Distinction between condition and warranty-Section 12(4)
Section 12(4) states that whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract as a whole. A stipulation may be a condition though called a warranty in the contract. A stipulation in a contract of sale may be a condition or a warranty. According to section 12 if a stipulation forms the basis of the contract or is essential to the main purpose of the contract, it is a condition. If, on the other hand a stipulation, though not essential to the main purpose of the contract is collateral to the main purpose of the contract (i.e. subsidiary promise) is a warranty. The points of distinction between the two are:
1. Nature: A condition is a stipulation in a contract which is essential to the main purpose of the contract, whereas a warranty in a stipulation in a contract collateral to the main purpose of the contract.
2. Effect of breach: The breach of a condition gives the aggrieved party a right to treat the contract as repudiated and also claim damages, whereas breach of warranty gives rise to a claim for damages. Where a condition is not fulfilled the buyer has a right to refuse to accept the goods and if he has already paid for them he can recover the price. If there is a breach of warranty the buyer must accept the goods and claim damages.
3. Change of status: Under section 13 a breach of condition may be treated as a breach of a warranty. But a breach of warranty cannot be treated as a breach of condition.
Condition treated as warranty-Section 13
1. Voluntary waiver of condition [Section 13(1)]: When a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may (a) waive the condition or (b) elect to treat the breach of the condition as a breach of warranty.
2. Acceptance of goods [Section 13(2)]: Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, unless there is a term in the contract, express or implied, to that effect.
Remember, section 13(3) lays down that the provisions of section 13 do not affect the cases where the fulfillment of any condition or warranty is excused by law by reason of impossibility or otherwise.