CHAPTER-III

BREACH OF WARRANTY, CONDITIONS & STIPULATIONS

Breach of Warranty refers to the failure of a seller to fulfill the terms of a promise, claim, or
representations made concerning the quality or type of product. The law assumes that a seller
gives certain warranties concerning goods that are sold and that he must stand behind these
assertions. As in express warranties, essentially become a part of the sales contract. If the seller
breaches an express warranty, the buyer can bring the cause of action against the seller for the
Breach of Contract. If it is implied warranty, then it will not harm the buyer. Liability for the
breach of implied warranties will only be imposed on sellers who regularly deal in the products
that caused the injury. If there is defective product, along with being the actual cause of the
injury, must also be the proximate cause of the Injury. Then the principle of Proximate Cause
will apply and thus, the defendant will not be liable where an intervening act supercedes the
defective product as the proximate cause of the injuries. If a landlord breaches a warranty of
habitability, a tenant may have such remedies as terminating the tenancy, recovering damages, or
withholding rent. The warranty is based in many jurisdictions either on case law or statute.

If the plantiff is successful in his suit based on a breach of warranty theory, the damages he can
collect are the same as those he can collect under an ordinary negligence or strict liability theory.
Commercial General liability (CGL) insurance protects an organization against claims for bodily
insurance and property damage caused by the company’s operations or products. This insurance
doesn’t typically covers breach of contract, but there have been recent cases that debated the role
of CGL insurance coverage in breach of warranty lawsuit due to a breach of warranty, one
should review that whether the claims are covered under them or not? If one’s company is faced
with breach of warranty claim, he may want to consult an attorney and determine if there is any
case laws to substantiate his side.

The effect of the breach of a condition in an insurance policy depends upon whether that
condition is or is not a condition precedent to the insurer’s liability. Breach of a condition
 Breach of Warranty, Conditions and Stipulations

precedent deprives the assured of his right to press his claim, as such a condition sets out the
procedural requirements for the making of a claim which, if not fulfilled, operate to bar the
claim. By contrast, if the term is not a condition precedent to the insurer’s liability, the insurer’s
remedy for breach of condition is either termination of the entire policy from the date of breach,
or damages: the former is available only where the assured’s breach goes to the heart of the
contract, and the latter is available only where the insurer can prove loss. What is clear from this
is that a breach of an ordinary condition is most unlikely to give the insurer any remedy at all,
whereas breach of a condition precedent gives an absolute right to refuse to pay. Not
surprisingly, therefore, the attitude of the courts to the construction of conditions precedent is
cautious in the extreme.

The Supreme Court, in MS Middle High School Vs HDFC Ergo General Insurance Co Ltd 1, has
upheld a high court judgment which held that once there is breach of condition of insurance
policy, the liability cannot be fastened on the insurer. The Punjab and Haryana High Court had
affirmed the findings of the tribunal that the offending vehicle did not possess a permit and that
constituted breach of condition in insurance policy. The said judgment was assailed through a
special leave petition.

In the case of breach of stipulations, in a warranty, the aggrieved party cannot rescind the
contract but can claim damages only while in a condition, the aggrieved party can repudiate the
contract and is exempted from performance and can also claim damages.

1
Appeal (C) No(s). 31406/2017

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 Breach of Warranty, Conditions and Stipulations

CHAPTER-IV

REMEDIES FOR THE BREACH

Section 59 of The Sale of Goods Act, 1930- Remedy for breach of warranty

(1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to
treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not
by reason only of such breach of warranty entitled to reject the goods; but he may-

(a) set up against the seller the breach of warranty in diminution or extinction of the price, or

(b) sue the seller for damages for breach of warranty.

(2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price
does not prevent him from suing for the same breach of warranty if he has suffered further
damage.

A breach of warranty does not entitle the buyer to reject the goods and his only remedy would be
those provided in section 59 namely, to set up against the seller the breach of warranty in
diminution or extinction of the price or to sue the seller for damages for breach of warranty.
From the definition of warranty given in section 12(3) it is clear that a breach of it gives rise to a
claim for damages only on the part of the buyer. It is also laid down by section 13 that, even in
the case of a breach of condition, if the buyer has accepted the goods, or, in the case of entire
contracts, part of them, either voluntarily, or by acting in such a way as to preclude himself from
exercising his right to reject them, he must fall back upon his claim for damages as if the breach
of the condition was a breach of warranty 2. This section declares the methods by which a buyer
who has a claim for damages in either case may avail himself of it. It does not deal with the cases
of fraudulent misrepresentation, which may enable the buyer to set aside the contract nor with
cases where, by the express terms of the contract the buyer may return the goods in case of a
breach of warranty. Also, in cases where the buyer has lawfully rejected he goods, he must
2
Commr of Income Tax v Profulla Kumar Malik AIR 1969 Ori 187

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 Breach of Warranty, Conditions and Stipulations

proceed not under this section, but under section 57, and if necessary under section 61, to recover
the purchase price and interest.

It must be noted here that in such cases, damages are assessed in accordance with the provisions
contained in section 73 of Indian Contract Act, 1872. This was also observed by a division bench
of the Bombay High Court in City And Industrial Development Corporation of Maharashtra ltd.,
Bombay v Nagpur steel and alloys, Nagpur3; “Remedies under Section 59 are not absolute and
cannot be resorted to at any point or strategical point suitable to the buyer. He is duty bound to
give notice of his intention. Its proper time, form and manner will, of course, depend upon the
facts and circumstances of each case. To hold otherwise, would amount to placing the seller in an
awkward and indefinite position — not warranted either by law or by equity.”

In the case of a warranty of quality, the presumption is that the measure of damages is the
difference between what the goods are worth at the time of delivery, and what they would have
been worth according to the contract which this must be ascertained by reference to the market
price at the time4.

In a majority of cases it is found that the warranty in question is not a warranty as defined in
section 12(2), but a condition which falls under section 13(2) to be treated as a warranty. Very
often it is the condition that the goods should correspond with the description by which they
were sold, or should be fit for a particular purpose.

It is necessary that the buyer should rely on the warranty, and act reasonably, that is to say, he
should take reasonable steps to minimize the damages.  Where there is a breach of the warranty
that the goods should be fit for a particular purpose, the rule again is that the damages should be
such, as may naturally flow from the breach. This was seen in a case where the plaintiff’s wife
died from the effects of eating tinned salmon which the plaintiff bought from the defendant, the
plaintiff was held entitled to recover, as damages for the breach of the warranty, that the salmon
would be fit for human consumption. Compensation was awarded for medical expenses, funeral
costs, and the loss of her life.5

3
AIR 1992 Bom. 55
4
Dingle v Hare (1859) 7 CBNS 145
5
Jackson v Watson & Sons [1909] 2 KB 193 (CA)

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 Breach of Warranty, Conditions and Stipulations

There may also be breaches of other conditions which can be treated as breaches of warranty,
such as the warranty of title. In such a case also, the buyer may be involved in difficulties with
sub-buyers, for instance, he may buy a motor car from one who has no right to sell it and may
resell it to a third person, from whom the true owner may recover it, or its value.

CHAPTER-V

CONCLUSION

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 Breach of Warranty, Conditions and Stipulations

It may thus may be concluded that in a contract of sale, parties may make certain statements
about the stipulations or the course of trade. These stipulations in the contract of sale are made
with reference to the subject matter of the sale. These stipulations may either be a condition or in
the form of warranty. A condition is a stipulation essential to the main purpose of the contract,
the breach of which gives the right to repudiate the contract and to claim damages under Section
12(2) of the Act. A warranty is a stipulation collateral to the main purpose of the said contract.
The breach of warranty which gives rise to a claim for damages. However, it does give a right to
reject the goods or treat the contract as repudiate under Section 12(3). A stipulation in a contract
of sale is either a condition or is a warranty depending in either case on the construction of the
contract. A stipulation may be a condition, though called a warranty in the contract. The
Insurance Act 2015 offers the solution for only one scenario, i.e., where the breach of warranty
can be remedied, since there is no mention of possible remedies where the breach is permanent.
In the case of breach of stipulations, in a warranty, the aggrieved party cannot rescind the
contract but can claim damages only while in a condition, the aggrieved party can repudiate the
contract and is exempted from performance and can also claim damages. The effect of the breach
of a condition in an insurance policy depends upon whether that condition is or is not a condition
precedent to the insurer’s liability. Breach of a condition precedent deprives the assured of his
right to press his claim, as such a condition sets out the procedural requirements for the making
of a claim which, if not fulfilled, operate to bar the claim. By contrast, if the term is not a
condition precedent to the insurer’s liability, the insurer’s remedy for breach of condition is
either termination of the entire policy from the date of breach, or damages: the former is
available only where the assured’s breach goes to the heart of the contract, and the latter is
available only where the insurer can prove loss.

The insurer will not be liable where the agreed cover is altered owing to the insured’s breach;
and when the risk returns to what was originally agreed, his liability resumes. The effect of the
suspension approach still requires that the warranty must be strictly complied with and that any
breach of warranty will result in an automatic suspension of the insurer’s liability.

BIBLIOGRAPHY

Books-

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 Breach of Warranty, Conditions and Stipulations

 The Insurance Law,1938, Bare Act, Professionals 2019

 Indian Contract Act, 1872, Bare Act, Professionals 2016
 The Sale of Goods Act, 1930, Bare Act, Professionals 2016

Websites-

 https://comtax.up.nic.in/Miscellaneous%20Act/the-sale-of-goods-act-1930.pdf

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