The buyer and seller, before entering into a contract of sale, make a number representations or statements to each other to protect their interest in the bargain. Such representations or statements definitely differ in their nature and importance. Some of these representations may be agreed by both the parties while others may be dropped. The representations finally agreed shall form part of the contract and are termed as stipulations. Again, some of these stipulations may be foundation of the contract of sale while others may be supplementary. So a stipulation in a contract of sale, in the light of their importance, may be a condition or a warranty, Section 12(1).
Law as to conditional warranties: Sections 11-17 deal with the question as to the legal effect of various terms in a contract of sale, and the legal consequences of a breach of any one or more of them. All terms of a contract are not on the same footing. Some are intended by the parties to be of a fundamental nature, the breach of which, is regarded as a branch of the whole contract. Some are intended by the parties to be binding, but of a subsidiary or inferior character, a breach of which does not put an end to the contract, but makes the party committing the breach, liable to pay damages. The former are called conditions and the latter are called warranties.
Definition: Section 12(2) defines a condition as a stipulation which is essential to the main purpose of the contract, the breach of which gives the aggrieved party a right to treat the contract as repudiated.
“Condition is an obligation which goes so directly to the substance of the contract, or in other words, is so essential to its very nature, that its non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all.”
Breach of condition: If there is a breach of condition, the aggrieved party can treat the contract as repudiated.
Definition: Section 12(3) defines warranty as a stipulation which is collateral to the main purpose of the contract, the breach of which gives the aggrieved party a right to sue for damages but not a right to reject the goods and treat the contract as repudiated.”
Breach of warranty: If there is a breach of a warranty, the aggrieved party can only claim damages and it has no right to treat the contract as repudiated.