A ‘warranty’ is a stipulation collateral to the main purpose of the contract, the breach of which gives the aggrieved party a right to sue for damages only, and not to avoid the contract itself.
It will be seen that the above definitions explain both the meaning and the legal effect of a ‘condition’ and a ‘warranty’. Accordingly, a ‘condition’ forms the very basis of a contract of sale, the breach of which causes irreparable damage to the aggrieved party so as to entitle him even to repudiate the contract, whereas a ‘warranty’ is only of secondary importance, the breach of which causes only such damage as can be compensated for by damages.
There is no hard and fast rule as to which stipulation is a condition and which one is a warranty. Section 12(4) lays down to the same effect, thus, “whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract.
Image Source:wsjlaw.com
ADVERTISEMENTS:
A stipulation may be a condition though called a warranty in the contract.” Thus the court is not to be guided by the terminology of the parties but has to look to the intention of the parties by referring to the terms of the contract, its construction and the surrounding circumstances to judge whether a stipulation was a condition or a warranty.
The most suitable test to distinguish between the two terms is that if the stipulation is such that its breach would be fatal to the rights of the aggrieved party, then such a stipulation is a condition and where it is not so, the stipulation is only a warranty.
Illustrations:
ADVERTISEMENTS:
(a) A man buys a particular horse which is warranted quiet to ride and drive. If the horse turns out to be vicious, the buyer’s only remedy is to claim damages.
But if instead of buying a particular horse, a man asks a dealer to supply him with a quiet horse and the dealer supplies him with a vicious one, the stipulation is a condition, and the buyer can return the horse and can also claim damages for breach of contract (Hartley vs Hyman).
(b) P goes to R, a horse dealer, and says, “I want a horse which can run at a speed of 30 kilometers per hour.” The horse dealer points out a particular horse and says, ‘”This will suit you.” P buys the horse. Later on P finds that the horse can run only at a speed of 20 kilometers per hour. There is a breach of condition, P can repudiate the contract, return the horse to R and get back the price.
But if P says to R, “I want a good horse.” R shows him a horse and says, “This is a good horse and it can run at a speed of 30 kilometers per hour,” and P buys the horse and finds later on that it can run at a speed of 20 kilometers per hour only, there is a breach of warranty because the stipulation made by the seller did not form the very- basis of the contract and was only subsidiary one.
ADVERTISEMENTS:
The seller gave the assurance about the running speed of the horse of his own without being asked by the buyer hence it is only of secondary importance.
The above illustrations are a clear proof of the fact that an exactly similar term may be a condition in one contract and a warranty in another depending upon the construction of the contract as a whole.