Implied Conditions and Warranties

Question 1

What is a condition?

Answer 1

Goes to the heart of the contract. If breached can be repudiation.

Question 2

What is a warranty?

Answer 2

If there is a breach of warranty, there can be no repudiation, but the wronged party can sue for damages. Generally guided by language of SGA. If ti says warranty, it is a warranty.

Question 3

Rowland v Divall

Answer 3

The Right to Sell (Condition) and Quiet Possession (Warranty)

1. RULE: Where a seller has no right to sell the goods, the implied condition in 13(a) cannot be turned into a warranty after acceptance. The seller has no right to sell stolen goods.
2. FACTS: P bought car from D that was stolen.
3. REASON: Seller argues s 12(3) that buyer accepted he cannot treat implied condition in 13(a) as a breach of condition. The fact that P used the vehicle before he discovered the breach makes no difference b/c P did not receive any part of contract.
4. HELD: D violated 13(a) as he did not have a right to sell the goods and s 12(3) cannot assist due to total failure of consideration

Question 4

Is it fraud if someone sells stolen property?

Answer 4

No, it different than fraud. The seller has no right to sell those stolen goods in the first place (Rowland v Divall)

Question 5

Niblett v Confectioners Materials

Answer 5

The Right to Sell (Condition) and Quiet Possession (Warranty)

1. RULE: Right to sell goes beyond to pass good title. If seller can be stopped by legal process from selling goods, he has no right to sell them.
2. FACTS: Sale of condensed milk that had label of “Nissly” which is similar to “Nestle”. Prior to contract, sellers were subject to injunction preventing them from selling products under this label and gave undertaking not to.
3. REASON: B/c of injunction and u/t, seller had no right to sell the goods. The right to sell means the seller has power to vest full and complete rights over the goods to the buyer. Can’t be restrained by legal process brought by another.

Question 6

If a seller can be stopped by a legal process from selling goods (e.g., an injunction), does he have the right to sell them?

Answer 6

No, the seller has no right to sell goods if he can be stopped by a legal process from selling. [The right to sell goes beyond the ability to pass on good title.] (Niblett v Confectioners Materials)

Question 7

Butterworth v Kingsway Motors

Answer 7

The Right to Sell (Conditions) and Quiet Possession (Warranty)

1. RULE: Where a person sells goods in which he does not have a right to sell but this is later perfected, title continues through subsequent transactions.
2. FACTS: First buyer did not pay all installments when she sold car to another (acted in good faith) and a chain of sale happened up to the D and P. P used car for 11 months when he received notice from original seller.
3. REASON: Under a conditional sales agreement, title rests with the seller and only passes once all payments are made. All parties acted in good faith with no intent to defraud. Notice had effect and when they sold the vehicle they had no right to do so as title remained vested. By repudiating, P not caught by 12(3) as court is willing to extend time for buyer to reject goods in cases where there is no right to sell.
4. HELD: Breach of 13(a). P entitled to full refund even though he used it for 11 months and was therefore not returning the same thing he had purchased. Once original buyer made the full payment, it legitimized all subsequent sales. B/c P gave notice before, he was not caught by act and could get full refund, but the other parties would only have claim for damages.

Question 8

What happens to title if a person sells goods he originally does not have the right to sell, but this is later perfected (after the sale)?

Answer 8

Title continues through subsequent transactions after the seller has perfected his right to sell (Butterworth v Kingsway Motors)

Question 9

Patten v Thomas Motors

Answer 9

Right to Sell (Condition) and Quiet Possession (Warranty)

1. RULE: Cannot repudiate after title has been perfected.
2. FACTS: Similar facts to Butterworth where there is a car and a chain of parties. Original buyer secured a loan against it and the lender repossessed the car.
3. REASON: Buyer here not entitled to refund b/c by the time they sought the refund title had already been legitimized (loan was already paid off).
4. HELD: Under PPSA, lender would register car and perfect their interest so that would govern any sale and lender could recover.

Question 10

Can repudiation occur after title has been perfected?

Answer 10

No, repudiation cannot occur after title has been perfected (Patten v Thomas Motors)

Question 11

Microbeads v Vinhurst

Answer 11

Right to Sell (Condition) & Quiet Possession (Warranty)

1. RULE: Right to quiet possession applies not only at the time of contract but into the future.
2. FACTS: D bought road-making machine that was faulty so they stopped paying. Partway through lawsuit, another company said the machines infringed their patent and sought an injunction.
3. REASON: At the time of sale, neither party knew about the patent issue b/c specifications had not been published until after. It would be too limiting for warranty to end when buyer takes delivery. Both parties are innocent, but seller in better position to bear the loss since it was their goods that infringed.
4. HELD: P infringed patent, which constitutes violation of 13(b).

Question 12

Does the warranty for quiet possession cease upon delivery?

Answer 12

No, warranty for quiet possession continues post-delivery (Microbeads v Vinhurst)