Difference Between Condition and Warranty in Contract Law

The most significant difference between a condition and a warranty lies in the consequences of a breach. When the conditions are fulfilled, the purpose of the contract is met. However, a breach of condition gives the aggrieved party with the right of contract termination and claiming damages. This is the remedy available to the aggrieved party. In contrast, a breach of warranty only allows the aggrieved party to claim damages, but the contract remains valid.

When it comes to contracts and legal agreements, the terms used can often be tricky and hard to understand. Two such terms that often cause confusion are ‘condition’ and ‘warranty’. This article will help you understand the difference between condition and warranty. This will make it easier for those dealing with contract law, particularly under the Sale of Goods Act, 1930. 

Table of Contents

• Difference Between Condition and Warranty
• What do you mean by Conditions and Warranties:
  • What is a condition?
  • What is a warranty?
• Condition vs Warranty: Which is better?

Difference Between Condition and Warranty

Conditions are the basis of any contract or sale whereas warranties offer additional assurances or guarantees. In case a condition is not fulfilled, it is considered as material breach. On the other hand, non-performance of a warranty is not considered as material breach. Here is a tabular comparison on the difference between condition and warranty:

Once you have learnt about the difference between warranty and conditions, let us learn what do you mean by conditions and warranties.

What is a Condition?

As per Section 12 of the Sale of Goods Act, a condition is a fundamental term that forms the basis of the contract. It is a primary obligation and is of utmost importance to the contract. If the prescribed facts are genuine and the conditions are fulfilled, the purpose of the contract is met. 

For instance, in a contract of sales, if you are purchasing a car and the expressed condition is that it must be a specific model, receiving a different model would constitute a breach of contract. This breach of condition gives the aggrieved party the right to reject the car and void the contract.

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Advantages of Conditions

The following points highlight the advantages of conditions within a contract:

• Provide a level of protection for the parties involved. If a condition is not met, the aggrieved party is allowed to terminate the contract, providing a safeguard against unfulfilled promises.
• Help to clarify the essential elements of the contract, making it clear what each party is obligated to do, which is the duty of the seller.

Disadvantages of Conditions

The following points explain the disadvantages of conditions:

• The strict nature of conditions can sometimes lead to unfair outcomes if a minor condition is breached.
• In case there is disagreement over whether a term is a condition or not, it can lead to legal disputes.

Case Studies: Bettini vs Gye (1876)

In this case, an opera singer (Bettini) was contracted to perform for a three-month period but was required to arrive six days before the performances for rehearsals. Bettini fell ill and missed the rehearsals but was ready for the first performance. The court held that the requirement to attend rehearsals was not a condition but a warranty. Therefore, contract could not be terminated, and the singer could not be replaced.

What is a Warranty?

A warranty is a secondary term or promise in the contract. It is not as crucial as a condition. A breach of warranty does not lead to the termination of the contract. Instead, it usually results in damages to compensate for the breach. A warranty is often a guarantee given by the seller, collateral to the main purpose of the contract. 

For example, in the same contract of sale, a promise that the car will be serviced before delivery would be a warranty. If the car is delivered without being serviced, this would be a breach of warranty. However, it would not invalidate the contract. You would still have to accept the car, but you could potentially claim damages for the cost of servicing the car.

Advantages of Warranty

The following points highlight the advantages of warranty within a contract:

• Warranties provide additional assurances beyond the essential terms of the contract, often relating to the quality or performance of goods or services.
• In an event of the breach of warranty, the aggrieved party can claim damages, providing a form of compensation for any loss suffered.

Disadvantages of Warranty

The following points elaborate on the disadvantages of warranty within a contract:

• A breach of warranty only allows for damages and does not give the aggrieved party the right to terminate the contract.
• As warranties are secondary promises, they can sometimes be overlooked or not given as much attention as conditions, potentially leading to breaches.

Case Study: Hong Kong Fir Shipping Co Ltd vs Kawasaki Kisen Kaisha Ltd (1962)

In this case, a ship was leased for 24 months, and the contract included a warranty that the ship would be seaworthy throughout the lease period. However, the ship was out of service for 5 weeks due to engine troubles and another 15 weeks due to crew incompetence. The court held that the warranty of seaworthiness was not a condition. Therefore, the lessee could not terminate the contract, especially since the ship was available for the majority of the lease period.

Condition vs Warranty: Which is Better?

The choice between a condition and a warranty largely depends on the specific circumstances and the importance of the promise in the contract.

Condition

If the promise is crucial to the agreement, then it is better to make it a condition. This is due to the fact that a breach of condition gives you the right to terminate the contract, providing a strong safeguard. In case the promise is less crucial and you would be okay with receiving compensation if it is not met, then it is better to make it a warranty. This is because a breach of warranty does not terminate the contract but allows for damages.

Warranty

Warranty offers more flexibility as they allow the contract to continue even if they are breached. This can be beneficial in situations where maintaining the contract is more important than the unfulfilled promise. Conditions, on the other hand, provide a strong guarantee that the crucial promises of the contract will be fulfilled. They offer a robust mechanism to ensure that the key terms of the contract are met.

Conclusion

The primary difference between a condition and a warranty lies in their importance to the contract and the consequences of a breach. A condition is a fundamental term, the breach of which can lead to the termination of the contract. In contrast, a warranty is a secondary promise, and its breach results in damages rather than termination. Understanding the difference between warranties and conditions is vital for anyone dealing with contracts, whether in personal or professional contexts. 

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