the 
contract of sale and the buyer relies upon them, they are relevant and have legal effects on 
the contract of sale. 
A representation which forms a part of the contract of sale and affects the contract, is called 
a stipulation. However, every stipulation is not of equal importance. Some of these may be 
very vital while others may be of somewhat lesser significance. The more significant 
stipulations contained in a contract of sale of goods have been called as “Conditions”, while 
the less significant stipulation have been given the name “Warranties”.  
Condition and warranty (Section 12): A stipulation in a contract of sale with reference to 
goods which are the subject thereof may be a condition or a warranty. [Sub-section (1)] 
“A condition is a stipulation essential to the main purpose of the contract, the breach of which 
gives rise to a right to treat the contract as repudiated”. [Sub-section (2)] 
Example 1: P wants to purchase a car from Q, which can have a mileage of 20 km/litre. Q pointing 
at a particular vehicle says “This car will suit you.” Later P buys the car but finds out later on that this 
car only has a top mileage of 15 km/ litre. This amounts to a breach of condition because the seller 
made the stipulation which forms the essence of the contract. In this case, the mileage was a 
stipulation that was essential to the main purpose of the contract and hence its breach is a breach 
of condition. 
“A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives 
rise to a claim for damages but not to a right to reject the goods and treat the contract as 
repudiated”. [Sub-section (3)].  
Whether a stipulation in a contract of sale is a condition or a warranty depends in each case 
on the construction of the contract. A stipulation may be a condition, though called a warranty 
in the contract. [Sub-section (4)] 
Example 2: Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes 
to promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it from 
Shyam. The car turns out to be unfit for touring purposes. Here, the term that the ‘car should 
be suitable for touring purposes’ is a condition of the contract. It is so vital that its non-
fulfilment defeats the very purpose for which Ram purchases the car. Ram is therefore entitled 
to reject the car and have refund of the price.  
© The Institute of Chartered Accountants of India
  BUSINESS LAWS  
 3.28 
Let us assume, Ram buys a new Maruti car from the show room and the car is guaranteed 
against any manufacturing defect under normal usage for a period of one year from the date 
of original purchase and in the event of any manufacturing defect there is a warranty for 
replacement of defective part if it cannot be properly repaired. After six months, Ram finds 
that the horn of the car is not working, here in this case he cannot terminate the contract. The 
manufacturer can either get it repaired or replaced it with a new horn. Ram gets a right to 
claim for damages, if any, suffered by him but not the right of repudiation.  
Difference between conditions and warranties: 
The following are important differences between conditions and warranties. 
Point of differences Condition Warranty 
Meaning A condition is a stipulation 
essential to the main purpose of 
the contract. 
A warranty is a stipulation 
collateral to the main purpose 
of the contract. 
Right in case of breach  The aggrieved party can 
repudiate the contract or claim 
damages or both in the case of 
breach of condition. 
The aggrieved party can claim 
only damages in case of breach 
of warranty. 
Conversion of 
stipulations  
A breach of condition may be 
treated as a breach of warranty. 
A breach of warranty cannot be 
treated as a breach of condition. 
2.3 WHEN CONDITION IS TO BE TREATED AS 
WARRANTY (SECTION 13) 
Section 13 specifies cases where a breach of condition be treated as a breach of warranty. As 
a result of which the buyer loses his right to rescind the contract and can claim damages only. 
In the following cases, a contract is not avoided even on account of a breach of a condition: 
(i) Where the buyer altogether waives the performance of the condition. A party may for 
his own benefit, waive a stipulation. It should be a voluntary waiver by buyer.  
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty. That 
is to say, he may claim only damages instead of repudiating the contract. Here, the 
buyer has not waived the condition but decided to treat it as a warranty. 
Example 3: A agrees to supply B 10 bags of first quality sugar @ 
` 
625 per bag but 
supplies only second quality sugar, the price of which is 
`
 600 per bag. There is a 
breach of condition and the buyer can reject the goods. But if the buyer so elects, he 
© The Institute of Chartered Accountants of India
Page 4


  BUSINESS LAWS  
 3.26 
 
LEARNING OUTCOMES 
UNIT – 2: CONDITIONS & WARRANTIES 
 
After studying this unit, you would be able to understand: 
? About Stipulation as to time 
? Conditions and warranties in a contract of Sale 
? About the implied conditions and warranties. 
? The doctrine of ‘caveat emptor’. 
 
 
 
 
2.1 STIPULATION AS TO TIME (SECTION 11) 
As regard to time for the payment of price, unless a different intention appears from the terms 
of contract, stipulation as regard this, is not deemed to be of the essence of a contract of sale. 
But delivery of goods must be made without delay. Whether or not such a stipulation is of the 
essence of a contract depends on the terms agreed upon. 
Price for goods may be fixed by the contract or may be agreed to be fixed later on in a specific 
manner. Stipulation as to time of delivery are usually the essence of the contract. 
Stipulation with Reference to Goods
Condition
Essential to main purpose of 
the contract
Breach-repudiation
Warranty
Collateral to main purpose of 
the contract
Breach-claim for damages
UNIT OVERVIEW 
© The Institute of Chartered Accountants of India
 
    
 
3.27 
THE SALE OF GOODS ACT, 1930 
2.2  INTRODUCTION - CONDITIONS AND WARRANTIES 
At the time of selling the goods, a seller usually makes certain statements or representations 
with a view to induce the intending buyer to purchase the goods. Such representations are 
generally about the nature and quality of goods, and about their fitness for buyer’s purpose. 
When these statements or representations do not form a part of the contract of sale, they are 
not relevant and have no legal effects on the contract. But when these form part of the 
contract of sale and the buyer relies upon them, they are relevant and have legal effects on 
the contract of sale. 
A representation which forms a part of the contract of sale and affects the contract, is called 
a stipulation. However, every stipulation is not of equal importance. Some of these may be 
very vital while others may be of somewhat lesser significance. The more significant 
stipulations contained in a contract of sale of goods have been called as “Conditions”, while 
the less significant stipulation have been given the name “Warranties”.  
Condition and warranty (Section 12): A stipulation in a contract of sale with reference to 
goods which are the subject thereof may be a condition or a warranty. [Sub-section (1)] 
“A condition is a stipulation essential to the main purpose of the contract, the breach of which 
gives rise to a right to treat the contract as repudiated”. [Sub-section (2)] 
Example 1: P wants to purchase a car from Q, which can have a mileage of 20 km/litre. Q pointing 
at a particular vehicle says “This car will suit you.” Later P buys the car but finds out later on that this 
car only has a top mileage of 15 km/ litre. This amounts to a breach of condition because the seller 
made the stipulation which forms the essence of the contract. In this case, the mileage was a 
stipulation that was essential to the main purpose of the contract and hence its breach is a breach 
of condition. 
“A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives 
rise to a claim for damages but not to a right to reject the goods and treat the contract as 
repudiated”. [Sub-section (3)].  
Whether a stipulation in a contract of sale is a condition or a warranty depends in each case 
on the construction of the contract. A stipulation may be a condition, though called a warranty 
in the contract. [Sub-section (4)] 
Example 2: Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes 
to promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it from 
Shyam. The car turns out to be unfit for touring purposes. Here, the term that the ‘car should 
be suitable for touring purposes’ is a condition of the contract. It is so vital that its non-
fulfilment defeats the very purpose for which Ram purchases the car. Ram is therefore entitled 
to reject the car and have refund of the price.  
© The Institute of Chartered Accountants of India
  BUSINESS LAWS  
 3.28 
Let us assume, Ram buys a new Maruti car from the show room and the car is guaranteed 
against any manufacturing defect under normal usage for a period of one year from the date 
of original purchase and in the event of any manufacturing defect there is a warranty for 
replacement of defective part if it cannot be properly repaired. After six months, Ram finds 
that the horn of the car is not working, here in this case he cannot terminate the contract. The 
manufacturer can either get it repaired or replaced it with a new horn. Ram gets a right to 
claim for damages, if any, suffered by him but not the right of repudiation.  
Difference between conditions and warranties: 
The following are important differences between conditions and warranties. 
Point of differences Condition Warranty 
Meaning A condition is a stipulation 
essential to the main purpose of 
the contract. 
A warranty is a stipulation 
collateral to the main purpose 
of the contract. 
Right in case of breach  The aggrieved party can 
repudiate the contract or claim 
damages or both in the case of 
breach of condition. 
The aggrieved party can claim 
only damages in case of breach 
of warranty. 
Conversion of 
stipulations  
A breach of condition may be 
treated as a breach of warranty. 
A breach of warranty cannot be 
treated as a breach of condition. 
2.3 WHEN CONDITION IS TO BE TREATED AS 
WARRANTY (SECTION 13) 
Section 13 specifies cases where a breach of condition be treated as a breach of warranty. As 
a result of which the buyer loses his right to rescind the contract and can claim damages only. 
In the following cases, a contract is not avoided even on account of a breach of a condition: 
(i) Where the buyer altogether waives the performance of the condition. A party may for 
his own benefit, waive a stipulation. It should be a voluntary waiver by buyer.  
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty. That 
is to say, he may claim only damages instead of repudiating the contract. Here, the 
buyer has not waived the condition but decided to treat it as a warranty. 
Example 3: A agrees to supply B 10 bags of first quality sugar @ 
` 
625 per bag but 
supplies only second quality sugar, the price of which is 
`
 600 per bag. There is a 
breach of condition and the buyer can reject the goods. But if the buyer so elects, he 
© The Institute of Chartered Accountants of India
 
    
 
3.29 
THE SALE OF GOODS ACT, 1930 
may treat it as a breach of warranty, hence he may accept the second quality sugar 
and claim damages @ 
`
 25 per bag. 
(iii) Where the contract is non-severable and the buyer has accepted either the whole 
goods or any part thereof. For Eg. If basmati rice and lower quality rice mixed together, 
the contract becomes non severable.  
(iv) Where the fulfilment of any condition or warranty is excused by law by reason of 
impossibility or otherwise. 
 Waiver of conditions 
 
2.4 EXPRESS AND IMPLIED CONDITIONS AND 
WARRANTIES (SECTION 14-17) 
Condition and Warranty 
 
‘Conditions’ and ‘Warranties’ may be either express or implied. They are “express” when the 
terms of the contract expressly state them. They are implied when, not being expressly 
provided for. Implied conditions are incorporated by law in the contract of sale.  
Express conditions are those, which are agreed upon between the parties at the time of 
contract and are expressly provided in the contract.  
Voluntary Waiver
? Waives performance of contract
? Elect to treat condition as 
warranty
Compulsory Waiver
? Non-severability of contract
? Fulfilment of conditions excused 
by law
? Express
? Implied
May be 
either
© The Institute of Chartered Accountants of India
Page 5


  BUSINESS LAWS  
 3.26 
 
LEARNING OUTCOMES 
UNIT – 2: CONDITIONS & WARRANTIES 
 
After studying this unit, you would be able to understand: 
? About Stipulation as to time 
? Conditions and warranties in a contract of Sale 
? About the implied conditions and warranties. 
? The doctrine of ‘caveat emptor’. 
 
 
 
 
2.1 STIPULATION AS TO TIME (SECTION 11) 
As regard to time for the payment of price, unless a different intention appears from the terms 
of contract, stipulation as regard this, is not deemed to be of the essence of a contract of sale. 
But delivery of goods must be made without delay. Whether or not such a stipulation is of the 
essence of a contract depends on the terms agreed upon. 
Price for goods may be fixed by the contract or may be agreed to be fixed later on in a specific 
manner. Stipulation as to time of delivery are usually the essence of the contract. 
Stipulation with Reference to Goods
Condition
Essential to main purpose of 
the contract
Breach-repudiation
Warranty
Collateral to main purpose of 
the contract
Breach-claim for damages
UNIT OVERVIEW 
© The Institute of Chartered Accountants of India
 
    
 
3.27 
THE SALE OF GOODS ACT, 1930 
2.2  INTRODUCTION - CONDITIONS AND WARRANTIES 
At the time of selling the goods, a seller usually makes certain statements or representations 
with a view to induce the intending buyer to purchase the goods. Such representations are 
generally about the nature and quality of goods, and about their fitness for buyer’s purpose. 
When these statements or representations do not form a part of the contract of sale, they are 
not relevant and have no legal effects on the contract. But when these form part of the 
contract of sale and the buyer relies upon them, they are relevant and have legal effects on 
the contract of sale. 
A representation which forms a part of the contract of sale and affects the contract, is called 
a stipulation. However, every stipulation is not of equal importance. Some of these may be 
very vital while others may be of somewhat lesser significance. The more significant 
stipulations contained in a contract of sale of goods have been called as “Conditions”, while 
the less significant stipulation have been given the name “Warranties”.  
Condition and warranty (Section 12): A stipulation in a contract of sale with reference to 
goods which are the subject thereof may be a condition or a warranty. [Sub-section (1)] 
“A condition is a stipulation essential to the main purpose of the contract, the breach of which 
gives rise to a right to treat the contract as repudiated”. [Sub-section (2)] 
Example 1: P wants to purchase a car from Q, which can have a mileage of 20 km/litre. Q pointing 
at a particular vehicle says “This car will suit you.” Later P buys the car but finds out later on that this 
car only has a top mileage of 15 km/ litre. This amounts to a breach of condition because the seller 
made the stipulation which forms the essence of the contract. In this case, the mileage was a 
stipulation that was essential to the main purpose of the contract and hence its breach is a breach 
of condition. 
“A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives 
rise to a claim for damages but not to a right to reject the goods and treat the contract as 
repudiated”. [Sub-section (3)].  
Whether a stipulation in a contract of sale is a condition or a warranty depends in each case 
on the construction of the contract. A stipulation may be a condition, though called a warranty 
in the contract. [Sub-section (4)] 
Example 2: Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes 
to promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it from 
Shyam. The car turns out to be unfit for touring purposes. Here, the term that the ‘car should 
be suitable for touring purposes’ is a condition of the contract. It is so vital that its non-
fulfilment defeats the very purpose for which Ram purchases the car. Ram is therefore entitled 
to reject the car and have refund of the price.  
© The Institute of Chartered Accountants of India
  BUSINESS LAWS  
 3.28 
Let us assume, Ram buys a new Maruti car from the show room and the car is guaranteed 
against any manufacturing defect under normal usage for a period of one year from the date 
of original purchase and in the event of any manufacturing defect there is a warranty for 
replacement of defective part if it cannot be properly repaired. After six months, Ram finds 
that the horn of the car is not working, here in this case he cannot terminate the contract. The 
manufacturer can either get it repaired or replaced it with a new horn. Ram gets a right to 
claim for damages, if any, suffered by him but not the right of repudiation.  
Difference between conditions and warranties: 
The following are important differences between conditions and warranties. 
Point of differences Condition Warranty 
Meaning A condition is a stipulation 
essential to the main purpose of 
the contract. 
A warranty is a stipulation 
collateral to the main purpose 
of the contract. 
Right in case of breach  The aggrieved party can 
repudiate the contract or claim 
damages or both in the case of 
breach of condition. 
The aggrieved party can claim 
only damages in case of breach 
of warranty. 
Conversion of 
stipulations  
A breach of condition may be 
treated as a breach of warranty. 
A breach of warranty cannot be 
treated as a breach of condition. 
2.3 WHEN CONDITION IS TO BE TREATED AS 
WARRANTY (SECTION 13) 
Section 13 specifies cases where a breach of condition be treated as a breach of warranty. As 
a result of which the buyer loses his right to rescind the contract and can claim damages only. 
In the following cases, a contract is not avoided even on account of a breach of a condition: 
(i) Where the buyer altogether waives the performance of the condition. A party may for 
his own benefit, waive a stipulation. It should be a voluntary waiver by buyer.  
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty. That 
is to say, he may claim only damages instead of repudiating the contract. Here, the 
buyer has not waived the condition but decided to treat it as a warranty. 
Example 3: A agrees to supply B 10 bags of first quality sugar @ 
` 
625 per bag but 
supplies only second quality sugar, the price of which is 
`
 600 per bag. There is a 
breach of condition and the buyer can reject the goods. But if the buyer so elects, he 
© The Institute of Chartered Accountants of India
 
    
 
3.29 
THE SALE OF GOODS ACT, 1930 
may treat it as a breach of warranty, hence he may accept the second quality sugar 
and claim damages @ 
`
 25 per bag. 
(iii) Where the contract is non-severable and the buyer has accepted either the whole 
goods or any part thereof. For Eg. If basmati rice and lower quality rice mixed together, 
the contract becomes non severable.  
(iv) Where the fulfilment of any condition or warranty is excused by law by reason of 
impossibility or otherwise. 
 Waiver of conditions 
 
2.4 EXPRESS AND IMPLIED CONDITIONS AND 
WARRANTIES (SECTION 14-17) 
Condition and Warranty 
 
‘Conditions’ and ‘Warranties’ may be either express or implied. They are “express” when the 
terms of the contract expressly state them. They are implied when, not being expressly 
provided for. Implied conditions are incorporated by law in the contract of sale.  
Express conditions are those, which are agreed upon between the parties at the time of 
contract and are expressly provided in the contract.  
Voluntary Waiver
? Waives performance of contract
? Elect to treat condition as 
warranty
Compulsory Waiver
? Non-severability of contract
? Fulfilment of conditions excused 
by law
? Express
? Implied
May be 
either
© The Institute of Chartered Accountants of India
  BUSINESS LAWS  
 3.30 
Implied conditions, on the other hand, are those, which are presumed by law to be present 
in the contract. It should be noted that an implied condition may be negated or waived by an 
express agreement.   
Following conditions are implied in a contract of sale of goods unless the circumstances of 
the contract show a different intention.  
 
(i) Condition as to title [Section 14(a)]. In every contract of sale, unless there is an 
agreement to the contrary, the first implied condition on the part of the seller is that  
 (a)  in case of a sale, he has a right to sell the goods, and  
 (b)  in the case of an agreement to sell, he will have right to sell the goods at the 
time when the property is to pass.  
 In simple words, the condition implied is that the seller has the right to sell the goods 
(means he should be the real owner) at the time when the property is to pass. If the 
seller’s title/ownership turns out to be defective, the buyer must return the goods to 
the true owner and recover the price from the seller. 
Example 4: A purchased a tractor from B who had no title to it. After 2 months, the 
true owner spotted the tractor and demanded it from A. Held that A was bound to 
hand over the tractor to its true owner and that A could sue B, the seller without title, 
for the recovery of the purchase price. 
Example 5: If A sells to B tins of condensed milk labelled ‘C.D.F. brand’, and this is 
proved to be an infringement of N Company’s trade mark, it will be a breach of implied 
condition that A had the right to sell. B in such a case will be entitled to reject the 
goods or take off the labels, and claim damages for the reduced value. If the seller has 
no title and the buyer has to make over the goods to the true owner, he will be entitled 
to refund of the price. 
Implied Conditions
Condition as to title 
Condition as to description 
Sale by sample 
Condition as to quality 
or fitness 
Sale by sample as well as by 
description 
Condition as to 
wholesomeness 
Condition as to 
merchantability 
© The Institute of Chartered Accountants of India