Chp 5 Conditions and Warranties

Question 1

What is a stipulation in a contract of sale

Answer 1

either a condition or warranty

Question 2

define condition

Answer 2

defined by Fletcher Moulton iin Wallis v. Pratt as a stipulation essential to the main purpose of the contract

non-fulfilment considered failure to perform contract, and breach means contract can be treated as repudiated

CASE: Behn v Burness

Question 3

define warranty

Answer 3

defined in Wallis v. Pratt as a stipulation collateral to the main purpose of the contract - must be performed but failure to perform will not allow buyer to reject goods or treat contract as repudiated

Question 4

how to determine if a stipulation is a condition or warranty?

Answer 4

• depends on the contruction of the contract as a whole in that particular case
• stipulation may be a condition though called a warranty in the contract
• court should not be guided by the terminology used by the parties in the contract

Question 5

difference between condition and warranty

Answer 5

1. value - conditions are essential to main purpose of contract while warranties are collateral to it
2. breach - breach of condition allows the aggrieved to repudiate contract while breach of condition allows the aggrieved to claim damages only
3. treatment - breach of condition may be treated as breach of warranty if aggrieved is content with damages only, but breach of warranty cannot be treated as breach of condition

VBT!!!

Question 6

when should a condition be treated as a warranty?

Answer 6

1. if buyer waives the condition (cannot insist on fulfilment later)
2. buyer treats the breach of condition as breach of warranty and settles for damages
3. if contract of sale is non-severable and the buyer has accepted the goods or part of the goods (unless there is express or implied term of contract saying otherwise)

Non-severable contract: A contract where the goods can’t be split into parts, meaning the buyer accepts everything or nothing.

once buyer has accepted any part of the goods, they lose the right to reject them for a breach of condition. The buyer can now only treat the breach as a breach of warranty, meaning they can claim damages but must keep the goods.

Question 7

which section of the SOGA contains the conditions where condition should be treated as warranty?

Answer 7

section 13

Question 8

define express and implied conditions and warranties

Answer 8

express = expressly agreed upon between parties at the time of making the contract

implied = law implies these conditions into the contract to protect buyers. They apply unless the parties specifically agree to exclude them; contained in secs 14 to 17

sec 16(4) - express warranty or condition does not negate an implied warranty or condition unless it is inconsistent with the implied stipulations

e.g. contract expressly states that goods are sold “as is” (with all faults), this may override the implied warranty of fitness for purpose, since the buyer has agreed to take the goods in whatever condition they are found. In this case, the express term (“as is”) would be inconsistent with the implied condition of fitness.

Question 9

what are the 7 types of implied conditions?

Answer 9

1. title
2. sale by description
3. quality or fitness
4. merchantability
5. implied by custom
6. sale by sample
7. wholesomeness

The Doctor Made Quentin Wear Indigo Slippers

Title, Description (sale by), Merchantability, Quality or Fitness; Wholesomeness; Implied by custom; Sample (sale by)

Question 10

express condition as to title

Answer 10

unless circumstances of contract demonstrate different intention, implied conditions for seller:

1. in sale, seller has RIGHT TO SELL the goods –> condition broken if goods delivered can only be sold by infringing a trademark (Niblett v. Confectioners’ Materials)
2. in case of ATS, seller WILL HAVE right to sell after property passes (Rowland v. Divall)

If seller has no title to goods at time of sale and subsequently acquires a title, this title feeds defective titles of both original and subsequent buyers (Butterworth v. Kingsway Motors)

Question 11

explain sale by description

Answer 11

if description of goods is the basis on which a buyer contracts, goods should correspond with this description or the other party is not bound to take it, including when:

1. buyer has not seen goods and relies on seller’s description
2. buyer has seen goods but relies on description instead of what they saw and deviation of goods from description is not evident
3. packing of goods according to description
4. sale by description AND sample

Question 12

explain condition as to quality or fitness

Answer 12

normally there is no implied condition as to quality or fitness for a particular purpose and the buyer must examine the goods before purchase to confirm suitability, but:

1. implied condition applies if buyer expressly or implicitly lets seller know the particular purpose they need goods for
2. implied condition N/A when buyer purchasing for a specific purpose has an abnormality not made known to seller at time of sale
3. implied condition N/A if buyer purchases goods under their patent/trade name unless buyer makes it known that they rely on skill and judgement of seller who supplies goods of that description
4. implied condition N/A if goods can be used for multiple purposes and buyer doesn’t disclose the particular one for which goods are needed

Question 13

condition as to merchantability

Answer 13

regardless of if seller is producer or not, if goods are bought by description from seller, there is an implied condition that they are of merchantable quality, including the packing of the goods i.e. goods should be commercially saleable under description by which they are known in the market at their full value (sec 62)

reasonable person acting reasonably would accept them after having examined them thoroughly

even if defect is easily curable, buyer can avoid contract unless they examined goods beforehand (perfunctorily or otherwise)

Question 14

explain condition implied by custom

Answer 14

purpose for which goods are needed may be ascertained from established practices in a particular trade or industry, or the conduct of contracting parties

in this case, buyer need not tell seller purpose for which good is needed

Question 15

explain sale by sample

Answer 15

in case of sale by sample, there are the implied conditions that:

1. bulk should correspond with quality of sample
2. buyer should have reasonable opportunity to compare bulk with sample
3. goods should be free from any defect rendering them unmerchantable provided the defect is not apparent on reasonable examination of the sample (applies to latent, not patent defects)

Question 16

explain condition as to wholesomeness

Answer 16

applies to eatables and provisions - in addition to applied condition of merchantability, goods must also be suitable for human consumption

Question 17

what are the 4 types of implied warranties?

Answer 17

1. warranty of quiet possession
2. warranty of freedom from encumbrances or liabilities
3. warranty as to quality or fitness by usage of trade
4. warranty to disclose dangerous nature of goods

Question 18

explain warranty of quiet possession

Answer 18

buyer should enjoy undisturbed possession and consumption and can sue otherwise if disturbed due to seller’s defective title to sell

Question 19

explain warranty of freedom from encumbrances or liability

Answer 19

goods shall not be subject to any charge or right in favour of a third party or buyer can claim damages for breach of this warranty

Question 20

explain warranty as to quality or fitness by usage of trade

Answer 20

in addiiton to implied warranty as to quality or fitness for a particular purpose, warranty about the quality or fitness of a product or service can be implied based on the common practices or norms within a specific trade or industry

Question 21

explain warranty to disclose dangerous nature of goods

Answer 21

if the seller knows their goods are inherently dangerous or likely to be dangerous to the buyer, and the buyer is ignorant to this, seller must warn buyer or be liable in damages

Question 22

explain the concept of caveat emptor

Answer 22

‘buyer beware’ - in a contract of sale, the seller is under no duty to reveal unflattering truths about the goods sold, meaning that a buyer must examine them thoroughly

if goods turn out to be defective or unsuitable for the buyer’s purpose, or they depend on their own skill or judgement and make a bad selection, the buyer is the only one at fault

Question 23

explain the concept of caveat venditor

Question 24

explain the concept of exclusion of implied conditions and warranties

i.e. in what ways can they be overridden

Answer 24

implied warranties or conditions that are automatically effected by law can be excluded by:

1. express agreement between the parties:
2. the course of dealing between the parties -history of transactions in which certain conditions or warranties were not applied or were varied
3. By the custom or usage of trade in particular industry - e.g. standard practice to provide goods ‘as is’

Question 25

5 exceptions to the doctrine of caveat emptor

Answer 25

1. fitness for buyer’s purpose
2. sale under patent or trade name
3. merchantable quality
4. usage of trade
5. consent by fraud

any factor that will hinder the buyer from making an informed decision, or excuse them from having to do so

Question 26

explain the exception of fitness for buyer’s purpose

Answer 26

if:

1. buyer expressly or implicitly makes known to seller the particular purpose they need goods for
2. relies on seller’s skill or judgement
3. and goods are of a description in the course of the seller’s business

seller must supply goods fit for buyer’s purpose

Question 27

explain the exception of sale under a patent or trade name

Answer 27

in this case, no implied condition that goods should be reasonably fit for any particular purpose

Question 28

explain the exception of merchantable quality

Answer 28

same as the merchantability point for implied conditions

Question 29

explain the exception of usage of trade

Answer 29

implied warranty or condition about quality or fitness for a particular purpose may be annexed by usage of trade

Question 30

explain consent by fraud as an exception to the doctrine of CE

Answer 30

applies when:

1. consent of buyer in contract of sale is obtained by seller by fraud (e.g. false statements, misrepresentation of goods)
2. seller knowingly conceals latent defect - could not be discovered by buyer on reasonable examination

2. will not allow buyer to make an informed decision because the information about the defect has been concealed!